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57-448: Founded in 1973, the organization has sought to be the people that build and service common interest developments (CIDs) to become a significant force in interest group politics in many states. According to Evan McKenzie, they are dominated by lawyers and property managers that have shaped legislative and judicial policy-making to prevent meaningful regulation of CID activity and help keep the discourse on such matters largely private. In

114-445: A board of directors . Initially, the board is composed of developer-appointed members, in order to maintain the character of the community that the developer has for it. As the percentage of ownership shifts from the developer toward owners, the corresponding percentage changes from developer-appointed members to homeowners elected at an annual meeting, and ultimately the board will consist solely of homeowner-elected members. Usually,

171-406: A business, industry, or trade-related organization is a stub . You can help Misplaced Pages by expanding it . Homeowners association#CIDs A homeowner association (or homeowners' association [ HOA ], sometimes referred to as a property owners' association [ POA ], common interest development [ CID ], or homeowner community ), is a private, legally-incorporated organization that governs

228-714: A category that includes planned unit developments of single-family homes , condominiums , and housing cooperatives . Since 1964, HOAs have become increasingly common in the United States. The Community Associations Institute trade association estimated that in 2010, HOAs governed 24.8 million American homes and 62 million residents. Throughout the rest of the world, HOAs—though they do exist in some neighborhoods—are uncommon. For centuries, communities have, informally or formally, combined resources to maintain common areas, like wells or roads. However, modern HOAs established covenants and deed restrictions to dictate who could buy

285-601: A clear understanding of the responsibilities of the HOA board, community members need to read their association's CC&Rs, Articles of Incorporation and Bylaws, and other rules. Many HOAs (especially larger ones with more upscale amenities) hire management companies to handle the governing duties of the association. Management services are typically divided into three categories: financial only, full management, and on-site management. Financial services typically cover administration of bank accounts, bookkeeping, assessment collection, and

342-460: A home in a development. These were the children of deed restrictions in a new kind of planned subdivision, and they established the national legal precedent for zoning districts exclusively for upscale, single-family residences. Private restrictions normally included provisions such as minimum required costs for home construction and the exclusion of all non-Caucasians, and sometimes non-Christians as well, from occupancy, except domestic servants. In

399-580: A housing community, collects dues, and sets rules for its residents. HOAs are found principally in the United States , Canada , the Philippines , as well as some other countries. They are formed either ipso jure (such as in a building with multiple owner-occupancies ), or by a real estate developer for the purpose of marketing , managing , and selling homes and lots in a residential subdivision . The developer may transfer control of an HOA after selling

456-410: A legal determination as to the enforceability of a provision in the governing documents. However, because HOAs are private associations, they are not considered "state actors" subject to constitutional constraints, and therefore homeowners cannot sue for civil rights violations under 42 U.S.C. 1983. The major power of the HOA is the ability to compel property owners to pay a share of common expenses for

513-401: A mandatory member of the HOA, and must pay assessments to, and abide by the rules of, the HOA. In return, the owner/member is permitted to participate in the HOA's governance and use the amenities offered by the HOA, provided that they are current on assessments (or on a payment plan to become current). Once an owner sells or otherwise transfers interest in all the property owned within the HOA,

570-399: A more lenient approach. For instance, while California does not require HOA managers to be certified, it does require that managers meet certain educational requirements to claim certification. Through its board an HOA will provide some level of amenities (though differing greatly between HOAs), regulate activities within a development, levy assessments, and may (if authorized by CC&Rs or

627-551: A powerful force for good or for ill' in their members' lives. Therefore, anyone who buys a unit in a common interest development with knowledge of its owners association's discretionary power accepts 'the risk that the power may be used in a way that benefits the commonality but harms the individual.'" Benefits to homeowners may include maintenance and management services, provision of recreational amenities such as pools and parks, insurance coverage, enforcement of community appearance standards which may lead to higher property values, and

