Homeowners Association? Think Twice

Everything has it's pros and cons. In theory, a homeowners' association is a good thing. They has rules and regulations that (in theory) ensure the neighborhood remains a safe and attractive place to live. This should make property values higher than an unmanned community. Often times the community consists of townhouses or condominiums. The association maintains the property and the building exteriors using money collected from monthly assessments. This all seems reasonable. No grass to cut. Roof replaced for "free". Sounds great.

How HOAs actually work is quite a bit different than how they should work. Mostly because the people running them (the board of directors) is staffed by people who are lay persons. They don't run businesses and have had no prior experience handing financial affairs for a large organization. Even worse, many board members take the position because it strokes their ego in some manner or they don't like the people on a previous board. Actual knowledge and experience for the job is optional. The actual administration of the monies and activities required to maintain the community and enforce rules is done by a professional management company. Ok, so at least somebody knows what they're doing, again, in theory.

Then there's unscrupulous behaviors. Board members who benefit from hiring companies to do work in the communities. These board members usually have some prior experience which should be a good thing. In reality, these board members are most dangerous because they may have learned how to skim from the coffers. They also treat people who support them well and others not so well. This angers some people and they stop paying assessments in protects. Given that the powers granted an HOA are a binding contract, it's entirely possible for you to lose your home if you don't pay your assessments. Given the personalities involved and the powers the board has, losing your home to the HOA until reparations are made does happen.

All of this requires staying involved in the HOA and being willing to run the show by taking a position on the board. Regardless, with frequent turnover of officers, long term management of funds can become a serious issue. Given that roofs are replaced every 15-20 years, this requires the board to save money for you over this time periods. The monies are managed by a board with different members who don't really know what the previous board did. This often leads to a shortage of funds for large projects. Roofs for 150 homes can cost $2M. Not too many HOAs keep that much money in the bank. This means assessments go up and special assessments occur.

I'd go on, but I think you get the idea. You are at the mercy of the board. If you are on the board, you are basically harassed by the community - all to avoid cutting the grass and saving to have your roof fixed... and oh, having someone else tell the neighbor to play nice instead of confronting them yourself.

If you really want to get scared, read this article: HOA SYNDROME: You May Be Entitled to Damages (A Two-Tailed Psychiatric Disorder), I've seen board members behave as is described in the study.