Deciphering Sample HOA Agreements: Key Features and Analysis

What is an HOA Agreement?

An HOA agreement is a legal document that spells out the obligations and rights of homeowners and the neighborhoods they live in. It is also called a declaration, bylaws, covenants, conditions, and restrictions (CC&Rs) and serves the purpose of outlining what is acceptable in subdivisions, gated communities, and condo developments. The document contains the restrictions set by the land developer for the community . For example, it might include things like restrictions on paint colors and architectural design for your home or where personal things like boats and RVs can be parked outside of your house.
When you sign the agreement, you consent to the obligations set in the document. The HOA agreement often doesn’t include public streets. Regardless, these documents are critical for setting up the rights of homeowners as well as those on the HOA board that provide management of the community.

Key Provisions of an HOA Agreement

Almost all HOA agreements will contain some standard terms or components. This is true whether the agreement is with the developers, who must comply with the rules of your association and help manage it, or owners, who are agreeing to follow the rules. Some of these details include:
Covenants, Conditions, and Restrictions (CCRs) – CCRs are the rules and restrictions to which the members of a community must adhere. These then become deed restrictions that are noted in the deed. Some CCRs keep up appearances and order in the community, but others can be much more specific. Most communities have some sort of restriction as it pertains to pets, for instance, with those that have pools or clubhouses having restrictions on their use.
By-Laws – These are the rules that govern the internal affairs of the corporation. Each association will have its own set of bylaws, which are filed with the Secretary of State. They typically contain 10-20 pages and are subject to change, depending on the needs of the community.
Code of Regulations – Like the bylaws, this is a document containing the rules and regulations that you must follow. These can be amended as often as the board sees fit – each community should make them accessible to all residents.
Construction documents/specifications/manuals – These are simply the blueprints of the project, showing lots, easements, and the location of utilities. These can be helpful if there are any issues with the construction of the home.
Homeowner manual -This contains information about the property and can include things like key information about the community and its services, such as waste collection and snow plowing, financial information, community associations, and regulations that must be followed.

Typical HOA Agreement Rules and Restrictions

When you join a community governed by an HOA, you are committing to abide by rules and restrictions that can cover a wide range of items. The particular rules and restrictions that apply to your property will be carefully delineated in your HOA agreement, but there are common ones that you can expect to see in nearly any HOA. These rules can help maintain property values within the community, ensure the safety and comfort of residents and create a well-manicured, organized living space for homeowners.
Many HOAs have strict guidelines about property appearance and exterior improvements. These regulations may prevent homeowners from painting their entry doors certain colors or making significant exterior changes to their homes without prior approval from the board of directors. Committees may also approve new landscaping, such as fences, gazebos, fire pits and permanent swings.
HOAs often limit the amount of noise that resident can make. These rules typically involve outdoor spaces and lawn maintenance hours while also addressing scenarios such as the playing of loud musical instruments and parties.
Pets are common in many households, so restrictions that ban certain breeds of dogs or put limits on pet sizes and weight are typical in HOA agreements. More permissive rules might limit the number of pets allowed per household or regulate how they are kept. Some restrict pets to only indoor living areas, while others may include both indoor and outdoor spaces.
While plastic flamingos and other decorations might be fine with some residents, an HOA may impose rules about third-party decor such as signs, wind chimes, garden gnomes, statuary and other items that could be considered "tacky" by some.

Understanding Financial Responsibilities

In looking to understand the HOA agreement, it is common for homeowners to want to know more about the obligations that they will have to their communities. The financial obligations section of the agreement will outline the fees that have been established by the board and how the assessments and fines are managed. By understanding these details, homeowners can better manage their own finances and will be better prepared for the bills they receive from their community.
Fees are generally established at a flat rate that all homeowners will pay, providing funding for a wide range of maintenance and management tasks. The amount charged in fees as part of the HOA agreement can vary in amount, so it is important to be sure that there is a right balance established to provide adequate funding while not overcharging the residents. The funds received from fees can go toward the upkeep of common areas, or on additional amenities provided by the community.
Fees are charged to a community through the use of assessments, which periodically charge residents to help cover the operating costs of the community. These assessments may go toward everything from providing regular maintenance to common areas to groundskeeping expenses. Assessments will often be calculated on a quarterly or monthly basis.
When a homeowner in a community breaks the rules or otherwise engages in unwelcome behavior, the board may establish a fine for the issue. This will be done based on the specific circumstances of the incident, but the details will be included in the HOA agreement to ensure that all residents are aware of the potential penalties for their actions.
While the financial obligations being placed on residents may seem high, they are intended to help communities function properly. A homeowner should never hesitate to ask for more details regarding the management fees their communities assess, as these can be an important part of keeping everything in top shape.