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684-477: A predetermined number of lots. In most cases, a person who wants to buy a residence within the area of a HOA must become a member, and therefore must obey the governing documents including articles of incorporation, CC&Rs ( covenants , conditions and restrictions) and by-laws—which may limit the owner's choices, for example, exterior design modifications (e.g., paint colors). HOAs are especially active in urban planning , zoning, and land use—decisions that affect

741-479: A reduction in public service levels and may be worse off. At the extreme, HOAs may contribute to sentiments of secession and withdrawal from the public sector." Real estate developers establish HOAs in the belief that they can contribute to the developer's ability to build and sell units profitably. Providing common amenities may enable developers to build at a higher density, if the local government has encouraged such results. In addition, by relieving municipalities of

798-410: A single lot or two contiguous lots as a current or future residence or vacation home. In some HOAs, the developer may have multiple votes for each lot it retains, but the homeowners are limited to only one vote per lot owned. This has been justified on the grounds that it allows residents to avoid decision costs until major questions about the development process already have been answered and that as

855-404: A state legislature) impose fines for noncompliance. Depending on the governing documents, HOA boards may create committees, such as an "architectural control committee" (this is a very common one, and frequently this committee has the ultimate authority to approve or deny a building request), a pool committee, a neighborhood watch committee, etc. Depending on the governing documents or state law,

912-427: A suburban look, they clustered homes around green open areas maintained by associations. These associations provided services that formerly had been provided by municipal agencies funded by property taxes. Residents of such development also had to pay their local taxes. Accordingly, local governments began promoting subdivision development as a means of improving their cash flow. In an effort to control water pollution,

969-418: A unified voice. Founded in 1973, the organization has sought to be the people that build and service common interest developments (CIDs) to become a significant force in interest group politics in many states. According to Evan McKenzie, they are dominated by lawyers and property managers that have shaped legislative and judicial policy-making to prevent meaningful regulation of CID activity and help keep

1026-566: Is crucial for reducing the chances of a special assessment (mentioned in the risks below). Obtaining a reserve study is recommended to help determine and set the reserve contribution rate which is included in the regular monthly assessment. According to a 2019 study in the Journal of Labor Economics , "houses in HOAs have prices that are on average at least 4%, or $ 13,500, greater than observably similar houses outside of HOAs. The HOA premium correlates with

1083-416: Is dominated by lawyers and HOA managers . The CAI does not represent HOAs. It lobbies the legislatures of states that have HOAs in order to promote legislation beneficial to its interests. Although in some cases membership in an HOA may be voluntary for a property owner, in the majority of cases membership in an HOA is mandatory. Once an owner purchases property within the subdivision, that owner becomes

1140-407: Is equal to the proportion of ownership, not to the number of people. The majority of property owners may be absentee landlords , whose values or incentives may not be aligned with the tenants'. However, some HOAs limit owners of multiple properties to one or two votes regardless of the number of lots owned, so absentee owners do not end up controlling the HOA to the detriment of residents who only own

1197-538: The Fair Housing Act of 1968 prohibited such discrimination. However, by requiring approval of tenants and new owners, HOAs still have the potential to permit less formalized discrimination. In 1963, the FHA had approved federal home mortgage insurance exclusively for condominiums or for homes in subdivisions that had a qualifying HOA. The rationale was that developers wanted to get around density laws. The effect, however,

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1254-417: The residual claimant , the developer has the incentive to maximize the value of the property. HOAs have been criticized for having excessively restrictive rules and regulations on how homeowners may conduct themselves and use their property. Some of the restrictions commonly put into place by HOAs are limiting the length of grass , number of cars on a property, what animals you can have on your property,

1311-445: The HOA may have the authority to place liens on a property (for non-payment of assessments and/or noncompliance with CC&Rs, an example would be the costs to remove a non compliant structure such as a mobile home on a lot restricted to "site built" housing) and to, ultimately, foreclose on it. Homeowners have the ability to defend against such actions, and are usually entitled to sue HOAs for contractual or statutory violations, or for

1368-448: The HOA may sue the developer. In The Voluntary City , published by the libertarian Independent Institute , Donald J. Boudreaux and Randall G. Holcombe note that the association's creator (e.g. a developer) has an incentive to set up a government structured in such a way as to maximize profits and thus increase the selling price of the property. If a certain decision would increase the selling price of certain parcels and decrease

1425-470: The HOA's real and intangible assets (generally the amenities provided which were the basis for inducing people to purchase lots), and enforcing the governing documents. Boards of directors have a fiduciary duty to the property owners; violation of that duty may result in liability for individual directors, and as such the HOA will often adopt an ethics code for the board members to ensure they act ethically and in accordance with their responsibilities. To gain

1482-446: The HOA, the developers have expanded their scope, giving them authority to regulate changes to residences, landscaping and maintenance requirements, color of houses, etc., a variety of other requirements and amenities that the developers believe will make their project more desirable to the market. The Community Associations Institute (CAI) is a trade association of individuals and businesses that sell supplies or services to HOAs, and

1539-490: The HOA. These benefits may include amenities (eg. a pool, tennis courts, clubhouse, and open areas). Individuals may also benefit more or less depending on their political standing in the association and the degree to which the community's decisions match their preferences. In the 1994 court case Nahrstedt v. Lakeside Village Condominium Assn. , the California Supreme Court noted: "...Owners associations 'can be

1596-503: The HOAs budget. Full management typically includes the financial services plus help with board meetings (keeping minutes, agendas, etc.), board elections, and maintenance duties (obtaining contractor bids, etc.). On-site management typically includes all of the full management services plus direct assistance to homeowners with an assigned manager to the HOA. Education requirements for managers varies from state to state, with some requiring certification under all circumstances and others having

1653-502: The U.S. Clean Water Act of 1977 required that all new real estate developments had to detain storm water so that flow to adjoining properties was not greater than the pre-development runoff. As a result, nearly all residential developments had to construct detention or retention areas to hold excess storm water until it could be released at the pre-development flow level. Since these detention areas serve multiple residences, they are almost always designated as "common" areas. This requirement

1710-506: The United States amount to billions of dollars a year, but are not classed as property taxes. When determining what the assessment should be, it is important to consider what funds are required. There should always be a minimum of two funds: an operating fund and a reserve fund. The operating fund is used to pay for the operating expenses of the association. A reserve fund is used to pay for the infrequent and expensive common area assets maintenance, repair and replacement costs. The reserve fund

1767-798: The absence of legislative regulation or oversight perceived as meaningful to their objectives, the idea of residential private government took the shape and was advocated originally by developers through the Urban Land Institute and the Federal Housing Administration , followed by lawyers and property managers through the CAI. CAI has worked to address concerns raised about the development industry by critics. Board and manager training classes and national certifications for core competency have been developed. The Institute has shifted its primary focus to asset management. This article about

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1824-415: The belief that they may reduce operational costs for the local government. Since the homeowners sometimes pay for roads, parks, and other services within the development, the local government may believe it can gain revenue from property taxes from owners in a development that costs the municipality little or nothing. A 2009 study of California HOAs suggested that this assumption was partially true, but that

1881-473: The board (or parts of it) will be elected at an annual meeting of the homeowners, as specified in the Bylaws. In order to avoid an owner of multiple lots (who likely own the lots for resale or rental property) controlling the HOA's operation (to the detriment of those owners who only own a single lot or two contiguous lots as a current or future residence or vacation home), the Bylaws may limit all owners (regardless of

1938-466: The costs of road and utility maintenance, developers may obtain more favorable terms. Ordinarily, the developer retains some control over the HOA until a specified number of units are sold, and the covenants, conditions, and restrictions of the HOA are put in place to further this goal. The potential disadvantage to a developer is that they may be exposed to liability to the HOA for poor construction, misleading marketing, or other problems. In these cases,

