Living in a condo or a home within a planned community is an attractive option for new homebuyers. They’re affordable, and offer all sorts of amenities to owners, including security gates and guards, swimming pools, and fitness rooms, among others. Not only that, the grounds are often maintained by the property management company, so owners usually are not responsible for having to maintain common elements within the building or community.
If you’re thinking of buying a condo or home within a planned community, you should know that you’ll need to abide by certain rules that are governed by the homeowner’s association (HOA) documents. The Association can have a lot of power over the lives of homeowners, and act in compliance with the terms that are part of these governing documents.
That’s why it’s critical for you to get your hands on these governing documents and gain an understanding of what is contained within them, how their conditions will affect your lifestyle, and if the association and its associated funds are in healthy condition.
Not every condo development is the same, nor are their governing documents. They often contain the Articles of the Incorporation, the bylaws, the rules and regulations, and the Declaration of Covenants, Conditions and Restrictions.
Articles of Incorporation
Developers of condominiums and planned housing communities form what’s called a Condominium or Homeowners’ Association before any unit can be sold. The Association is usually generated by filing Articles of Incorporation for a nonprofit organization with the secretary of state. These articles contain basic information about the Association, including the name, location, and purpose. Anyone who purchases a home or unit in one of these developments becomes an automatic member of the association.
Bylaws of the Association
The Association will usually include a set of bylaws after it’s formed, which essentially outline in detail how the Association will operate, and what the rules are to govern things like how Board of Directors meetings are called and how often they are held. The bylaws also stipulate the rights and responsibilities of the Association, as well as the procedures for creating an annual budget.
The Board of Directors runs the Association, which is made up of owners (either resident or non-resident, depending on the specific bylaws), who are elected by all owners of the Association. Elections will occur periodically, typically on an annual basis at yearly owners’ meetings. As a new owner, it’s helpful for you to look over these bylaws so you can get familiar with how the Association works and how much power and restrictions Board members have over it.
Declaration of Covenants, Conditions, and Restrictions
The most important information about your homeowner’s association and how it operates is contained within the Declaration of Covenants, Conditions, and Restrictions. It’s a pretty lengthy and detailed document that contains the following:
- The overall structure of the development
- What parts of the community are designated as common areas
- Restrictions on how owners are allowed to use their specific units and common areas
- The rights and responsibilities of the owners
- Procedures for amendments
- The Association’s authority
How expenses are paid and the amount of money contained in the reserve fund are outlined in any one of the governing documents, including the Declaration of Covenants, Conditions, and Restrictions. Big expenses will have to be made from time to time in a development, and it’s the owners who cover the costs.
For starters, the governing documents will outline how much the HOA has the right to collect from owners on a monthly basis, which covers the costs of ongoing operation, maintenance, and repair of common areas. An HOA will come up with an annual budget to determine how much money will need to be collected. In addition, an HOA needs to keep a certain amount of money in a reserve fund to cover major expenses, such as replacing the roof or plumbing system.
Ideally, the amount of money in the reserve fund should be considered a healthy amount, which is usually determined by an auditor who looks over these numbers every year. Not only that, you want to be sure that the amount of money that you will have to pay to the HOA every month fits within your budget.
You will definitely want to know what information is contained in the Declaration of Covenants, Conditions, and Restrictions, since they will have a direct impact on your enjoyment of your home in the HOA. For example, you’ll need to know if you’re allowed to have a gas barbecue on your deck, whether or not you have to mow your own lawn, and whether or not pets are allowed. Information like this can have a direct influence on whether or not you would like to live in a specific HOA community.
Rules and Regulations
In addition to the rules spelled out in the Declaration, a separate document containing rules and regulations is often adopted by the Association. This document contains information about how the property can be used and how it should be maintained to ensure an acceptable appearance. Rules and regulations can include a wide range of topics, such as the permitted size/weight of dogs, where smoking is allowed, the height of fences, and even the color of garage doors.
Out of all the governing documents, it’s usually the rules and regulations that are the most disputed among owners. If any of the owners wish to have a rule changed that is included in the Declaration, an amendment to the Declaration will be required, along with a certain approved vote percentage from unit owners.
The rules and regulations will directly impact how you’ll be able to use your property and the surrounding common elements. That’s why it’s so important to go over these rules to make sure they fit in with your specific lifestyle and how you will be able to use the property. Once you become an owner, you’ll also have to make sure you keep on top of any changes that might be made to these rules and regulations.
The Bottom Line
Any documents governing an HOA should be requested and reviewed before you buy into a property like this. While they can be rather complex and lengthy, your real estate agent or even a lawyer can help you make sense of these otherwise complicated documents. Having an understanding of the contents within these documents can help you make the right decision about whether or not a specific HOA is right for you.