I had a potential buyer call me about possibly moving to Colorado from another state recently. The buyer was interested in the Boulder area, wanting to be near shopping, dining, and entertainment. During that conversation, the buyer said "under no circumstance do I want to live in a community with an HOA." This stopped me in my tracks. HOA’s are not always seen in the best light however; communities put them in place to protect you, the home buyer. I know that in my neighborhood, if it wasn’t for the HOA, there would be dog messes everywhere as that is where a good portion of our dues go (unfortunately). It seems that in the Boulder/North Denver area that I specialize in, there are so few communities without an HOA and for this reason, I really had to dig deep in my explanation as to why this may be difficult to find the right home in an area without one. So here are some clarifications on HOA’s with some pros and cons.
What is an HOA?
A Homeowners Association is an entity that governs an organization in a subdivision, planned community or condominium that makes and enforces rules for the properties in its jurisdiction. HOAs also collect monthly or annual dues to pay for upkeep of common areas like parks, tennis courts, elevators and swimming pools, among other items as well. They can levy special assessments on homeowners when the association lacks sufficient reserves to pay for unexpected repairs, as well as deliver fines when the homeowner is not following the Declaration of Covenants, Conditions and Restrictions or CC&R’s as they are commonly referred to. Without HOA’s in many suburban and urban communities, there would be a lot less to be desired aesthetically and otherwise. They prevent your neighbor from painting their home undesirable colors like neon green, and the house across the street from leaving the big bunny blow up decoration out year around. They can often be misunderstood as strict, but often it is to benefit the community as a whole.
What does it cover?
Every HOA is different and it also depends on the type of community that the HOA is governing, but here is a short list of the most common items that the fees go to. It is unlikely that your HOA will cover all of the items below but there is usually at least 2-3 items on the list.
Exterior walls painting
Electricity for common areas
Insurance for common areas also referred as “exterior insurance”
Landscaping - that may include lawn maintenance & tree removal
Hallway cleaning and other maintenance like bulbs and carpet change
Parking lot maintenance
Long- and short-term replacement reserve
Doorman / courtesy officer
Swimming pool maintenance
Condominiums cash reserve is a huge item that many HOA s do not budget for. Yet without it FHA will not back financing in a complex.
Repave streets inside development
Repave parking area
What “runs” the HOA?
The true governor of the HOA is the CC&R’s. This combined with the bylaws, decide how the HOA will function including: what is allowed, what isn’t, how meetings, elections and how assessments are conducted. There typically is a Board of Directors that are elected (unpaid members of the HOA) that make sure that all the rules and restrictions are enforced. Then there is the hired management company who collects the fees, and ensures various workers (landscapers, park maintenance, etc).
What happens if I do not pay my assessment? What about a fine or a penalty?
The Declaration found in the HOA governing documents, allows the HOA to place a lien on the property. If the homeowner does not come up to date or settle with the HOA, the association has the ability to foreclose on the property. For some people it may be hard to believe that an HOA can foreclose on your home but it happens. As a matter of fact, it happened in Colorado several times in the last year. In addition, if there is a dispute for a fine or some other assessment separate from your regular dues, these payments can also add up, with extra add on fees when you do not pay your assessment. You would be surprised how quickly a $50.00 fine for leaving your Christmas lights up for too long can turn into a thousand dollar fine with the penalties assessed each month. I always tell people that are in disagreement with their HOA, pay first and dispute after, because if the judge rules in your favor they will have to pay you back, but if you lose, the fees will be astronomical.
What causes HOA fees to rise?
The assessment or fees that you pay monthly are based on a budget that is determined each fiscal year. The budget takes into account routine operation, maintenance, repairs, taxes, and in some areas: things like pest control, landscaping, paining, and of course a reserve that will cover any emergent things that may come up. If the monthly fees charged do not meet the needs required for the community the fees will adjust to compensate for that.
Resources for HOA’s in Colorado: