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 a housing community, collects dues, and sets rules for its residents.wynnfieldmobile.com 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 a predetermined number of lots. These legal structures, while most common in residential developments, can also be found in commercial, industrial and mixed-use developments, in which context they are referred to as property owners' associations (POAs) or common interest developments (CIDs) instead of HOAs.
HOAs are most frequently found in the United States, Japan, Canada, Australia, and the Philippines, and to some extent in other countries, such as New Zealand, Israel, Mauritius, South Africa, most of the countries of the European Union, such as Denmark, France, Germany, Spain, the Netherlands, Ireland, Austria, Poland, Hungary, Bulgaria, Greece, Sweden, Belgium, Croatia, the Czech Republic, Latvia, Lithuania, Cyprus, Luxembourg, Estonia, Slovakia and Slovenia, and some of the Latin American countries, such as Chile, Argentina, Brazil and Mexico.
Elsewhere, one also finds concepts such as strata title (originating in Australia but since emulated by several other countries, including the Canadian provinces of Alberta and British Columbia), which are similar in principle to homeowner associations but have a different legal heritage.
In most cases, a person who wants to buy a residence within the area of an HOA must become a member, and therefore must obey the governing documents including articles of incorporation, covenants, conditions and restrictions (CC&Rs) 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 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 local laws that govern non-profit corporations and HOAs. Regulatory oversight of HOAs varies from jurisdiction to jurisdiction; some jurisdictions, such as Florida and California, have a large body of HOA law. However other jurisdictions, for example Massachusetts, have limited HOA law. HOAs are commonly found in residential developments since 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), 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. They have also been common in Japan, Canada and Australia since later previous years. 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.
Early history 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 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.
History in the United States In the United States, the evolution of HOAs is intertwined with racism, with many HOAs excluding all non-Whites, and sometimes non-Christians as well, from occupancy, except domestic servants. In the early postwar period after World War II, many HOAs 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 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 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 US 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, 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 in the United States (many of which were based on homeowners' associations) 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 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, 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 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 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.
In the US, the Community Associations Institute (CAI) is a trade association of individuals and businesses that sell supplies or services to HOAs, and 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.
Operation 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 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, the owner ceases to be a member of the HOA and loses all rights previously held.
Governance Usually HOAs are structured as private corporations or private unincorporated associations (commonly as non-profit ones). However, despite usually being a non-profit corporation, they are not tax-exempt, and payments to them cannot be deducted for income tax purposes. 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 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:
The covenants, conditions, and restrictions (CC&Rs) of the subdivision. These are likely the most important documents affecting the subdivision and are usually created when the subdivision is initially formed, and as such are often recorded in the official property records of the county or other jurisdiction where the subdivision is located. Commonly the CC&Rs specify what types of structures can be placed on a lot (e.g. an upscale community may prohibit mobile homes or travel trailers and require minimum sizes on dwellings, along with offsets from the property line where building is prohibited) and other property restrictions (e.g. no animals except for traditional household pets, no operation of commercial business). The HOA's articles of incorporation and bylaws In some cases, the documents may include board-enacted rules as authorized (expressly or implicitly) by the CC&Rs.
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 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.wynnfieldmobile.com
Board of directors The HOA will be governed by a board of directors.