Buyer Beware when purchasing in a restricted community
As Home Inspectors, we do not have expertise in how restricted properties are managed, or review their documents, however, buyers ask questions regarding what they can or cannot do regarding making changes to their property. We also find deficiencies that may be the responsibility of the HOA.
Therefore, if buyers (s) are looking to purchase a home in an HOA-controlled single-family or condominium housing project, they should do their due diligence before signing a contract to purchase.
I have lived in restricted communities and served on their Board of Directors including the office of President. I do have some knowledge of how HOAs are managed and operated.
In 2018 legislation was passed whereby the HOAs must make rules, regulations, governing documents, and amendments available to members upon request.
I recommend before you make an offer on the property that you request a copy of the Declaration, Master Deed, and Bylaws which outline the rights and responsibilities of members and the Home Owners Association (HOA), and include how the Home Owners Association will operate. The documents include information on meetings, dues, special assessments, elections, and dues collection policies.
In addition to the Declarations, Master Deed, and Bylaws, you should ask for a copy of the Rules and Regulations also referred to as Covenants, Conditions, and Restrictions or CC&Rs. The CC&Rs limit your uses of the property, and how you can make improvements to the property.
Simply put, CC&Rs are just the rules you’ll have to follow if you live in that community. Unlike zoning regulations, which are government-imposed requirements on how the land can be used, restrictive covenants are established by HOAs to maintain the attractiveness and value of the property.
Restrictive covenants differ from community to community, but here are some you can expect to see:
Permissible colors for exterior house paint
Minimum property and landscaping standards to include the use of flags, solar lights, plantings
Types of fencing allowed
Color and types of window treatments allowed
Limitations on the type of security lights you can attach to the house
Controls on installing sporting equipment such as a basketball hoop in the driveway
Restrictions that limit vehicle storage or recreational vehicle parking
Curbs on property uses that generate noise or smells (e.g., raising livestock)
Rules on commercial or business uses of land reserved for residences
What happens if you break or violate the HOA rules or can’t pay your HOA fees? First off, rest assured that most lending institutions take the HOA fee into consideration when they write up your mortgage. In other words, they evaluate your monthly income compared with your monthly expenses, and they won’t make a loan on the desired property unless they feel you can safely cover everything: your mortgage payment, taxes, and HOA fees.
If you break your HOA’s rules, the consequences could be severe, and potentially, HOA management could evict you from your property. Fall too far behind on paying HOA fees, and the penalty could be the same as if you fail to make your mortgage payments.
There are many Pros and Cons of living in HOA-controlled communities. Home Buyers weigh a laundry list of factors before purchasing a home. Location, price, size, and style are all taken into consideration. But for some, a home in a community with a Homeowners Association could either sweeten the pot or be a major deal breaker. You need to make a list of pros and cons and determine what best fits your lifestyle.
By: John Schuler
J&H Home Inspections