About Homeowners’ Associations (HOAs)
Nearly one in five Americans resides in Association Governed Housing, over 67 million people. Over the past 5 decades, local governments have created land use policies that strongly favor or require establishment of Association-Governed Residential, Common Interest Developments (CIDs). As a result, most new development is burdened by a set of covenants, conditions and restrictions (CC&Rs). Common ownership also exposes consumers, especially homeowners, to numerous financial risks.
The governance model of “modern” HOAs established in the past 4 decades is almost always corporate, resulting in a privatized form of local governance directly affecting individual property rights, Civil Rights, and civil liberties of its owners and residents.
Generically known as HOAs, planned or private communities come in all shapes and sizes: detached and attached single family homes, low-rise and high-rise condominiums, converted apartment buildings or historical structures, townhouses or “twin” homes, and villas. Some HOA communities combine several different housing types within one Large Scale Association or Development District.
While mandatory membership HOAs can vary in size from a few homes to many thousands of homes, they share certain characteristics:
- Portions of the property within the community – green space, interior and exterior common spaces, common use building structures, recreational amenities such as pools or sports facilities – must be maintained with funds collected from every member of the Association.
- Most HOAs established in the past 3 decades require mandatory payment of assessments to cover costs to insure, maintain, repair, and make future improvements to common property of the Association. Owners are also jointly responsible for defending all legal and financial interests of the HOA, with authority vested in a board of directors/trustees.
- Upon purchase, owners are legally bound to abide by all Covenants, Conditions, and Restrictions (CC&Rs) or Declarations of Condominium that were in effect at the time of purchase, as well as any future changes to those legal documents, including Board-enacted Rules and Regulations.
- The Board of an Association has broad authority to enforce all terms of the CC&Rs, Rules, and Regulations. The Board also has substantial authority and fiduciary duty to manage the financial resources and ongoing operation of the Association.
- Association-Governed and Common Interest Developments are almost always created of, by, and for a Developer, who appoints the Board of Directors during construction phases. A developer or affiliated party may retain full or partial control over the community for several years or decades, depending on the organizational structure of the association and/or special district(s), if any, subject to state law.
- The Association-Governed Community is usually established as a non-profit, not-for-profit, or mutual benefit corporation, with governance principles based on a corporate model rather than principles of the U.S. democratic republic. Some Associations are set up as corporations with commercial enterprises that operate for profit.
- As construction nears completion, control should gradually transition to a volunteer, elected Board of Directors, governed under the same Developer-created CC&Rs and corporate ByLaws. For the most part, volunteer leaders are not legally required to possess relevant leadership, financial, or management skills in order to serve on the Board of an Association.