Homeowners Association—HOA Definition

A homeowners association (HOA) is an organization in a subdivision, planned community or condominium that makes and enforces rules for the properties and their 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.

Homeowners associations (HOAs) are formed by communities with single-family homes or multiple-unit buildings, such as condominiums. As the name implies, the HOA is comprised of, and run by, the community's residents; in fact, membership in an HOA is usually a requirement to buy a home within the community. An HOA is typically established to make and enforce rules regarding the properties within the jurisdiction.

Most HOAs are incorporated and thus subject to state laws. Some states consider condominium-based HOAs, often called "condominium communities," and organizations governing cooperatives (aka "co-op boards") to be separate from HOAs because the property interests differ. "Community association" is a broader, umbrella term that encompasses all such organizations. The Community Associations Institute, a trade organization that lobbies state legislatures on behalf of HOAs, estimates that in 2018, there were between 346,000 adn 348.000 community associations across the United States with upwards of 70 million residents.

An HOA has a board of directors or governors, elected to enforce and oversee the HOA's rules and regulations. An HOA will typically describe its rules in a document called the Declaration of Covenants, Conditions and Restrictions (CC&Rs), which set certain conditions on owners and their properties. The conditions may include structural restrictions such as the type of fences or landscape allowed, or minor selections such as the color of paint on a house. This document usually also outlines the penalties for violating the CC&Rs, which may include fees, forced compliance or in some cases, litigation.

Homeowners associations wield significant financial and legal power over the property owners in their jurisdiction. HOAs collect monthly association fees or annual dues to pay for the upkeep of common areas like parks, laundry rooms, elevators, and swimming pools. Typical HOA fees are between $200 to $400 per month, but they could range anywhere from less than $100 to upwards of $10,000 for high-end 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 or dues, 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 his dues.

The HOA provides the regulations and guidelines for the community. These standards are, or should be, done with the aim of preserving and enhancing the community's property values. Often, they are appearance-oriented, dealing with cleanliness, condition, and repair. Sometimes they are designed to keep a uniform appearance to the building(s) or the community as a whole.

The HOA management services may provide amenities such as landscaping and parking lots, pools, and facilities like swimming pools, tennis courts, or party spaces that are available for all the HOA members. Some HOA fees cover the cost of trash collection and snow removal.

On a more theoretical level, HOAs are symbols of self-governance and democracy. Who better to run a community that the people living in it—as opposed to some absentee landlord?

The negative side of an HOA starts with the high cost of the association fees, which could act as a deterrent for prospective buyers. Another deterrent: all the HOA rules and regulations, which can seem unreasonable, arbitrary, or too restrictive for some homeowners, who may want the freedom to customize their properties.

Also, while self-governance is a fine concept in theory, it may not work out well in practice. AHOA board members, who usually are volunteers, just may not be up to the job of managing real estate or dealing with complex financial issues (in many ways, a community association is like a small business or nonprofit institution). At the very least, it's not the most efficient of set-ups: Because HOAs must reach a consensus regarding common-property decisions such as maintenance and upgrades, conflicts among HOA members can be rife.