Homeowners Associations - Friend Or Foe?
When a real estate developer begins work on a new neighborhood site, they frequently choose to establish a Homeowner’s Association, also known as an HOA. An HOA is a legal entity, much like a non-profit corporation, which manages the neighborhood and enforce the covenants, conditions, and restrictions of the area. Once a developer sells a certain number of homes in its neighborhood, it can transfer legal ownership of the neighborhood to the HOA, essentially absolving itself of any responsibility for the management of the neighborhood.
In many ways, HOAs are similar to a local governing body such as a municipal government, but without as many constitutional limits on its powers, though they are typically regulated by state laws concerning non-profit organizations and HOAs in particular. HOAs do have the power to set neighborhood rules, collect assessments from its members, and impose fines for violations.
Becoming a member in a Homeowner’s Association is rarely optional. When a homeowner buys property in a neighborhood managed by an HOA, a provision in the deed requires them to join the HOA and agree to its rules.
Ongoing Controversy
With the number of HOAs in the United States rapidly increasing, controversy is inevitable. On one hand, HOAs offer a number of benefits to its members. A well-functioning HOA can keep a neighborhood clean and safe, beautify and maintain neighborhood lands, increase property value, promote shared neighborhood identity, and provide residents with exclusive neighborhood amenities (swimming pools, playgrounds, etc.)
On the other hand, however, HOAs are often accused of being undemocratic organizations with few checks on their power. Critics allege that the relative lack of restrictions on HOAs allow them too much freedom. A trend in court decisions siding with HOAs has also made it difficult for HOA members to rein in or influence the actions of the governing board. Also part of the problem is that so few homeowners realize what they are agreeing to when they buy property in an HOA-managed neighborhood. In a spate of highly-publicized recent reports, news agencies documented the plight of families whose HOAs foreclosed on their homes. Believe it or not, such action is legal; many HOA agreements include a “power of sale” clause legitimizing exactly this type of behavior.
To learn more about creating and handling Homeowners’ Associations, visit the website of Austin real estate lawyers Slater & Kennon at http://www.slaterandkennon.com
Joseph Devine
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