The landscape of things that intrude on your life has quietly changed over the last 30 years. Since the 1980s the focus has been on government intrusion but there are new players that can stick their collective noses into your life in ways the government would have neither the interest nor the resources to pursue.
These organizations can tax you, sometimes in excess of what you’re paying to other government entities and sometimes more than what you’re paying for your house. They can tell you which colors you can paint your house, how long your grass can be, when you can put your trash cans out, and dictate whether you can work on your car in your own driveway. In some instances they can demand to know who is staying at your house and for how long. They can make your guests produce photo ID and register, putting strict limits on what they can do while staying with you. They can tell you what kind of car you can drive and whether you can rent out your house. They can also decide to change those rules, at any time in the future, and you’re stuck with whatever those changes may be. Fail to comply and they can fine you, take you to court and, if the standoff goes on long enough, they can seize your home.
Like many things in real estate these days, Homeowners Associations or HOAs, started off with the best intentions. Most began as informal groups of neighborhood residents banding together to improve security and maintain property values. While most are relatively benign, many have become both intrusive and abusive and a few border on criminal. Membership in an HOA or common interest development is considered voluntary in the eyes of the law and courts have consistently sided against individual owners when disputes end up in court.
The power of HOAs and common interest developments has grown quietly over the years and regulation has not kept pace with their intrusive latitude. For many people living in the suburbs or urban areas, HOAs and common interest developments are a major force intruding upon and dictating their daily lives. Some new buyers have found themselves on the hook for thousands of dollars in special assessments mere days after closing on a new home. In other instances buyers have seen dues rise to shocking new highs, sometimes amounting to more than their house payment. In other neighborhoods the CC&R, or Conditions, Covenants, and Restrictions have grown so draconian over the years that they dictate even the smallest aspects of daily life.
Perhaps more ominous few states have per se liability if HOAs or common interest developments don’t provide proper documentation of financial management. The crooked players in real estate have realized that common interest developments are cash cows and, if they can find a way to siphon off the money from your neighborhood association, few states provide for any kind of liability if they then destroy the evidence. Corruption and mismanagement are rampant. Most of the financial reports issued by HOAs and common interest developments are mere summaries that are cranked out by software. Without regular auditing it is difficult to prove fraud.
Once you sign the papers for an HOA or common interest development, you’re on the hook for better or worse. There was a time you could gloss over HOA agreements but those days are over. Read the CC&R, and demand the board of directors minutes and review them for any potential special assessments. Every common interest development has a reserve fund so ask for a copy of the Reserve Study to understand any upcoming repairs. Also review the community governing documents, including the plat and recorded community plan.
Getting hooked by a bad HOA or community interest development can make the worst government intrusion seem like a day in the park. Because of the voluntary nature of the associations, seeking relief in the courts will likely be unsuccessful. While courts have provided some accountability and liability for the very worst abuses, the realm of HOAs and common interest developments is still guided by the rule of buyer beware.