Is Homeowners’ Association Living Right for You? Part 2 – The Thorns

Last week we learned about all the wonderful benefits of homeowners’ association (HOA) living, like laying on a bed of roses.  Today, we’re going to focus on the thorns.

As you may recall from last week, for the purposes of this article, when we say HOA, we are referring to communities of single-family homes, condominiums, townhouses and rowhouses.  While there are technical distinctions between these, we are just looking at the big picture.

So. . .back to those thorns, starting with the assessment.  Many HOAs can be expensive.  Sure, it’s nice to have a doorman, a gym, an indoor pool, a rooftop pool, and a party room.  It’s nice to have someone else tuckpoint the building, mow the grass, and fix the roof.  But all of that costs money.  You may not be personally maintaining these items, but you are still paying for them.  Assessments can go anywhere from $100 a year to thousands of dollars a month.  It depends what you’re buying, where it is, how much money the association needs, how much money they have in reserve, are there any loans they need to pay off, how many employees they have, whether they have a professional manager, and even how bad the weather gets (those snowplows are not cheap).

If the association suddenly has a large unanticipated expense, like a building water heater or boiler dies, or the roof starts leaking, there may be sudden additional costs to you.  If something is just old and needs replacement, like balconies, windows, etc., there may be additional costs to you also.  These extra costs are called special assessments.  Special assessments are typically meant to cover large projects that the association needs extra funds for.

HOAs come with rules, rules, and even more rules. You could be limited in how much you can personalize your home. For example, the HOA may dictate fence/door/siding/mailbox colors, roof shingle color/size/material requirements, how many cars can be parked in your driveway, where you can park, when you can park, types of pets you can have, the number of pets you can have, the weight of your pets, how and when you can decorate for holidays, where you keep your garbage cans, just to name a few. If you don’t follow the rules, you run the risk of being fined, liened, or even forced out of the property.  The association wants to maintain standards for the community as a whole.  These standards may not align with your vision for your home.

Little things can turn into big issues.  For example, let’s say you have a puppy.  Over time, your puppy grows and now it’s a full-fledged dog.  But your association has a weight limit on dogs, and your dog exceeds it.  The association can fine you, force you out, etc.  Either that or you need to get rid of your dog, which you probably don’t want to do.

Another example: Let’s say you run a business from your home.  I don’t mean a “work-from-home” arrangement or just using your home as an office.  I mean a situation where trucks are delivering boxes that you are storing in your garage, you are sending out large shipments constantly, customers are visiting, you are storing wrapped company trucks in your driveway, etc.  Many associations don’t allow this.  I had an instance a number of years ago where my client cancelled the purchase of a home because they did run a full-fledged business from their home.  When reviewing the HOA rules before purchase, they realized it would not be allowed.

Bad board management is also a big concern. Some boards are great.  Others can be unprepared, unprofessional and actually create problems due to their mismanagement. Boards are often run by residents in the community, and residents may use that board position to advance their own agenda. They could implement rules for their own benefit and not for that of everyone in the community.  They may target certain people.  A few years ago, for example, after the Russia / Ukraine war started, I had a client who claimed she was being discriminated against by Russian board members because she was Ukrainian.

If your board is not financially savvy, your association may run out of money.  Off the top of my head I can recall some instances where this came up in the last year – a couple different condo associations in the southwest suburbs (both times my client did not go through with the purchase), and a townhome association in the north suburbs that appears to be a complete lost cause with respect to funding.

Even worse, if you have any unscrupulous board members, they could actually steal money from your otherwise well-funded association.  Unfortunately, I periodically get calls about this exact situation, especially in small self-managed associations.  You may think this could be resolved by hiring a management company, but about ten years ago I was involved in a situation where a board hired a professional management company, who then proceeded to rob them blind to the tunes of hundreds of thousands of dollars. Whether it’s the board or a management company, the bottom line is you are placing a lot of trust in and giving a lot of money to people you don’t know.

Even when the management company is not stealing from you, professional property management can be expensive.  This is just another issue to be aware of.

As you can see, there are pros and cons to HOA living.  Therefore, it is important to look into any association before purchasing there.  In the long run, this could save you time, money, and a lot of stress.