HOAs are common throughout Canada and the U.S., so it’s likely that while you’re house hunting, you’ll discover at least some homes in an HOA. If you’re wondering “what does HOA stand for?” you’re not alone. HOA is simply an acronym for “homeowners association.”
It’s well worth knowing what homeowners associations are, how they work, and the various pros and cons before deciding to purchase a house in one. This guide will cover everything you need to know about HOAs.
What Is an HOA and How Does It Work?
Let’s start with the basics: what does HOA mean, and how does one work? A homeowners association is simply a non-profit organization comprised of all the people who own a home in a community. HOAs are common in condo complexes and townhouse developments but can also be found in regular neighborhoods and gated communities.
There’s usually a board made up of a few of the members who help run the HOA, and while each HOA differs, for the most part, their job is to manage the community. The main goal of any HOA is to increase property values for everyone in the community.
To achieve this, members strive to create a clean, friendly and welcoming environment while maintaining specific standards in terms of maintenance and repairs.
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Do I Have to Join an HOA?
When you buy a home in an HOA, you will automatically become a member. This enables you to vote on issues, raise concerns, take advantage of the various amenitiesWhat are amenities? Amenities are characteristics that increase the real or perceived value of a... More on offer, and even join the board. However, you cannot opt out of joining the HOA. If you want to purchase a house in an HOA, you must become a member.
What Are HOA Fees?
When you join an HOA, you’ll have to pay the required fees. The cost depends on the services the HOA offers, as well as the amenities. For example, a community that provides a vast array of shared amenities, such as parks, playgrounds, community clubs, pools and gyms, will have higher fees than one that offers the bare basics.
Fees can vary from as little as $40 per month in Canada or $100 in the U.S. to as much as $1000. However, sums fall within the $200-$300 range in most cases. These tend to be collected monthly but can also be issued annually or quarterly.
Regular services carried out by homeowners associations include:
- Trash collection
- Cleaning of common areas
When buying a house in a homeowners association, it’s essential to budget for the monthly fees. Your lender will certainly consider the cost.
What Happens If I Don’t Pay HOA Fees?
You’ll usually be charged a late fee and interest if you miss an HOA payment. In some cases, you may also be banned from communal amenities. In addition, if you continuously miss payments, some HOAs have the power to place a lien on your home, which could eventually lead to foreclosureWhat is foreclosure? Foreclosure is a legal process by which lenders acquire a title to... More. Essentially, if you can’t pay, they’ll force the sale of your home and take what they’re owed from the proceeds. However, this is a rare scenario and is also illegal in certain areas.
Are HOA Fees Tax Deductible?
HOA fees aren’t generally tax deductible if the property is your primary residence, but exceptions exist. For example, if you’re renting the property out, you can normally deduct the fees from the tax return. In addition, in Canada, if you work from home and have a home office, you may be able to deduct a portion of your HOA fees from your tax return.
What HOA Rules Do I Need to Follow?
All HOAs are different, each with the power to set their own rules and restrictions—some are certainly stricter than others. You’ll find a complete list of the rules in the Covenants, Conditions, and Restrictions (CC&Rs), also known as the master deed. This legal document details the rights and responsibilities of HOA board members and homeowners, as well as the architectural standards the community should follow.
Some of the most common rules are as follows:
- Membership fees: how much is owed, and the consequences of failing to pay
- Quiet times: most HOAs enforce noise restrictions to ensure everyone can get a good night’s sleep, as well as capping the noise limit at certain times with regards to power tools and parties
- Pets: from clean up regulations and lease laws to noise limits and how many pets each member can own, HOAs can even ban certain breeds
- Curb appeal: HOAs aim to make neighborhoods look more desirable and standardized by regulating exterior wall colors, how many holiday decorations you can put up, and decreasing clutter. The strictest HOAs may even dictate the height of your grass or even the type of mailbox you can use
- Parking restrictions: from how many vehicles you can keep on your drive to the type of vehicles allowed, as well as street parking regulations
What Are the Consequences of Breaking HOA Rules?
If you fail to comply with the rules, there’s usually some punishment. Minor issues will generally result in an informal chat with a board member. However, you could be fined for repeat offenses or more severe problems. These may be a one-time penalty or a rolling fine that increases each day you violate the rules. You may also be banned from amenities, and, in severe cases, the association could sue you.
HOA Pros and Cons
HOAs receive mixed reviews, and it often comes down to how strict the rules and regulations are. With that in mind, let’s take a look at some of the pros and cons.
Higher Property Values
The rules implemented by an HOA are often designed to increase property values in the community by keeping the neighborhood tidy and well-maintained. This can be great for everyone.
Access to Amenities
Many HOAs provide shared amenities, such as swimming pools and sports facilities, community centers and playgrounds for the kids. In addition, they often arrange social events and activities.
Most HOAs will take care of tasks like mowing the grass, trimming hedges, shoveling snow and cleaning communal areas.
An HOA is an excellent solution if you’re uncomfortable with conflict or confrontation. Rather than deal with nuisance neighbors directly, you can file a complaint, and the HOA will handle the dispute.
It can cost a lot to be in an HOA, especially one with many services and amenities. So be sure to budget for it and avoid missing the payments.
In many HOAs, the rules make a lot of sense. However, in others, they can be very restrictive, and you may take umbrage at being told what you can and can’t do with your own property. If you want to go for something different, you’ll normally need permission first, which can be time-consuming and tedious.
Home-Based Businesses Can Struggle
Some HOAs forbid members to operate a business from their homes. Not only is this restrictive, but it can also prevent you from easily renting the property, which can be a big problem if your circumstances change.
Bailing Out the HOA
Residents will generally be required to foot the bill if a homeowners association runs into financial difficulty.
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