1995-591: The developer sole rights to amend the CC&;Rs was declared unenforceable as a matter of public policy in at least one state, where the developer attempted to amend years after he had sold all the property. That state's legislature later codified that public policy. Other examples include CC&Rs which prohibited sales of property to certain racial groups; the Fair Housing Act rendered all of these also to be unconstitutional and unenforceable. The HOA will be governed by

2052-438: The discourse on such matters largely private. In the absence of legislative regulation or oversight perceived as meaningful to their objectives, the idea of residential private government took the shape and was advocated originally by developers through the Urban Land Institute and the Federal Housing Administration , followed by lawyers and property managers through the CAI. CAI has worked to address concerns raised about

2109-724: The early postwar period after World War II, many were defined to exclude African Americans and, in some cases, Jews, with Asians also excluded on the West Coast. Some of the first HOAs were formed early in the 20th century in Los Angeles County . The Arroyo Seco Improvement Association in Pasadena was founded around 1905 by Henry Huntington , a transit magnate who developed several whites-only housing divisions. The Los Feliz Improvement Association (still in operation today) in Los Angeles

2166-418: The land" , which means that all current and future owners of property within the HOA will be bound by them as a condition of property ownership. They usually include: Generally CC&Rs are enforceable as legal documents. However, there are instances where a CC&R is rendered illegal by later enacted state or federal law and therefore is no longer enforceable. For example, a developer-drafted covenant giving

2223-677: The maximum volume for playing music at certain times of day, what signs you can display on your property, and what plants you can plant. Homeowners have challenged political speech restrictions in associations that federal or state constitutional guarantees as rights, claiming that certain private associations are de facto municipal governments and should therefore be subject to the same legal restrictions. Several court decisions have held that private actors may restrict individuals' exercise of their rights on private property. A 2007 decision in New Jersey held that private residential communities had

2280-420: The more amenities provided the more frequent the assessment must be paid. Some associations operate little or no common property, and the expenses relate solely to enforcement of use restrictions or assumed services. Others are effectively private towns, with elaborate amenities including private roads, street lights, services, utilities, commonly owned buildings, pools, and even schools. Assessments paid to HOAs in

2337-426: The number of lots owned) to one or two votes per owner. Depending on the state, board meetings may be required to be open to the public, except in instances where a board may enter into an "executive session" for discussion on confidential matters (e.g. discussions with its attorney on an upcoming lawsuit). The board of directors makes decisions regarding the HOA, including management of the HOA's finances, protecting

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2394-458: The opportunity for members to plan development in accordance with community values. Disadvantages to homeowners may include the financial burden of association fees, punitive fines, and costs of maintaining appearance standards; restrictions on property use and personal autonomy; and the potential for mismanagement by the board, including the possibility of arbitrary or heavy-handed enforcement of rules. Many municipalities have welcomed HOAs in

2451-434: The overall effect of HOAs on municipalities was mixed. While HOAs did offset the costs of city governments to a small degree, they also reduced overall tax revenues because their members, insulated from the larger community, tended to vote down taxes that the city required to fund services. This led to an overall decrease in government expenditures that disproportionately affected those citizens who did not reside in an HOA. As

2508-500: The overall maintenance of the HOA and the amenities, usually proportionate to the ownership interests (either by unit or based on square footage). These expenses generally arise from the operation and maintenance of common property, which vary dramatically depending on the type of association. An HOA may have, in addition to a regular assessment, a "special" assessment for unexpected expenses (such as for road maintenance). The assessment may be paid monthly, quarterly, or annually; generally

2565-432: The owner ceases to be a member of the HOA and loses all rights previously held. Usually HOAs are structured as private corporations or private unincorporated associations (commonly as non-profit ones). HOAs are governed by federal and state statutes applicable to corporations (or unincorporated associations if so structured), as well as the HOA's own "governing documents". The HOA's governing documents generally "run with

