The primary purpose of a Homeowners Association (HOA) is to preserve a subdivision’s property values so owners can enjoy a consistent quality of neighborhood and lifestyle.
One way they do this is by enforcing standards for the external appearance of homes and yards as defined in the neighborhood’s restrictions and covenants. Another is by maintaining the common areas throughout the subdivision including entrances, median strips, and roads and in some cases naturally occurring features such as lakes and wooded areas, all of which require some form of regular maintenance.
If a neighborhood offers amenities such as pools, tennis courts, golf courses, walking and bike trails and playgrounds, these are also maintained by the HOA.
Some communities such as Wintergreen in Nelson or Lake Monticello in Fluvanna County provide their own police force and fire and rescue squads.
How They Work
Subdivision developers create the HOA and builders and homeowners must adhere to the covenants and restrictions. Initially, the developer approves all plans, specs, and plot plans and overlooks details such as exterior colors, siding and roofing, landscape design, size and location of storage sheds, and fencing.
After the sale of a predetermined number of a subdivision’s lots, the control of the HOA passes automatically to a Board of Directors elected by and made up of homeowners who serve their community as volunteers. Most then also have an associated Architectural Review Board, explained Judy Savage with Savage and Company Realtors, “to monitor exterior changes to properties to insure uniformity and keep property values high.” In some instances the Board may hire a professional management company to handle the business of running the community.
While HOAs have certain common functions, no two are identical. “I’ve lived in numerous neighborhoods,” said Savage, “and the HOA varies from neighborhood to neighborhood. Every one of them is different.” A good example is Wintergreen where the HOA helped make their neighborhood an official Bear Smart Community, increasing resident’s safety while still respecting the local wild life.
HOA Finances
Property owners support the HOA by paying dues in the form of annual assessments plus fees for special services like golf course use or clubhouse rental. Some communities also assess their homeowners in advance for seasonal maintenance items like snow removal or clean up after a big storm to assure sufficient funds are available if and when they are needed.
Managing the Association’s finances, including items such as insurance, is a big part of an HOA’s function, and that includes planning for sufficient money to fund long-term capital projects, explained Thomas Barger, Managing Director for Nest Community Group, which provides management services for HOAs. For example, a community may need to repair and upgrade roads or sidewalks. If the HOA has not maintained a reserve fund for these kinds of expensive repairs they will need to do a special assessment to raise the funds.
Barger stressed that prior to purchasing a home in an HOA community, buyers need to inspect information about the association’s reserve fund to avoid a situation where they are surprised with an unexpected special assessment. “The HOA dues are part of the home’s deed and must be paid,” he said. This means if homeowners can’t pay, the HOA can foreclose on their property.
HOAs that collect dues are governed by the Property Owners Association Act, which mandates that buyers moving into one of these communities receive a disclosure package once they have successfully negotiated a contract to purchase. “A buyer has three days after receipt of the disclosure package to review the rules, regulations and budgets of the Association. If they are troubled by any of it they can terminate the contract without penalty,” Savage said. Barger suggests they also look at minutes from the Board meetings to “get a feel for how the HOA is run.”
Advantages and Disadvantages
HOAs promote a certain quality of life by assuring the community is well maintained and there is consistency in how homes and lots are kept so that property values remain high. Another benefit of HOA communities is that they are more likely to offer amenities such as pools, tennis courts, club houses, golf courses and walking trails, all of which require a high degree of maintenance.
Buyers who appreciate that kind of lifestyle may prefer an HOA neighborhood. However they are not for everyone, especially those who don’t like lots of rules and regulations. “I do have many clients who just say ‘no’ to subdivisions with HOAs,” Savage said. “Besides the dues, they don’t want someone else telling them what they can and can’t do with their property.”
Call your agent for more information about the pros and cons of HOAs. He or she will educate you on the basics and help you find a community that meets your unique needs.
By Celeste M. Smucker, Ph.D.
Celeste Smucker is a writer and blogger who lives near Charlottesville.