Another advantage of living in a neighborhood with an HOA is that all of the members are owners of the shared common property such as the pool, playground, park, tennis and basketball courts, walking trails, fitness centers, etc. Some homeowners purchase a home in a neighborhood that includes all of these amenities because they can’t afford to purchase them on their own. So, they purchase a home in a neighborhood where they can share the costs of the amenities with other homeowners in the association. Some custom home or acreage neighborhoods have other amenities such as horse barns, riding stables, fully stocked fish ponds and boat ramps. All of the homeowners in a mandatory HOA sign an agreement when they purchase their homes to share the costs of the common property within the neighborhood. These shared costs are paid for by the association dues or assessments that are expressly mandated by the governing documents of the association.
Homeowner’s Associations are created as a non-profit corporation and managed by a Board of Directors. The Board has the authority to make and act on decisions that will affect the association. HOA’s are governed by a set of documents comprised of the Articles of Incorporation, the Bylaws and the Declaration of Covenants, Conditions and Restrictions (DCC&R’s). These documents are called the “governing documents” of a community. These governing documents clarify what homeowners can expect when living in a community with a mandatory HOA. Some expectations of a homeowner living in a HOA can include the following:
Most mandatory HOA’s are managed by professional management companies that are hired by the Board of Directors. Since HOA’s provide self regulation for neighborhoods with deed restriction enforcement, cities and counties will undoubtedly continue to make the creation of community associations mandatory for builders and developers.
Enhanced and maintained common areas such as pools, playgrounds and walking trails
Enforcement of the Deed Restrictions
Consistent and/or increased property values
Venue for resolving neighbor disputes
Committee involvement such as social events and communications (newsletters and websites)
Assessments or dues to pay for expenses to maintain the common areas
As one might expect, the costs to maintain such amenities is not unsubstantial. In fact, budgets for associations with multiple amenities can extend well over $1,000,000.
As with most budgets, the homeowner’s association budget includes income and expenses for a set period of time, usually one year. The income consists of the amount of dues that will be collected at closing from each home buyer. The expenses include everything the association must pay for including but not limited to electric, water, administrative supplies, general maintenance, landscaping, insurance and capital reserves. If an association has a pool or other amenities, the budget will need to include expenditures for maintaining those items as well. The budget should also include a line item for a capital reserve fund. A reserve fund is a savings account to pay for future maintenance of common property. This is especially important in gated communities that own their streets. With the rising cost of fuel, street repairs have become increasingly expensive. Without reserve funds to pay for street repairs, the Board would be forced to either borrow the money or propose a Special Assessment to the membership.
The budget is based on the fact that all homeowners will pay their dues. When members of the association choose not to pay their dues, the budget becomes unbalanced because the money that was supposed to be there to pay for expenses is absent. When homeowners refuse to pay their dues, they force the other members of the community to pay for their share of the common expense. At that point, money must be moved from one budget line item to another so that the essential items can be paid. For example, if homeowners do not pay their dues, money that was originally earmarked for needed maintenance of the association’s monument will get transferred to pay for the water at the pool. The monument does not get fixed and subsequently affects property values. Homeowners who are looking to sell their property will have a harder time selling in a neighborhood with a crumbling monument.
People move into a neighborhood with amenities for a reason. They want to use, enjoy and benefit from living in an association with perks. They expect the pool to be clean. They expect the playground to be safe for their children. They expect the fountain at the monument to work property. All of these expectations can quickly evaporate if homeowners choose not to pay their dues on time. The lifeblood of any business is cash flow, and that is not different for an HOA. The association needs cash in order to operate successfully.
Providing a Service
Without an active homeowners association, many neighborhoods would simply fall apart. Below are some examples of real situations where without an HOA, the homeowners would suffer:
Graffiti Removal: With an association, there is money to have graffiti removed within hours. Without an HOA, graffiti stays on walls, fences, light poles, stop signs, curbs and culverts forever. The neighborhoods without an association have considerable more graffiti than those that do. Prolonged graffiti will significantly reduce property values and invite more illicit activity into the community.
Neighbor Dispute Resolution: Homeowners that live in a mandatory HOA have a place to turn for help with dispute resolution between neighbors. This is especially important when renters are involved. The association can send a violation letter to the owner so that they can tell the renter to fix the problem on the property. For example, a rental management company has rented a house in a neighborhood to college students. The college students have a party that lasts until 4:00am. The neighbors were able to contact the HOA management company who in turn contacted the rental property management company and the homeowners who lived in California. The renters were evicted after due process, which was what the neighbors wanted. Without an association, the neighbors would not have had an outlet to get their problem resolved.
Accidents: When a car accidentally hits the monument or perimeter wall of a neighborhood with an HOA, the likelihood of the damage being repaired quickly goes up considerably. Associations carry property and general liability insurance which pays to replace damaged common area, especially in the case of a hit and run. Without an HOA, the monuments sit decaying sometimes for years. Some associations have solid rock wall perimeters that cost literally hundreds of thousands of dollars to construct. If a car runs through that wall, the damages could be very costly. The insurance is there to cover these kinds of repairs to protect the homes and home values of all who live in the neighborhood.
General Benefits of an Association: There are many instances where a homeowners association is very beneficial to homeowners. Some of the various examples are listed below:
o Provides a united front for rezoning cases for neighboring land
o Helps promote community involvement through committees
o Associations have donated food, items and money during times of crisis, ie hurricanes, floods, fires, etc.
o HOA’s have powerful leverage with local government to get things done like road repair, traffic signals, street light replacement, drainage mowing and graffiti removal.
o The Board has the power to enact rules for the enjoyment of all of the homeowners that live in a neighborhood.
With proper direction from the Board and expert guidance from a professional management company, a Homeowners Association is an excellent option for homeowners who desire modern amenities, a high standard of living, and a continued increase in their property values.