Under terms established by covenants (agreements) that were recorded when a neighborhood or condo complex was first built, a home owners association (HOA) may have powers to set rules for the neighborhood, control alterations to homes or landscaping, and assess fees to maintain the neighborhood and/or the buildings. We you buy a home under the jurisdiction of an HOA, you’re effectively buying into a corporation which may have rules you’re not comfortable with and which may have debts that you’re assuming part of. We’ll routinely obtain the minutes of HOA meetings, the financial statements of the HOA, and the rule,
A4HB Homebuyer's Blog
In addition to recorded covenants, most town home or condominium associations have unrecorded rules and regulations that you will have to live with. You need to review these and make sure you are comfortable with them. It is also a good idea to review the minutes of recent association meetings to familiarize yourself with the issues that are of concern to current owners in the complex.
The unit that you are buying may be immaculate, but if the complex as a whole is poorly cared for you may have a very difficult time selling. In most cases, if you see that the complex has not been well maintained, you will find that the financial status of the association is less than ideal.
Larger condo complexes in our area typically have professional management. They will have detailed budgets and projections for future repairs and maintenance. Smaller associations may be managed by one of the owners in the complex, the landscaping may be taken care of by the owners, and the owners may routinely deal with major repairs by requiring everyone to kick in $500 to cover costs. You need to know what the management style of the association is and make sure that you’re comfortable with it.
If the association needs to replace the roofing or resurface the parking lots, or build a new road or water system, they will need money to cover the costs. If they don’t have the money in their reserve accounts, they will either have to assess every owner for a portion of the costs or they will have to borrow the money and raise association fees for owners to cover the loan payments. If they are going to assess you $1,000 in excess of normal association fees, you need to take this into account. And if they raise association fees above