2622-477: The pace of growth, the quality of life, the level of taxation , and the value of land in the community. Most HOAs are incorporated , and are subject to state statutes that govern non-profit corporations and HOAs. State oversight of HOAs varies from state to state; some states, such as Florida and California , have a large body of HOA law. Other states, such as Massachusetts , have limited HOA law. HOAs are commonly found in residential developments since

2679-565: The passage of the Davis–Stirling Common Interest Development Act in 1985. In Canada, HOAs are subject to stringent provincial regulations and are thus quite rare compared to the United States. However in recent decades, HOAs have infrequently been created in new subdivision developments in Alberta and Ontario . The fastest-growing form of housing in the United States today are common-interest developments (CIDs),

2736-478: The right to place reasonable limitations on political speech, and that in doing so, they were not acting as municipal governments. With few exceptions, courts have rejected claims that private actors are subject to constitutional limitations in a manner comparable to courts and police. Community Associations Institute The Community Associations Institute (CAI) is an organization that represents homeowners, condominiums, and other community associations around

2793-405: The selling price of others, the developer will choose the option that yields his project the highest net income. This may result in sub-optimal outcomes for the homeowners. HOAs established a new community as a municipal corporation. Voting in an HOA is based on property ownership, By the 1970s, only property owners had were eligible to vote, while renters are prohibited from directly voting for

2850-424: The stringency of local land use regulation, local government spending on public goods, and measures of social attitudes toward race." The study also found that people in HOA neighborhoods "are on average more affluent and racially segregated than those living in other nearby neighborhoods." The perception of the benefits that an HOA provides to homeowners varies depending on the specific regulations and practices of

2907-493: The study noted, "...critics of private governments claim that HOAs erode support for public institutions. Those who join can bypass the public system: homeowners who fear crime do not have to vote for tax dollars to attack the root of the problem; they can build a gate to keep the criminals out. Opponents maintain that the erosion of public support, reflected at the ballot box, leads to further deterioration of municipal services and reductions in local revenues. Nonmembers experience

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2964-519: The unit. They could, however, deal directly with their landlords under their lease contract, since that is the party who has responsibility to them. In the 1973 book Federally Assisted Communities: New Dimensions in Urban Development , author Hugh Mields, Jr. raised questions about the constitutionality of having an association that had the authority of a municipal government, despite being private in nature. Additionally, voting representation

3021-516: The world. Based in Falls Church , Virginia in the United States , the CAI has more than 60 chapters of condominium and homeowner associations with over 45,000 members worldwide. The CAI provides education and resources to help the volunteer leaders and boards that govern community associations. It also advocates for laws and regulations that benefit community associations and their members. CAI allows community associations to join together and have

3078-449: Was a reason for developers to establish an HOA. Although these areas can be placed on an individual homeowner's lot, eliminating the need for an association, some U.S. municipalities now require these areas to be part of a common area to ensure an entity, rather than an individual or the municipality itself, has maintenance responsibility. Real estate developers have frequently established HOAs to maintain such common areas. Having established

3135-574: Was founded in 1916. A racial covenant in a Seattle, Washington , neighborhood stated, "No part of said property hereby conveyed shall ever be used or occupied by any Hebrew or by any person of the Ethiopian, Malay or any Asiatic race." In 1948, the United States Supreme Court ruled such covenants unenforceable in Shelley v. Kraemer . However, private contracts effectively kept them alive until

3192-769: Was strongly influenced by a 1964 publication (TB 50) by the Urban Land Institute . This technical bulletin was funded by the National Association of Home Builders and by certain federal agencies: the FHA , the United States Public Health Service , the Office of Civil Defense , the Veterans Administration , and the Urban Renewal Administration . In order to do this while still retaining

3249-429: Was to divert investment from multi-family housing and home construction or renovation in the inner cities. This accelerated the middle-class exodus to the suburbs and into common-interest housing. The rapid expansion of federally subsidized highways under federal programs made access to new areas easy. According to Donald R. Stabile, the explosion in the number of CIDs (many of which were based on homeowners' associations)

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