Role of the HOA Board

The agreement will define the role of the Homeowners Association board. The HOA board plays a central role in the overall management of the community, and may have far-reaching powers. Typically, the HOA agreement will detail the process where board members are appointed or elected, terms of office, and the duties they are obligated to perform. In a gated community, such as an HOA, the board may have even greater powers than a standard community association. Whereas most communities can only assess a fee for the maintenance of common areas or costs due to damage caused by residents, an HOA board often has powers to assess fees for:
In addition, the document should advise if board members are voluntary or paid employees of the community. It will set forth how directors will be appointed (if voluntary) or hired (if paid employees). If the document sets board members up to be paid employees , it should set forth compensation components such as:
The board may also have the power to fine members for violations of various rules. The agreement should set forth that the board has the authority to hold special hearings when a resident is accused of violating the rules and regulations. The agreement should also state that residents have the right to appeal any fines levied by the board.
Finally, the agreement will likely set forth grievance processes when disputes arise between board members, board and residents, residents and residents, etc. It will set forth components of these processes, and may do so by stating that a certain section of the CC&Rs governs the grievance process. These sections contain specific language about the process and steps residents must go through to settle a dispute.

Alternatives for Dispute Resolution

The management of disputes among homeowners, as well as between homeowners and the association, is often anticipated in the association’s governing documents. Such mechanisms include negotiation by way of a meeting between opposing parties and the board, mandatory mediation, binding arbitration, or some combination thereof. We will review several of these options, particularly the mandatory mediation and non-binding arbitration provisions.
Since the adoption of the Davis-Stirling Common Interest Development Act (Davis-Stirling) in 1985, associations have been mandated to provide that members submit their disputes to mandatory mediation or non-binding arbitration. The purpose of this requirement is to encourage informal resolution of disputes and thereby limit the number of cases that reach the litigation stage. Since the adoption of the Cure Statute in 2004, this requirement extends to creditor/association disputes as well, such as disputes over unpaid assessments.
Davis-Stirling’s mediation/arbitration statute requires all common interest developments to adopt a policy requiring mediation of an association’s internal disputes (i.e., disputes between association members) unless the parties agreed otherwise. An association may not include an automatic waiver provision in its governing documents because such a provision is not enforceable under current law.
Mediation is a relatively simple means of resolving conflict between parties. Informal efforts are often unsuccessful because of intractable positions. Mediated settlements tend to be far more durable because they involve agreements that enhance the quality of communication and resolve the underlying issues.
Non-binding arbitration is optional in specific circumstances. Non-binding arbitration is an efficient, inexpensive alternative to litigation for resolving legal disputes. Arbitrations are heard and judgment is entered by a single arbitrator.
For the above reasons, Davis-Stirling’s mandatory mediation policy is an effective means of enabling members to resolve disputes with their associations without the time and costs of litigation.

Reviewing an HOA Agreement

When homeowners receive their sample HOA agreements, they should read them closely to determine the terms and conditions, financial obligations, dispute procedures, and other applicable. It is also important to know when an assessment increases and how often it does so.

• What is included in the association fees? For example: trash, lawn care, snow removal, water, sewer or maintenance of amenities? Homeowners will want to know what is included and what is not included in the fee. Each situation is different and it is worth reviewing these details prior to purchasing the home. Associations may add additional assessments for various reasons outlined in the declaration. An example is that an association may sell a lot within an association where the annual assessments are lower than the annual assessments for the remaining lots. The buyer will not know that information prior to purchasing the lot, unless it is disclosed in the contract or by the seller.
• What are assessment due dates? It is also important to know when the assessments are due each year or month.
• Assessments increase: What are the circumstances for assessment increase?
• Rights and Obligations of the Homeowners Association: It is important when purchasing a home to review the obligations for mowing , snow removal, trash removal or any other maintenance for the common areas. It’s important to ensure that there are no surprises once the association takes over.
• Voting Rights: The declaration details voting rights who has them and what their voting weight is.
• Dispute Resolution: In the event that there is a dispute with the association, which is common, it is important to understand the process for resolution.
• Notice of Meetings: Each month the Association must provide the membership notice of the annual meeting, as well as the agenda. It is important to read the notice to see what the association is going to discuss.
• Documents available: It is important to review the governance documents and financials that are available. The declaration is the contract between the homeowner and the association. Read this prior to purchasing a home in the association. It is also worth reviewing the bylaws of the association which is the procedural rules for the association.
• Concerns: It is important to determine what happens if you have a concern with an action taken by the association. Is there a process to address your concerns and to make your voice heard?