Homeowner associations (HOAs) are entities that enforce the rules for living in a community that chooses to be governed. They are common in planned developments; you join them and agree to their terms and fees when you close on a home in a community with an HOA.

Homeownership in these communities—also called membership—binds you to the association’s covenants, conditions, and restrictions (CC&Rs). The associations also have legal powers, such as placing a lien on your home, imposing fines, or suing you for not complying with the rules.

If you’re in the market for a home, you’ll likely look in neighborhoods with HOAs. Here are nine factors you should consider before purchasing a home in a governed neighborhood.

1. Homeowner Association Covenants, Conditions, and Restrictions

Homeowner associations create CC&Rs and enforce them. Before purchasing a home in a community with an HOA, make sure you ask your realtor or the HOA for the CC&Rs. Some examples of the restrictions and rules you might see are limits or requirements for:

• Siding and roof colors and materials
• Parking RVs or trailers in the driveway
• Fencing height and placement
• Visitor parking
• Vacation renting
• Yard decorations
• Yard work
• Additions

If you can’t find the CC&Rs online on the HOA’s website, ask your real estate agent to acquire them for you or obtain them by contacting the HOA directly. Be sure to check if the document is up-to-date before you proceed too far into the buying process.

Since the rules and regulations of any particular HOA may be unique, don’t rely on second-hand information or past experience at other developments to learn what an HOA’s rules and covenants are. Also, think hard about whether you’ll be able to live with them.

2. Homeowner Association Fees

Homeowner associations need funds to operate. They gather these funds through fees paid by community members—some can be quite high. Median monthly fees range from $600 (New York, the highest) to $100 (Wyoming, the lowest). Fees can differ even within a development due to variations in square footage, location, and orientation.

Most multiple listing services (MLSs) include HOA fees in the property listing, so when you’re looking at homes, ensure you locate this information. You can access it on most real estate sale websites, such as REMAX, Zillow, or Realtor.com.

You should also find out how often fees have increased over time and by how much. If you can, obtain a printed history of HOA dues by year for the past 10 years. HOA increases are generally mapped out a few years in advance using estimates of the future costs of utilities, labor, and maintenance.

3. Homeowners Association Amenities

Find out what the fees are paying for, and determine how they will affect your household finances. For example, will you have to pay for garbage pickup? Are utilities included? Which ones? What about cable and internet service? Remember that you’ll pay for perks, such as recreational facilities, whether you use them or not.

HOA fees generally increase annually, but for new developments, they may go down slightly over time as more homes are added to the development, and more homeowners are available to share the HOA’s fixed costs.

4. Homeowners Association Operations

When you buy a home in a managed community, you’re actually agreeing to a bundle of legal obligations and entitlements in addition to purchasing a home. Find out the hours for amenities, such as pools and tennis courts, to determine if they’ll work with your schedule.

If you’d think you’ll want to share these facilities with friends or family, check the rules and fees that pertain to guest use.

5. Homeowners Association Finances

An HOA may adopt one of several approaches to financial management. These choices mainly affect how it funds unexpected expenses or capital investments like replacing an HVAC system in a common area.

Reserves

Some associations might keep a large cash reserve to pay for maintenance, repairs, or other issues. Others might have lower fees, relying on special assessments to cover unexpected expenses.

Here’s how the assessment route works: When a major expense, such as replacing a roof or elevator, comes up—and the HOA’s reserves lack the funds to pay for it—the association may charge each homeowner a special assessment. These levies can run into thousands of dollars.

Financial Plans

Developments often draw up multiyear plans for repairs and capital investments, including their annual costs and the expected balance in the reserve fund when the outlays will be required.

Ask to see those documents, and pay special attention to how well the needed expenditures line up with the reserve fund balance. Professional help can be valuable when analyzing these spreadsheets.

The HOA should be able to provide this list. Ask if any special assessments are planned in the future. Note that economies of scale may mean that special assessments for a particular capital expense may be smaller in HOAs with many members and higher in smaller HOAs.

6. HOA Fees and Your Mortgage

When contemplating a property purchase in a planned development, mortgage lenders will factor in the impact of its HOA dues on your overall finances. As they do with property taxes (which are not included in HOA fees at most developments), banks will consider your monthly HOA fees when deciding how large a mortgage you can afford.

Your prospective lender can provide the mortgage-payment figure, and you should already have the property-tax and HOA-fee numbers. If you’re just starting your home search—and don’t yet have relationships with any lenders—use an online mortgage calculator to estimate the likely mortgage payment for the principal you’re seeking, and enter other relevant information, including your planned down payment.

