When buying property in a common interest development (“HOA”), one automatically becomes a member. Here are 14 items to consider before closing escrow:
Read the CC&Rs. CC&Rs are covenants automatically binding all association members when they take ownership without need of a signature. Read this document before taking ownership, not after. Look for restrictions regarding how your property is used – Are there pet limits? Can you park RVs in driveways? In a multi-story building, are there restrictions against hard floors? You need to know first, not later.
Review the reserves disclosures. Prudent associations set aside money each month to offset the ongoing deterioration of major capital components (roofs, asphalt, paint, etc.). Associations with little money saved in reserves may need special assessments or long-term loans to fund major refurbishments. Underfunded reserve accounts are a form of hidden debt not reflected on the balance sheet.
It isn’t about “me,” it’s about “us.” Common interest communities are just that – communities. Shared ownership also means shared control, which means you can’t just do anything you want (nor can your neighbors).
Is it managed? California HOA law is so complicated it is difficult to operate one without a professional manager. If the association has volunteer management, it is probably innocently violating many laws (and the board is probably working too hard as free community managers).
Other things to consider:
The directors on the board are also homeowners and pay the same assessments as you. They volunteer their time to handle things you don’t have to worry about. To understand more and be involved, volunteer for the board.
California requires no license or credential to manage associations, so ask about the manager’s credentials.
If buying a condominium, understand that “common area,” the shared property, is probably a lot more than you think. It may include even the drywall underneath your paint, or the floor underneath your carpeting.
In associations it is NOT better to ask for forgiveness than permission. Check the architectural requirements, as you may be required to apply to the association before making changes to your home or yard.
Never assume it’s OK to ignore a certain rule or restriction because the board appears to not enforce it. The board’s enforcement actions are normally in closed session, and you may be unaware of the board’s actions against violators… until you become one.
HOA managers don’t make decisions, unlike apartment managers, but advise the board and then implement board decisions and policies.
Directors have no individual power to make decisions – HOA leadership is a team sport, and boards make decisions by majority vote.
Very small HOAs often operate very informally with less compliance to laws or the documents, more akin to a small partnerships than associations.
Download CAI’s informative “First Time Homeowners Guide to HOAs” at caionline.org. Use the search box to find this free 5-page publication.
It’s all about being good neighbors. Consideration is the key to happy and successful association living. A self-centered focus leads to conflict and unhappiness with one’s HOA neighbors.
It’s not just paperwork. Look before you leap! Going in with eyes open helps you to embrace the benefits (and responsibilities) of HOA living and increases your chances of enjoying a positive ownership experience.
Kelly G. Richardson CCAL is a member of the College of Community Association Lawyers and Partner of Richardson Ober LLP, a California law firm known for community association advice. Send questions to Kelly@roattorneys.com.