Surviving the HOA

Whether your beloved Homeowners Association (HOA) manages the home you live in or your rental investment, unless you are sitting on the board, you probably cringe everytime HOA is mentioned. We all know that HOAs have a purpose, but many of us have had the experience of finding out that not all HOAs are easy to understand or work with. If you stumbled upon our last blog, Paying the Price of Landlord Mistakes, then you may have caught a glimpse of what you need to be aware of when it comes to surviving the HOA.  If not, read on. You will get more than you bargained for.

Know your HOA

You wouldn’t purchase a car without test driving it, correct?  Then don’t buy a home without investigating the HOA. Every HOA is different in what they cost, cover, allow and restrict. Some properties even have 2 HOAs: a master HOA and a sub HOA.  Do your research! Not all HOAs are managed professionally as some may be managed by volunteers that live in the building or relevant neighborhood. Two great ways to understand your future HOA better is to either speak to non-board member neighbors or request a copy of the last few meeting’s minutes (or heck, the last year’s worth) to see what type of conflicts arose and how they were resolved.

HOA Communication

The best avenue to get to know your HOA, and sometimes even your neighbors, is to attend the HOA meetings.  If you have questions or concerns about the HOA or items that the HOA can control within your community, these meetings may be the perfect platform to have a voice.  HOA meetings are also a great resource for updates on any new HOA policies or bylaws that have been changed or created. Don’t forget about email and snail mail. Find out how your HOA sends out notices of violations as well as updates if you are unable to make it to the meetings.  These are two things you definitely do not want to miss!

HOA Offerings

It’s nice to know that your money is being used wisely, supporting a good quality of life in your community and protecting the value of the homes in your ‘hood.  If you live in a condo building, the HOA may cover property needs such as roofs, security gates, exterior paint, parking lots and maintaining amenities such as fitness equipment, swimming pools, and other common areas.  If you live in a single family home, the HOA may cover snow shoveling, maintaining community pools and parks, landscaping in courtyards, etc. These are the awesome bonuses that your hard earned money is paying for every month.  Keep an eye out for HOA negligence and make sure you are getting what you are paying for.

Once you are clear on everything that the HOA is responsible for, speak with your homeowner’s insurance agent to confirm that you have invested in the appropriate insurance policy.  Your policy should be less than that of a single family home if you own a condo given that the HOA most likely has insurance to cover much of the exterior on a multi-family building.

HOA Fees and Dues

Know your dues and pay them on time!  In the beginning, non-payment may result in not being able to take part in the amenities, as they can definitely restrict your or your tenants’ privileges such as not receiving your/their annual community pool pass. Don’t be that landlord. On a more serious note, non-payment can lead to legal action.  Though it is tougher for your HOA to foreclose on your property these days, why go down that road?

Has your HOA changed management companies?  If so and you are on auto pay for your dues, make sure you set up your auto pay/ACH with your new company.

What about HOA fees?  Many (most) interior multi-family units have some sort of move-in/move-out process and fee/deposit required for each move to cover reserving the elevators and taking the time to do a pre and post inspection of common areas that may have been affected during the move.

Rental Tip:  Put these processes and fees in your lease and make your tenants initial this section.

HOA Bylaws, Covenants, Rules and Regulations

Oh the headache!  Without coming across as a Webster dictionary, here is a quick explanation of the big policy words in the HOA world:

Bylaws – these determine the day-to-day governance of the HOA and have to be voted on by board members to make changes.

CC&R’s (Covenants, Conditions and Restrictions) – these are legally binding documents that are filed with the state regarding obligations and rights of the HOA and the home owners.  CC&R’s have to be voted on by board members to make changes.

Rules and Regulations – this is the catch all category of community policies and can be changed through a vote process by community members.

Within this mound of legal mumbo jumbo come the obligations of the homeowner as well as the restrictions of the HOA.  So what does this mean for the homeowner? The homeowner may be obligated to paint the exterior of the home upon HOA demand.  Watch out! Some colors may not be allowed so get everything preapproved. Moving along, there may be landscaping requirements and/or restrictions, hoops you have to jump through for certain home/property modifications, and restrictions when it comes to pet size, quantity and breed as well as certain types of vehicles that you may want parked at your home.

A couple more items to keep in mind if your purchasing a new home:

  1. If you are teetering towards the crunchy lifestyle (some may call it environmentally friendly, natural, tree hugging…), then check to see their requirements or restrictions toward pesticides, xeriscaping, garden sizes, compost piles and solar panels. You may not see eye to eye.
  2. Determine if the property is already in the midst of current HOA violations.  
  3. Make sure you understand any litigations against the HOA.
  4. Know what the condo reserve amount is and make sure it is adequate for the age, size, condition of the property.  Usually an HOA completes a reserve study every few years. The reserve amount ensures that there is enough money to handle common area issues such as replacing the roof, repaving a parking lot or dealing with a major landscaping challenge.
  5. Review the HOA’s previous and current years’ budget vs actual spending.

Rental Tip:  HOA’s can be very picky about satellite dishes and will most likely require them to be approved prior to installation.  This is always a good piece of communication to pass on to new tenants as soon as possible.

HOA Violations

Though HOA violations are a direct result of not abiding by the above listed powers of the HOA, they deserve their own category.  HOA violations will sometimes depend on who the board members are, where they live in regards to the violators, and how bored or picky they may be.  Bottom line is that you will get at least one warning before a violation fee is issued, but it will save everyone a lot of distress if the rules are known up front.  Typically, if you or your tenant(s) keep their porches tidy, don’t smoke, pull their weeds, put trash in proper place and don’t use the wrong grill on the balcony, then everyone should be good, but rules can change, so stay informed.

Rental Tip: Know your rules & regs and pass them along to your tenant prior to move in, better yet, with a copy of their lease so they have the best chance to start off on the right foot at their new home.

Let’s Recap

Be proactive and diligent.  HOAs have their pros and cons and not all are difficult to work with. For the most part, they should have your community’s best interest in the forefront of their goals.  When purchasing a home, do your research and decide if you want to deal with an HOA or the particular HOA that comes with your home and at what cost. If you end up working with an HOA, get to know them inside and out and stay in communication with them.  If you have renters, keep them informed. Follow their rules. If you don’t like them or the rules, go to the meetings, voice your concerns, request a change or try to get on the board so you have more influence. Pay your dues. Pay your dues on time. Follow up with warnings and violations and take care of them before they escalate. Most of all, enjoy where you live.

If you live in Greater Denver area, contact TJC Real Estate and Management Services for a complimentary consultation.  We are unique in the industry as we are a one stop shop for real estate investors. TJC can help with the acquisition, property management, and asset management. Our goal is to create a long-term relationship that helps your asset(s) grow, as well as, provides stable, long-term ROI. We are happy to assist you on your journey to become a successful real estate entrepreneur!

Schedule an appointment today to discuss your property management questions!

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