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Homeowners associations (HOAs) are increasing in popularity in the United States. In fact, approximately 84 percent of all newly built single-family properties that were sold in 2022 were regulated by HOAs, according to statistics from the US Censor Bureau.

If you have been elected to be the manager or board member of a community association, your first order of business should be familiarizing yourself with the relevant HOA laws. Homeowners associations are regulated at the national, state, and county level, and understanding the regulations that have been put in place are essential to avoid penalties and legal repercussions.

In this comprehensive guide, we will provide a general overview of the HOA laws that apply across the board. We'll also help you understand what these organizations are and how they work.

What Are Homeowners Associations?

Homeowner associations (also known as community or property owners associations) are typically created within neighborhoods or communities that comprise single-family houses or multi-unit structures such as townhouses or condominiums.

A homeowners association is often formed to create and enforce rules governing the units under its authority. Members of the community establish and control these organizations. Membership is typically required in most states, although some do not impose mandatory membership.

Moreover, a board of directors is normally elected to manage the HOA. These bodies are appointed to enforce and regulate the association's rules and regulations.

In an agreement named the Declaration of Covenants, Conditions, and Restrictions (CC&R), a community association will outline its regulations as restrictive covenants. CC&Rs impose various requirements on property owners in terms of maintenance to ensure that certain standards are upheld in the community.

These criteria may include structural limitations, such as the kind of fencing installed. HOAs can also impose other rules to maintain the aesthetics of the neighborhood, which might include limitations on the color of exterior paint that may be used. 

A CC&R agreement could also describe the consequences of breaking the agreement's rules. Penalties might take the form of fines, forced compliance, or, in extreme cases, legal action. 

The Building Blocks of HOAs: Rights, Responsibilities, Structure, and More

There's no denying that personal property owners associations are complex entities, and the principles mentioned above need more explanation. In this section, we'll go into more detail and dissect the statements mentioned above to ensure that you understand the role these organizations play in society.

Structure

Firstly, let's talk a little more about the structure of a homeowners association. These organizations are governed internally by a board of directors, which is responsible for managing funds and making decisions, among other things.

An HOA is primarily made up of homeowners or members who are governed by elected volunteers on the board of directors. The board, which includes officers such as a president and treasurer, administers community activities, enforces governing agreements, and manages funds.

Regular meetings allow homeowners to engage in decision-making, and committees may address specific duties. Administrative activities may be handled by professional management firms or done in-house. The legal underpinning for the HOA's organization and activities is provided by its governing documents. 

HOA Regulation

Homeowners associations are regulated primarily by federal and state law. They are also subject to the terms and conditions set out in their own governing documents. In the section below, we'll talk more about the various parties, laws, and documents that regulate HOAs.

Federal Law

The national government has implemented certain laws that will affect how a property owners association is run. The following regulations typically apply:

  • The Federal Fair Housing Act (FHA). This law is designed to protect residents against housing discrimination. As a result, HOAs are not permitted to discriminate against homeowners or prospective buyers on the basis of qualities such as color, race, disability, familial status, religion, age, etc.
  • The Federal Flag Display Law. HOAs in the United States may not prohibit the display of the national flag. This law details matters related to flag display. It's important to note here that HOAs are allowed to include certain rules or guidelines that specify how the flag is to be placed.
  • Internal Revenue Code. The truth is that most HOAs function as non-profit corporations for tax purposes. Therefore, they will be subject to the provisions of the Internal Revenue Code to maintain their non-profit status.

State Law

In addition to federal laws, homeowners associations are also subject to state laws:

  • Regulatory Legislation. Some states have detailed statutes governing various areas of HOA governance. The Davis-Stirling Common Interest Development Act, for example, is designed to regulate community associations in California, whereas the Florida Homeowners' Association Act prevails in Florida.
  • Laws That Address Common Interest Communities. The majority of US states have legislation that expressly addresses common interest communities, which include condominiums and planned communities. These statutes lay the groundwork for HOAs to operate under.
  • Fair Housing Laws. Many states have their own fair housing regulations that offer state-level protections to homeowners.

