What Is a Homeowner Association (HOA)?

A homeowner's association (HOA) is an organization in a subdivision, planned community, or condominium building that makes and enforces rules for the properties and its residents. Those who purchase property within an HOA's jurisdiction automatically become members and are required to pay dues, known as HOA fees. Some associations can be very restrictive about what members can do with their properties.

Understanding an HOA

Homeowner associations (HOAs) are usually formed within communities or neighborhoods of single-family homes or multiple-unit buildings (such as condominiums). An HOA is typically established to make and enforce rules regarding the properties within the jurisdiction. An HOA is comprised of–and run by–the community's residents. Membership in an HOA is usually a requirement to buy a home within a community where an HOA has been established.

An HOA usually has a board of directors or governors that are elected to enforce and oversee the HOA's rules and regulations. An HOA will typically describe its rules in a document called a Declaration of Covenants, Conditions, and Restrictions (CC&Rs). CC&Rs set certain conditions for owners about the maintenance of their properties. These conditions sometimes include structural restrictions–the type of fences or landscape allowed–or more minor aesthetic choices, such as the color of paint on a house. A CC&R document may also outline the penalties for violating the guidelines set forth in the CC&R. The penalties range from fees to forced compliance or in some cases, even litigation.

Key Takeaways

  • A homeowner association (HOA) is an organization that makes and enforces rules and guidelines for a subdivision, planned community, or condominium building.
  • The members of a homeowner association are the residents of the subdivision, community, or building; some communities require mandatory membership for individuals that purchase property in the zone.
  • Run by a board of directors, homeowner associations (HOAs) typically collect monthly or annual fees to pay for common area maintenance and the upkeep of facilities.
  • Homeowner associations (HOAs) may impose fines on non-compliant homeowners.

9 Tips for Handling Homeowners’ Associations

Homeowner Associations vs. Community Associations vs. Property Owner Associations

Most HOAs are incorporated, and, thus, are subject to state laws. However, some states consider condominium-based HOAs, often called "condominium communities," and organizations governing cooperatives—called co-op boards—to be distinct entities from HOAs. This distinction is made on the basis of the assumption that the property interests of these organizations differ. As a result, the designation "community association" serves as a broader, umbrella term that encompasses HOAs, condominium communities, and co-op boards.

The Foundation for Community Association Research is a trade organization that lobbies state legislatures on behalf of HOAs. The most recent data available from them estimates that in 2018, there were 347,000 community associations in the U.S. and 26% of the population resided in areas where there were community associations.

An HOA is distinct from a property owners association (POA). A POA is a more broad term that usually refers to a group of people who want to better their community and the real estate values of the property in their community. The main difference between POAs and HOAs is that POAs may include anyone in the community with an interest in the value of the community's real estate; so, unlike HOAs, POAs may include individuals who are not homeowners.

Advantages and Disadvantages of Homeowner Associations

The HOA provides regulations and guidelines for its members. These standards are upheld with the aim of preserving and enhancing the community's property values. Often, the guidelines are appearance-oriented, so they deal with regulations for the cleanliness of the property, the condition of the property, and any repairs done to the property. Usually, the guidelines for HOAs are designed to help ensure a uniform appearance for all the properties included in the association's zone.

Typically, the HOA management will provide additional services for its members in exchange for their HOA fees. These amenities may include landscaping, parking lots, and facilities like swimming pools, tennis courts, or party spaces available for all the HOA members. Some HOA fees also cover the cost of trash collection and snow removal.

On a more theoretical level, for some people, HOAs are symbolic of self-governance and democracy. This belief may stem from the idea that the best people to manage a community are the people living in it (as opposed to a landlord who doesn't live on the premises).

  • Set and enforce community rules

  • Protect property values

  • Provide services, amenities, and facilities

  • Offer self-governance

  • Set fees, dues, and assessments

  • Impose restrictive regulations

  • Operate inefficiently

  • Management amateurishly or ineptly

One disadvantage of an HOA is the high cost of the association fees, which ultimately could be a deterrent for some prospective buyers. Also, the HOA rules and regulations can seem unreasonable, arbitrary, or too restrictive for some homeowners, who may want the freedom to customize their properties.

In addition, HOA board members are normally volunteers, and they may not be properly trained to manage real estate, deal with complex financial issues, or unite a disparate group of people for a common cause. Because the leadership of HOAs must reach a consensus when they are making decisions about maintenance and upgrades, it is also possible that there may be conflicts amongst HOA members who disagree.

Special Considerations

In some cases, HOAs can wield significant financial and legal power over the property owners in their zone. HOAs collect monthly or annual HOA fees. HOA fees are typically between $200 to $400 per month, but they can range anywhere from less than $100 to upwards of $10,000 in luxury neighborhoods or communities.

HOA fees also often contribute to the association's reserve fund, which is set aside for major renovation projects or emergency use. In addition to regular fees, HOAs can also impose special assessments on homeowners when the association lacks sufficient reserves to pay for unexpected repairs on common areas, such as sidewalks or parking lots.

The HOA's board, which is usually responsible for the organization's finances, oversees the collection and management of funds. Along with setting dues and assessments, the board can slap fines on homeowners who break the rules or damage the common areas. In addition to imposing penalties, HOAs can also place a lien on a property if a homeowner falls seriously behind on their dues. Existing HOA liens can make it difficult to sell the home unless they are cleared.

Example of a Homeowner Association

Sometimes, conflicts related to HOAs make the national headlines. Beginning in 2014, an Indianapolis homeowner and his HOA entered into a dispute over the solar panels on the roof of his home. To fully capture the sun's energy, the solar panels need to face south—a direction the HOA won't allow, saying they are too visible to the street and other neighbors.

While the language in the HOA covenant permits solar panels, it is vague on the subject of their positioning. With the support of several state legislators, the homeowner tried to get a bill passed by the Indiana General Assembly that would prohibit HOAs from restricting solar panels or their placement in any way. Bills have been introduced but not passed in 2018 and 2019. A new bill has been introduced in 2020.