HOAs Provide Stability At A Price

Some 42 million of us nationwide now belong to homeowners associations, which control more than $18 billion in reserve funds. Some of us are happier about these private governing bodies than others.

Remember the days when the Smiths could put a car on blocks in their front yard? When the Jones' grass could grow until it needed bailing instead of mowing? When the Johnsons could have a bright-red front door with clashing pea-green shutters? Increasingly, such "eye sores" are simply forbidden.

Homeowners associations have effectively outlawed laissez faire living in the interests of stabilizing, perhaps increasing, home values in an area. For this benefit and others, many homeowners are willing to trade a certain amount of their cash and personal freedom.

Generally, reserve funds saved up from homeowners' dues are used for community upkeep-maintenance of common areas such as parks, entrance-ways, sidewalks, recreation facilities, etc.

HOA residents benefit from amenities that individual homeowners might not otherwise be able to afford. Swimming pools, tennis courts, health clubs, even lakes with paddle boats can all be financed from homeowners' dues.

Where a government lacks the funds to keep up with new demands for services, homeowners associations sometimes fill the gap with trash removal, road maintenance, etc.

The benefits of an HOA are balanced by homeowner responsibilities. You're likely to be regulated as to how you keep your yard and maintain your home's exterior. Often, houses must conform to certain cosmetic design restrictions, such as approved colors and architectural elements. Yard displays of excessive toys and eclectic decorations may be prohibited. Conducting auto maintenance or parking a boat in your driveway or on the street could be a "no no."

When homeowners don't follow the rules, various sanctions can be meted out, ranging from losing privileges (no visits to the pool) to liens on the homeowner's property. In the most severe cases, associations can even go to court to enforce rules.

Most new home developments are built now with an HOA in mind, the developer maintaining control of governance until most all the homes are sold. Once the homeowners take control, it's their responsibility to ensure that the reserve account is well-funded, not only for regular maintenance but for large projects such as facility repairs, street repairs and other expenditures.

If you are looking at purchasing a house in an HOA, consider reviewing the financial statements of the organization to be sure that reserves are well-funded. Sometimes, surprise expenses force the board to dip into the fund, drawing down reserves to the extent that a special assessment may be required. You don't want to move into a new house and be presented with that sort of surprise!

Also, be sure to read the fine print in the association's covenant. Could you install a fence for your dog? Would you be allowed to put an addition onto your home? Can you build a tree house for your kids?

A homeowners association can create a harmonious community with rules and regulations established for the greater good. Nevertheless, for homeowners who value certain personal freedoms, a community without an HOA may be the better choice.