The HOA's Governing Documents

Finally, homeowners associations are also regulated by their own internal governing documents. These documents typically consist of the following:

  • Articles of Incorporation. A homeowners association's Articles of Incorporation are a legal document that is typically filed with the state. They formalize the organization as a legal entity, describing its mission, structure, and authority. It normally includes information such as the name, location, and original board of directors of the association.
  • Bylaws. This document contains the HOA's rules that regulate its internal operations. They define meetings, elections, and decision-making processes, as well as the powers that the board of directors has. It also describes the reasonable restrictions placed on assessment collections. Bylaws also outline homeowner rights and responsibilities within the community.
  • Declaration of Covenants, Conditions, and Restrictions. An HOA's CC&R contains rules that define real property use within the boundaries of a community. They set architectural standards, oversee landscaping, and more. The association's power, assessment procedures, and enforcement mechanisms are also outlined in the CC&R regulations, assuring a consistent and well-maintained neighborhood.

The Rights and Powers a Homeowners Association Has

Individual homeowner's associations have varying degrees of legal authority, depending on state law and other factors. In general, these private legal entities have the legal right to establish and implement community bylaws, such as limiting smoking in certain areas or restrictions on the kind of pets that homeowners may have.

Community associations also set construction budgets and have the right to impose either recurring or one-time fees to their residents. Furthermore, property owner associations can apply a variety of penalties if an owner refuses to pay their dues or comply with the community standards.

In many circumstances, these consequences can involve monetary fines, restrictions on their access to shared spaces, and even lawsuits and foreclosures.

Responsibilities and Duties

Homeowners associations also have a number of duties and responsibilities. Let's take a look at some of them.

Maintenance and Repair in Common Areas

One of the primary functions of property owners associations is maintaining common areas and facilities.

Many planned communities have shared features, such as clubhouses, swimming pools, or parks. Homeowners associations are often instituted to regulate and maintain these areas. This includes duties such as mowing the lawn, cleaning the pool, or repairing a damaged roof in shared areas.

Enforcing Rules and Regulations

It's important to remember that community associations are designed to maintain property values, and to do so, it has to create and enforce their own rules. This might include certain restrictions, such as the type of fencing used, to ensure consistency in the community.

Managing Finances and Preparing Financial Records

HOAs are designed to maintain common elements, which will require the use of funds. These funds come from homeowners, and to ensure transparency and the proper management of the money collected, the organization must prepare budgets and financial statements.

The truth is that this might seem like a behemoth of a task. However, there are intuitive tools available that make it easier to ensure transparency and accuracy. DoorLoop is designed to streamline your workflow and ensure that your HOA is compliant. More on our HOA management software later!

Scheduling Regular Meetings

Lastly, homeowners associations must ensure that they schedule regular meetings. This is because community members are required to be a part of the decision-making process. They have voting rights, as outlined in state law, and must be updated on community activities in regular meetings.

HOA Fees

Property owners association fees, often known as assessments or dues, are obligatory payments demanded of homeowners in a controlled community.

These charges are meant to fund the costs of maintaining, managing, and improving shared community spaces and amenities. The amount and frequency of HOA fees vary greatly from one homeowners association to another.

Essential services such as landscaping, common area upkeep, insurance, security, and, in some circumstances, utilities are often funded by the fees collected by these organizations. HOA fees also go toward reserve funds, which are set aside for major repairs, replacements, or unexpected expenses.

The association's board of directors creates the association's budget, which determines the value of HOA fees. Moreover, the board takes into account things like ongoing maintenance expenditures, expected spending, and the requirement for reserve cash.

An HOA may levy monthly, quarterly, or annual fees, and failing to make payments may result in penalties, late fees, or even legal action, which we will discuss in the next section.

Before purchasing a house in a planned community, homeowners must grasp the specifics of HOA costs. They should examine the association's financial health, budget, and fee increase policies.

While HOA payments contribute to the general welfare of the community, it is critical for homeowners to be informed of their financial commitments and participate in the association's decision-making procedures.

Fines, Liens, and Foreclosures

Property owners associations have processes in place designed to enforce community rules and collect unpaid fees. In the event that a homeowner fails to make payment, they may face penalties, which could involve fines, liens, and, in extreme cases, foreclosure.

Fines

Community associations can impose fines for violations of community rules as described in the organization's Declaration of Covenants, Conditions, and Restrictions (CC&R). Common violations include architectural non-compliance or a failure to adequately maintain the property.

In many states, the law requires HOAs to provide sufficient notice and allow the offending member the opportunity to be heard and to rectify the violation.

