Depending on where you want to buy a home in the Denver metro area, you may be looking at communities with homeowners associations (HOAs). For every person who’s a fan, there’s another for whom this structure doesn’t work. Here are some things to consider when you’re deciding HOA yea or nay.

What is a Homeowners Association (HOA)?

Almost every HOA begins as an organizational structure that a real estate developer/homebuilder creates to manage a community of houses, townhouses or condominiums. The developer transfers ownership of the association to the homeowners after selling a predetermined number of lots. At that point, the focus of the HOA turns toward providing shared services and amenities, as well as preserving and enhancing the value of the homes in the community.

To do that, most HOAs have covenants, conditions, and restrictions (CC&Rs). CC&Rs spell out what you must, may, or cannot do as a homeowner. When you buy a home in an HOA community, you become a member of the HOA. This means you are subject to the HOA’s authority on these matters. If you don’t follow the CC&Rs, the HOA can take action against you. Action can range from requiring you to comply within a specified timeframe, to assessing penalties and fines, to filing a lawsuit against you.

Your REALTOR® can provide you with a copy of the CC&Rs for a home you’re considering. In many cases, the CC&Rs are available online on the community’s website or via phone call to the association.

HOAs incur costs to provide services. These costs are covered by dues paid by homeowners in the community. Dues will vary from one community to the next. Depending on where you live and the services and amenities the HOA provides, dues can run from under $100 a year to over $1,000 a month. Your HOA dues are counted when your lender considers how much you can afford as a mortgage payment each month.

Yea or Nay: Setting and Enforcing Standards for Your Home’s Appearance

Living in an HOA community means, among other things, that the association gets to determine what is an “acceptable” appearance for your home. It can get really specific – paint colors, where you can park your car, how often you must mow your lawn, what you may or may not plant in front yard, and how you decorate your home’s exterior for the holidays. Maybe the rules are similar to the way you would maintain your home anyway. If they feel overly specific or restrictive, the HOA community may not be for you. Your REALTOR® can direct you to communities where the CCRs are more lenient, or to non-HOA communities.

Yea or Nay: Mediating Disputes Between Neighbors

If your neighbors are hosting all-night ragers every weekend, or if they routinely leave their dog outside all day to bark, you can ask the HOA to contact the neighbors and resolve the situation. This way, the neighbor never needs to know that it was you who made the initial complaint. While it sounds great not to have to confront your neighbors, there is a potential downside. If the problem occurs or becomes unbearable at a time when the HOA office is closed, you’ll have to endure the situation until you can report it and then wait for the HOA to take action. All of that takes time and means things won’t get better immediately.

Yea or Nay: Unpaid HOA Dues Can Lead to Foreclosure

Remember how we said HOA fees are counted in the total of what you can afford to pay on your home each month? This is part of why that’s so important. If you fail to pay the HOA dues or related penalties or late fees, an HOA can file to foreclose on your property…even if you are current on your mortgage.

According to legal website Nolo.com on its page for Colorado HOA foreclosure information:

“If you default on the assessments, the HOA can foreclose. A common misconception is that the association cannot foreclose if you are current with your mortgage payments. However, the association’s right to foreclose has nothing to do with whether you are current on your mortgage payments.”

“In Colorado, the HOA may foreclose on its lien in the same manner as a mortgage lender can foreclose on a mortgage (Colo. Rev. Stat. § 38-33.3-316(11)). Since mortgages in Colorado must be foreclosed judicially, this means that the HOA must file a lawsuit in court to foreclose its lien.”

How could an HOA’s ability to foreclose on property be a beneficial thing? Consider a situation where a homeowner hasn’t paid dues in months and has let their property go to ruin after ignoring all communications from the HOA. That home’s appearance isn’t going to do your property values any good, and the longer the situation goes on, the worse the impact on the community. Foreclosure can be the necessary step to get the property available to be purchased by someone who will take care of it and abide by the CC&Rs.

What’s MY opinion on HOAs? On balance, I believe they are beneficial and that homeowners generally receive value in equal or greater measure to the rights and decisions they cede to the HOA. With that said, I also can completely understand why someone would prefer not to buy in an HOA community. I can and do help buyers on either side of this issue.

Where do you stand on HOAs?
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