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What is an HOA?

March 01, 2022
Exterior of Brookfield Residential townhomes

A Beginners Guide to HOAs

Finding your dream home in today’s market is already hard enough. Add in the extra hoops that need to be jumped through when dealing with community associations, such as HOAs, and things can get downright discouraging for the first-time homebuyer. To make it easier for you, we’ve created a beginners guide to help you navigate the intricacies of purchasing and owning a home in a community association.

Keep reading to learn all you need to know about HOAs including what they are, why they exist, and the pros and cons of having an HOA:

What is an HOA?

An HOA, or homeowners association, is a type of community association that makes and enforces rules for the residents and homes of planned communities, subdivisions and condominium buildings. Homeowners associations are governed by a board of elected members of the community. If you purchase a home within an HOA, you will be automatically enrolled in it and required to pay monthly dues.

Why do HOAs exist?

HOAs exist first and foremost to maintain property values and to increase them if possible. HOAs began as more and more people began living closer together and the actions of one person began to affect the property values of another. This is why you are unlikely to see untended yards, junk cars, or brightly-colored homes in modern subdivisions. Some HOAs are more restrictive than others and some even handle community amenities such as landscaping or pools.

What’s the difference between a master association and a subassociation?

Some communities require residents to pay money to two separate homeowners associations instead of the traditional single association. This generally happens in larger communities where there are subassociations that govern a small area of the community while a master association governs the subassociations. This is very similar to state governments and federal governments as subassociations are allowed to tailor rules and dues to their specific communities while master associations look after the entire community.

What is an HOA fee? What do HOA fees cover?

HOA fees are a monthly fee charged to every resident of a community. They help pay for the general upkeep of common areas as well as any improvements and maintenance that needs to be done. Some of the areas that are usually taken care of with HOA fees include:

  • Landscaping
  • Common area patios
  • Lobbies
  • Swimming pools
  • Elevators
  • Tennis/basketball courts

Do you have to pay HOA fees? What happens if you don’t?

Yes. Everyone that owns a home or condominium that resides within a homeowners association must pay a monthly HOA fee. If you don’t pay your HOA fee on time, you will most likely be sent a letter explaining that you missed an HOA payment and be assessed a late fee when you do pay it. If you don’t pay the missed fee for 30 days, you may be assessed an additional late fee and have your access to community areas revoked. Eventually, if the fee remains unpaid, your HOA has the right to pursue legal action such as pursue a lawsuit against you or filing a lien against your property.

Are HOA fees tax deductible?

HOA fees are only tax deductible if the property is solely used as a rental property. This is because the IRS allows you to deduct the fees from your taxes as rental expenses. If the property is not solely used as a rental property, you cannot deduct your monthly HOA fees from your taxes.

Pros and Cons of Having an HOA

Now that you have a good understanding of what HOAs are all about, let’s go over some of their pros and cons:

The pros of having an HOA

  • Maintained property values
  • Well taken care of communities
  • Community amenities
  • Conflict resolution

The cons of having an HOA

  • Monthly fees
  • Restrictive
  • Can be difficult to make changes/improvements to a home that you own

Takeaway

It’s important to know what an HOA is and if the home you are interested in purchasing is a part of one. Depending on what you are looking for in a home or a community, an HOA can either be a selling point or a drawback. If you’re looking for more of the manicured, picture-perfect suburban lifestyle, becoming part of an HOA is probably for you. For more information on master planned communities and HOAs, read our blog post on “The Advantages of Living in a Master Planned Community” or contact us directly.

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