Liens

However, if the delinquent homeowner fails to make payment after being issued fines, the HOA may take further action.

This involves placing a lien on the home. A lien is a legal claim against the property that provides a homeowners association the right to collect unpaid dues or fines when the property is sold or refinanced.

Foreclosure

In extreme cases of non-payment, a community association may initiate foreclosure proceedings. This allows it to take possession of the home and sell it to recover the outstanding debts.

It's important to note that most states have laws in place that govern foreclosures, so it's important to familiarize yourself with these regulations.

The truth is that foreclosure is often a last resort, and community members are typically given multiple warnings and opportunities to pay the outstanding amount before their home is foreclosed.

Homeowners have a responsibility to pay their dues and must be aware of their rights and obligations. They can do this by taking the time to read and understand the association's rules, attend meetings, communicate with the HOA if there is a problem, and participate in community affairs.

Membership

The reality is that the law in some states makes it compulsory for homeowners to join homeowners associations. This means that in these areas, property owners are obligated to become members and will be required to pay regular assessments for the maintenance of common spaces.

However, in some states, the law is silent about membership, so it is left to the HOA board to decide whether membership is essential. In these states, new homeowners who move to an area managed by a mandatory HOA will be obligated to become a member.

On the other hand, those who live in areas regulated by voluntary associations can choose to become members and may leave at their own discretion.

In most cases, the real estate agent will provide the new homeowner with more information about the association upon the closing of the sale.

Dissolution

If an HOA's leaders feel that it would be best to dissolve the association, this is typically done by obtaining a vote from the community members.

Although the specific requirements for dissolution will vary from one state to the next, the general rule is that a majority vote must be obtained in order to proceed.

Once a majority vote has been obtained, the HOA board members will need to settle any outstanding debts and sell the organization's assets.

After this is done, they can file the Articles of Dissolution with the Secretary of State. In most cases, the process for dissolution is included in the association's governing documents.

The Pros and Cons of Instituting a Property Owners Association

Now that you have a comprehensive understanding of what a community association is and how it works let's discuss the benefits and drawbacks of instituting such an organization in a community.

The Advantages That a Homeowners Association Offers

A property owners association offers its members stability and structure through the establishment and enforcement of rules and regulations. This is done in order to preserve and enhance the property values of all units or homes in the neighborhood.

The rules frequently have to do with aesthetics and will include guidelines for the neatness and appearance of the property, its condition, and any repairs made to it. Typically, association guidelines are intended to help ensure a consistent appearance throughout the neighborhood.

Furthermore, HOAs take care of the maintenance of shared spaces, ensuring that they are well-kept and in good working condition at all times. They also offer dispute resolution and can enhance community engagement.

These associations are also mindful of security needs, which contributes to a safer living environment for all.

The Disadvantages of HOA Management

Like all things in life, there is a downside to implementing HOA governance. The costly nature of professional administration is one major downside of having such an organization manage the community, which could discourage some interested buyers.

Furthermore, the rules and restrictions may appear unfair, arbitrary, or unreasonable to certain residents who desire the freedom to personalize their homes to suit their needs and preferences.

In addition, board members are often community volunteers who may lack the necessary training to oversee property management, handle complex financial matters, or bring together a diverse group of people for a shared goal.

Fortunately, there are solutions to this problem. Our dedicated HOA management software is designed to automate tasks and streamline HOA operations. It can help to ensure a more efficient and professionally managed homeowners association.

The Difference Between Homeowners Associations, Property Owner Associations, and Community Associations

Although we use these terms interchangeably, there are differences between the terms "homeowners association," "property owner association," and "community association" that you should know about.

The majority of homeowner associations are incorporated. This means that they are governed by state legislation. Some states, however, regard condominium-based associations that oversee cooperatives (known as co-op boards) to be separate organizations.

This distinction is based on the notion that such entities' interests in property differ. As a result, the phrase "community association" has come to function as a general term that includes co-op boards, homeowner's associations, and condominium complexes.

A "homeowner's association," on the other hand, is not the same as a "property owners' association." This is a broader word that is typically used when making reference to a group of individuals who have a desire to improve their community.

The key difference between these two entities is that a "property owners' association" can encompass anyone in the neighborhood who has an interest in improving the market value of the community's real estate, including non-homeowners.

Learning About HOAs: Next Steps

The successful operation of a homeowners association starts with a comprehensive understanding of HOA laws. However, the information we have provided here is generalized and lacks specific details about each state.

The good news, however, is that we have created an overview of the laws in place in each state, so you can visit those regulations for more state-specific information. It's worth noting, though, that these articles are not meant to provide legal advice. To truly ensure that your HOA is fully compliant, it's best to consult an experienced attorney, who will provide more insight into the regulatory framework in place.

Streamlining HOA Operations with DoorLoop's Intuitive Tools

As we have just seen, homeowners and condominium associations are multi-faceted organizations that are governed by a myriad of laws. Managers, board members, and executives have a responsibility to ensure that they don't just understand but also abide by the applicable legislation.

Trying to manage a homeowners association without the proper tools can be a tiresome and overwhelming task. The good news is that we have made property management software more accessible.

With DoorLoop's HOA management software, you will have all you need to generate flawless financial statements, receive and keep track of assessments, create budgets, and communicate with members.

You'll also be able to store everything in one place, ensuring transparency and the retention of records, as required by state laws.

Plus, you can expect world-class support from our competent team and incredible ease of use, which makes managing your day-to-day activities more enjoyable.

If you are hesitant to get started, please sign up for a FREE demo and test it out first - risk-free! Contact us today to learn more about this offer.

Closing Comments

In this article, we have provided a general overview of homeowners associations and the rules that govern them.

However, it's important to understand that state laws vary, and it's important to conduct additional research to ensure that you have a good understanding of how your association should be run.

We have created a guide to the laws that apply in each state, so please browse through them to find more information on the regulations that will apply in your state.

You will also find additional resources at the end of this article, so be sure to check those out!

Frequently Asked Questions

1. How many property owners associations are there in the United States?

According to statistics from Elireport.com, there are roughly 350,000 homeowners associations in the US, which amounts to approximately 53 percent of the properties occupied by owners.

2. What is the largest homeowners association in the US?

The Association of Poinciana Villages in Florida is the largest homeowners association in the United States. It has over 100,000 members.

3. What is the purpose of a homeowners association?

HOAs exist for the betterment of their communities. They are responsible for establishing and enforcing certain rules and regulations and for maintaining common elements in a neighborhood. By doing so, they enhance property values and ensure a more uniform and well-run community that is safe.

Most of the rules established by these associations have to do with the aesthetic qualities of the neighborhood. This ensures that the area is attractive and appealing to potential buyers.

4. What can a homeowner expect to pay in fees in an area governed by an HOA?

The truth is that fee amounts vary greatly from one HOA to the next. The average HOA fee in the US is $170, according to Bankrate.com, but the amount that is charged will depend on factors such as:

  • The location
  • Property values
  • The size of the community
  • Inflation
  • Changes to the minimum wage
  • The kind of maintenance and repairs needed
  • Increase in the cost of materials and supplies needed for maintenance practices
  • The cost of hiring staff and contractors to conduct maintenance and administer the HOA's tasks

5. Are HOA governing documents public records?

Each state will have its own laws and regulations regarding governing documents. These documents are public records in some states but may only be obtained by approaching the association directly in others.

6. What is a homeowners association?

HOAs are legal entities that have the right to enforce their own rules and regulations. These organizations are subject to federal, state, and local laws and also to the regulations set out in their own governing documents.

Homeowners associations conduct repairs and maintenance on common areas and shared utilities to ensure that these facilities are in good working order and available to the community for use.

Members have the right to vote on important decisions, and they are required to pay the HOA assessments to cover the cost of maintenance practices.

7. Can homeowners take legal action against a homeowners association?

Yes. If the association violates any state, federal, or local laws, a resident can hire a private lawyer and take legal action against the association.

They can also file a complaint with a number of federal or state agencies, such as the United States Department of Housing and Urban Development. This is why it is imperative that HOA managers and board members understand how to handle complaints and disputes.

Resources:

David is the co-founder & CMO of DoorLoop, a best-selling author, legal CLE speaker, and real estate investor. When he's not hanging with his three children, he's writing articles here!

Legal Disclaimer

The information on this website is from public sources, for informational purposes only and not intended for legal or accounting advice. DoorLoop does not guarantee its accuracy and is not liable for any damages or inaccuracies.

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