Real Estate News

September – Real Estate Newsletter

Lots of people love their Home Owner Association (HOA). They appreciate the way that a volunteer group of home- owners safeguards the appearance of an entire residential community and, in the view of many owners, protects their property values. The way that an HOA protects home values is to make sure that all owners in the community follow the same set of maintenance standards and architectural guidelines. (While HOAs can be found in various kinds of communities, including condominium complexes, this story deals with single-family home communities.)

Contrary to some urban myths, the majority of HOAs are popular with their homeowners: 70% of residents say their association’s rules protect and enhance property values, according to the Community Associations Institute, an HOA trade group.

For other homeowners, however, HOAs are a source of bitter controversy. Typically staffed by people with little training in either law or public administration, HOAs sometimes get into protracted quarrels with neighbors they view as rule breakers. In some cases, conflicts between HOAs and homeowners descend into personal spats that seem never to end.

Mixed Results

The tranquility of a beautiful and orderly community is sometimes undermined by conflict and disagreement that can occur, particularly when HOAs attempt to discipline homeowners they view as non-compliant And with the power to place liens on property and even foreclose, HOAs can be formidable adversaries.

“Before now, associations rarely, if ever, foreclosed on homeowners,” reports the Associated Press. “But today, encouraged by a new industry of lawyers and consultants, boards are increasingly foreclosing on people 60 days past due on association fees.”

Clearly, a small number of HOAs can be a little too strict, or, in other cases, possibly a little lacking in human empathy. Take the case of a 90-year-old war veteran and winner of the Congressional Medal of Honor in Sussex County, VA, who had a long quarrel with his HOA over his right to have a flagpole in his front yard to fly the Stars and Stripes. (The White House and several Congressmen expressed support at one point.) Eventually, the HOA relented.

In another case, an HOA in Rancho Santa Fe, CA, fined and threatened foreclosure on a resident for growing too many roses. After losing in court, the homeowner was forced to pay $70,000 in legal fees, subsequently losing his home in a bank foreclosure.

In a particularly odd case, a retiree in Long Beach, CA, who walks with a cane was fined $25 multiple times for failing to carry her cocker spaniel through a public lobby. In yet another case, an HOA forbid a homeowner from operating a business inside his home, even though his business activity was undetectable from the outside.

In many cases, such conflict is unnecessary: Some people who buy homes in HOA-controlled communities do not take the time to learn about all the obligations and restrictions, sometimes quite a long list, that are set down in what are known as Codes, Covenants & Restrictions (CC&Rs). And people who don’t know the rules can sow trouble for themselves and their neighbors alike.

HOAs originated way back in 1844 and for many years existed primarily as a way to exclude minorities from “private” housing developments. The popularity of HOAs took a sharp leap in 1963, when the U.S. government authorized federal home mortgage insurance exclusively for homes in subdivisions that had HOAs. Mortgage insurance was intended as an incentive for people to buy homes in decaying inner-city neighborhoods, but had the unintended effect of encouraging developers to create hundreds of HOA communities in the suburbs. The federal highways program, which provided fast-moving roads for commuting between home and urban work places, further facilitated the process.

Dramatic Membership Growth

In the last half century, HOAs have mushroomed in number to about 323,000 associations nationally, according to the Foundation for Community Association Research. Currently, nearly one quarter of new homes in the country are governed by HOAs, according to the same group.

HOAs are created by homebuilders as a way for owners, or their representatives, to handle the responsibility of collecting monthly dues for landscaping and common-area maintenance. In addition, HOAs typically administer a reserve fund that can pay for some unforeseen event, such as a costly repair, without requiring homeowners to pay any additional fees.

In the name of preserving property values and “keeping things nice,” HOAs rely on a set of CC&Rs. Often created by the original home builder, these rules are intended to ensure a uniform set of maintenance standards for all homes. And HOAs can create new rules, as they see fit.

Strict Guidelines on Appearance

Often quite extensive, these rules typically specify which paint colors are to be used on the home exterior. Rules also apply to landscaping and grass, even down to the kinds of turf and flowers that owners plant. Attempts to individualize the appearance of a home, with statues, signs or painted designs and symbols can all run afoul of some HOAs.

In some cases, a few HOAs can be unreasonably inflexible or even downright ec­centric in their restrictions. Critics, for their part, accuse HOAs of sometimes usurping the rights of homeowners, such as First Amendment protection to freedom of expression. In the view of one


“First-time homebuyers are still at a historically low share, less than one- third of buyers in June, compared to the historical norm of about 40%. The supply of homes for sale on the lower end of the housing market continues to fall; homebuilders are concentrating largely on the move- up buyer, due to higher costs of construction. This is only pushing prices higher for first-time buyers, and sidelining them longer… Higher prices, however, may finally be getting potential sellers to take the plunge. More current homeowners, 61%, responding to the Realtors’ survey said now is a good time to sell, compared to 56% who felt that way in the first quarter of this year.” –CNBC legal expert, in fact, HOAs are “private governments” that are difficult to challenge, sometimes even in court.

Some HOAs Criticized

Evan McKenzie, a University of Illinois- Chicago political science professor and author of Beyond Privatopia: Rethinking Residential Private Government, said in a recent interview that “there’s no training or actual requirements” for board positions. “This means the people in charge often don’t understand the most basic requirements of the law,” he adds.

Horror stories about HOAs, in fact, have become part of the folklore of American real estate. Overreach by the HOA is a common complaint. HOA rules may limit the paint colors owners can use on their homes (as was mentioned earlier) and even the color of the front door. Certain vehicles, such as large trucks and extra- long trailers, may be prohibited outright. All other cars may be required to be parked out of site inside garages. Grass must be green and neatly clipped, while the size of garden and even the kind of – flowers that the owner may grow, are also regulated.

Freedom vs. Predictability

In a sense, the controversy over HOAs represents the clash of two positive forces: One is the desire to maximize property values by banning eyesores and shoddy maintenance.

The desire for a clean and orderly neighborhood, however, runs counter to the deep American belief that one’s home is one’s castle and its appearance is a badge of personal freedom. “I’ll never live in a HOA, even if it was a mansion that cost $1,” writes one dissenting homeowner on an anti-HOA website.

HOA Positives

HOAs can offer and sustain home values, according to Lori Loch Lee, a member of Professional Community Association Management, a trade group for HOAs. She lists 10 positive goals of home- owner associations:


“If you own a home, chances are good that you saw it rise in value again. Property information provider CoreLogic reports housing prices were up in May both year-over-year and month-over-month. Their Home Price Index (HP1) jumped by 5.9% from the same month a year ago, and was up 1.3% from April. ‘Housing remained an oasis of stability in May with home prices rising year over year between 5% and 6% for 22 consecutive months/said CoreLogic Chief Economist Dr. Frank No thaft. The consistently solid growth in home prices has been driven by the highest resale activity in nine years and a still-tight housing inventory.”

First, amenities and common areas remain attractive and well-maintained. Plus, an HOA may offer an “increased number of amenities, such as walking trails, sport courts, swimming pools, barbecue pits and neighborhood parks.” Homes are esthetically pleasing, she adds. “Just take a drive through your community and you’ll see.” Meanwhile, rules and regulations deter “nuisance activity” and “promote conformity.”

HOAs offer “an added layer of support in dealing with neighborhood property issues,” by enforcing the local municipal code as well as HOA rules.

HOAs are also socially positive, by promoting community bonding and communication among neighbors, according to Lee. Owners feel community pride by living in an “attractive, well-run community.”

The associations also offer “financial stability” to homeowners, she writes. A well-managed HOA has reserves available for future repairs and improvements, “thereby reducing the likelihood of special assessments down the road.” Common areas are cared for by “trained professionals.”

The Number One benefit, according to Lee, of living in a well-managed HOA are “properly protected property values.”

Know Your CC&Rs

Even though the majority of home- owners in HOA-governed communities like their homeowner association, some HOAs are clearly easier to deal with than others. To minimize the possibility of disputes, people who contemplate buying a home in an HOA community should do their homework first.

One good idea is to talk with more than one homeowner in the target community, to see if residents are happy with their HOA, and whether the homeowners’ association acts in a reasonable and respectful way toward homeowners. (It’s not always possible to please everyone, however: In some cases, homeowners can be irascible and will resent any attempt to have rules enforced on them.)


“Total business investment has declined as the energy sector continues to suffer from depressed oil markets, but there are indications the economy … regained momentum in the second quarter. Retail sales (continued) to grow and sales of existing homes rose to their highest level in nine years, reaching a new peak in May. Spending on home construction and remodeling has grown this year at the fastest pace in more than three years. Economists expect the expansion, now in its eighth year, to continue at a modest pace.”- Welch & Forbes

Another critical point is to read the list of CC&Rs yourself. You may ask a second person, perhaps a real estate attorney, to read the CC&Rs and discuss them with you, so you know exactly what is expected of homeowners in a given community. Perhaps the rules conform to your personal ideas of what you’d like to see in your neighborhood: good maintenance, beautiful common areas and no rusting cars sitting on concrete blocks in your neighbor’s front yard.

HOAs and the Law

Ilona Bray, a legal writer for Nolo Press in Berkeley, CA, recommends that before homeowners protest a decision by the HOA, “make sure to review the CC&Rs and see whether your own actions were allowable or were, in fact, done in violation of the rules,” she writes in

“If you have a major dispute and believe your HOA is out of line, you can take legal action,” says Bray. Because an HOA is a legal entity, “you can file a lawsuit against it and ask a court to get involved. A judge can order the HOA to obey its own rules,” she adds. “A court can even decide that a certain rule is unfair or unconstitutional and order it to be stricken or removed from the HOA governing documents.”

At the same time, Bray urges caution. “Taking further action can create a negative relationship with your HOA and fellow homeowners who may, after all, be your neighbors for the long term,” she writes. “You don’t want to get into a downward spiral such that you feel your only option is to sell your home and move.”

A Choice of Priorities

In the end, the choice of living in an HOA community comes down to a highly personal question: What is more important: Maintenance that preserves property values, or the freedom to do, or not do, with your home as you please? Only you can answer that question.

Thinking about buying into a HOA-governed community? Does the idea of an entire community looking clean and uniform conform to your ideas of a sound real estate investment? Or looking for a home without an HOA? Give us a call.