A homeowners' association, also known as a HOA, is an association or corporation that's nonprofit. It is made up of property owners in the particular development it has been formed to manage. It's basically a governing body that establishes certain rules in order to manage the real estate development in a manner that (ideally) addresses the needs of individuals within the development itself.
Usually, the homeowners association elects a board of directors to manage and direct the association's activities, and board members are assigned certain duties and powers. Directors themselves have individual duties as well, and they may in fact face consequences if they do not fulfill those duties.
Homeowners within a development
In addition to the board of directors, the homeowners association is made up of all of the property owners within a particular real estate development. You must be a member of the homeowners association in order to live in that particular development.
Laws governing HOAs
HOAs are not just governing bodies unto themselves, however. They are regulated under and actually created by state law.
What can -- and can't -- HOAs do?
In general, homeowners associations are set up to take into account everyone's rights within a development. They can enforce the laws and provisions that homeowners have agreed to in order to live within the development. They can also require payment of taxes and assessments in common areas, and contract for insurance for the association. They may also hire maintenance workers, goods or services for common areas of the particular association, at the association's expense. Homeowners association members pay dues to the association itself (usually every six months) to help pay for these services, such as common area upkeep.
Because homeowners associations are governing bodies and are considered nonprofit corporations or unincorporated associations, they also have to prepare budgets and financial statements for the association and keep members apprised of how monies are spent.
They may also require that association members follow certain rules for facilities, common areas, or elicit certain agreements as to how properties are going to be maintained. They can also conduct disciplinary proceedings if members of associations have not met these rules as they agreed to when they moved into the development.
Acting in "good faith"
The homeowners association board of directors must perform their duties in good faith, which means that they take the interest of everyone in the development into consideration and try to meet the needs of everyone with reasonable care under the given circumstances. Other directors, officers, professional people, or committees may also be brought in to make decisions.
Can a homeowners association "kick you out"?
In some cases, yes, homeowners association can kick out association members of they don't strictly follow the covenants, conditions and restrictions set forth by the homeowners association. For example, the color you can paint your house may be limited by what the homeowners association says, or even the number of people that live in your house.
What should you do if you're considering purchasing a house in an area where you're going to have to agree to homeowners' association rules?
If you are considering purchasing a house in an area that requires you to abide by homeowners association rules, it's a good idea to talk to residents who already live there. In most cases, the covenants, conditions and restrictions (CC&R) set forth by a homeowners association are purely there to make sure everyone who lives there has a clean, safe environment to live in that respects everyone's rights and privacy. However, some are better than others in actually fulfilling their promises, and some may even be overly restrictive based upon your own personal preferences. So make sure you know what you're agreeing to before you purchase a home where you'll be required to be a member of a homeowners' association and follow certain rules and regulations.