What You Need to Know About Homeowners Associations

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indiana chapter 7 bankruptcy means testHomeowners associations are the source of far more controversy than many people realize. According to the Indianapolis Business Journal, some homeowners associations in Indiana have begun banning the use of homes in their neighborhoods for short-term rentals, because they believe that renting out homes for less than 30 days brings down property values in the area. Per the Rockland/Westchester Journal News, a board member of a homeowners association was recently charged with second-degree grand larceny for stealing nearly $100,000 from the HOA.

While your homeowners association may not be involved in anything as nefarious as that, it does not mean that you should assume that your HOA is always working in your best interests. You need to know what your homeowners association is up to and how HOAs are supposed to work so that you can ensure your rights as a homeowner are not being violated.

What is a Homeowners Association?

Homeowners associations are organizations formed to oversee condominiums, planned communities, and subdivisions. HOAs have jurisdiction over issues within their neighborhoods such as what types of structures homeowners can build on their property, landscaping rules, and restrictions on street parking.

Do I Have to Join the HOA?

Yes. If you buy a house in an area governed by a homeowners association, you are joining it. Buying the home signifies a contract with the HOA, so you are automatically part of it. If possible, review the terms of the HOA before you close the deal on the house.

How Do Homeowners Associations Work?

While not all homeowners associations are the same, generally, most homeowners associations are structured similarly. In most cases, if someone moves into a home in the HOA’s jurisdiction, they are required to become members of the homeowners association. Most HOA’s rules are listed in a document known as a Declaration of Covenants, Conditions & Restrictions (CC&Rs). The CC&Rs gives the HOA a lot of legal power to govern property owners in their neighborhoods/buildings. To enforce the CC&Rs, a board of directors, often composed of property owners who reside in the HOA’s jurisdiction, is elected.

How Much Should Homeowners Association Dues Cost?

Knowing how much you can be charged for homeowners association dues under the law can often save you a great deal financially and help you ensure that the dues you pay are spent properly. HOA dues are collected to pay for cleaning, landscaping, and maintaining common areas, like neighborhood parks, basketball courts, and swimming pools. HOA dues are sometimes collected monthly and other times annually. Depending on the area’s property value, dues can range in cost from under $100 a month up to over $10,000. If property owners fail to keep up with their dues, the HOA may be able to charge them late fees or even put a lien on their property. In addition, HOAs can charge fees for violating neighborhood rules.

Can I Find Out If My Homeowners Association is Using My Dues Properly?

You should never just blindly assume that your homeowners association is spending your dues properly. You need to know what they are using your dues for and why. This means asking questions, consulting with an attorney regarding the CC&Rs, attending HOA meetings, and even getting involved with the HOA as a board member.

What Questions Should I Ask About My Homeowners Association?

Whether you have just joined a homeowners association or have been a member of one for years, there are always questions you should be asking, including:

  • What are the rules in the CC&Rs?
  • If you are considering buying a property in the neighborhood, does the property already comply with the CC&Rs?
  • How much are the HOA dues?
  • What are the HOA dues used for?
  • Can I get copies of the minutes from HOA meetings?
  • What are the penalties for violating the terms of the HOA?
  • Do the HOA dues increase? If so, how often and how much do the fees increase?

It is often a good idea to discuss any issues or questions you have about a homeowners association with a real estate lawyer. You never know. It could end up saving you money and helping you avoid legal problems in the future.

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