7. HOA Legal Powers

As in any community, disagreements arise within a planned development, sometimes over residents bending or breaking the rules. Before you buy, explore how rules are set and enforced and what penalties are imposed against rule-breakers.

HOAs are legal entities—some are businesses and some are non-profits—and have the legal right to enforce rules and issue punishments for not following them.

Sanctions can be strict. In some HOAs, the outcomes may include being fined or sued or having the HOA place a lien on your home. Pay particular attention to whether the HOA can foreclose on your property for not paying HOA dues or fines resulting from CC&R violations.

Ask about the process for resolving any conflicts and how the HOA manages additions to or amending the rules. 

Request a list or other accounting of conflicts and rule violations the association has had to resolve. If that information doesn’t detail lawsuits, ask about those. Be sure to check for any past, present, or pending lawsuits involving the HOA. Also, review the outcome of these cases.

8. Homeowners Association Reputation

Since the association essentially serves as a hyper-local government for the community, it pays to look into who runs it and how well those people function together.

It’s common for HOAs to be overseen by community residents who hold their positions as volunteers and are elected by association members. However, some associations are managed professionally. Here are some steps you can take if a private company manages the HOA:

• Investigate its reputation before buying: If the HOA has some employees or companies to which it contracts out tasks, ask about these entities and their work.
• Talk if you can to some of the community’s current owners: Preferably, you’d talk to ones who are not on the HOA board and have lived in the building or community for several years. How collegially does the board function? Are differences in opinion usually handled in a civil and constructive manner? Be alert for indications of frequent, even perpetual, drama. As with other governing bodies, HOAs can be hampered by egotism, power plays, and petty politics. 
• Schedule time to speak with the HOA president: This will help you get a sense of whether you want this person making decisions on your behalf about the development. Ask the president, too, about interest among residents in serving on the board: Is there high motivation to do so or relative indifference? This conversation may also motivate you (or not) to serve on the board yourself one day, a move that would require getting elected and giving up some free time for your new responsibilities.

9. HOA Insurance Responsibilities

Insurance provisions within a planned development can be divided. For example, the HOA might cover some perils or areas, with homeowners held responsible for the coverage of others. Check whether the HOA provides additional coverage as a perk for owning within the development.

Insurance Requirements Vary by State

Check the law for the state you’ll be living in for precise requirements. Then, confirm the HOA for the property you’re considering is adhering to those requirements.

These are often mandated by state law. In Florida, for example, a condominium HOA must insure all common property, which includes every part of the building up to a unit’s unfinished drywall. Meanwhile, the homeowner is responsible for insuring all personal property within their unit, including appliances, flooring, cabinetry, window treatments, and the like.

Catastrophe Insurance

Catastrophe insurance is critical if you’re considering a purchase in an area prone to major natural disasters, such as floods, earthquakes, blizzards, wildfires, tornadoes, or hurricanes. You should also confirm if this additional coverage extends to the areas that are the homeowner’s responsibility under the HOA rules.

Pros and Cons of Homeowner Associations

Pros Explained

• Neat and well-kept neighborhoods: Homeowner associations ensure a community maintains a specific level of decorum and presentability. Often, they are very nice neighborhoods to live in.
• Amenities for members: Communities with HOAs can have amenities like a community pool, playgrounds, or common areas to gather in.
• Rules keep the peace: In a community with an HOA, you have somewhere to turn other than calling the police if there is a dispute with a neighbor. These associations might have the authority to mediate conflicts and take actions that can influence better behavior.

Cons Explained

• Required to abide by the rules: Buying a home or residence in an HOA community seals you into an agreement to follow the rules, even if you disagree with them. Failure to follow the rules often leads to fines or the HOA taking other actions against you.
• Can be expensive: Fees for these associations can be steep, so you should ensure you budget for the extra expenses.
• Can be aggressive: Some HOAs will give you a notice for the slightest infraction.

The Bottom Line

Living in a planned development—and being governed in part by the rules of an HOA—can be a mixed blessing. It offers the prospect of exchanging some control over your home for the reduced responsibilities of maintaining areas around it and for the benefit of enjoying shared amenities and security. However, you’ll need to be comfortable trading the diverse look of a typical neighborhood for a more uniform appearance and the work it requires.

How well you embrace those tradeoffs will contribute to how happy you’ll be in a condominium or planned and uniform development. If you decide to proceed with a purchase, be sure to talk to professionals, including a real estate agent familiar with planned developments and HOAs.