A homeowners' association (or HOA) is a legal entity built into virtually all master-planned residential projects. Essential to these communities are the covenants, codes and restrictions (CC&Rs) that the HOA structure is set up to enforce.
A trade group called the Community Associations Institute recently reported that 23 million American homes and 57 million residents were governed by HOAs. In upscale golf communities, the daily activities of HOAs also include organizing clubs, events, recreation and entertainment.
So, even if a community you are considering still has its developer on-site and in charge of operations, there’s an established HOA alongside that is likely to be collecting dues now and expecting to do all the governing later, once the developer deeds over the common amenities and departs.
For the prospective home buyer, the management style and strategy of a community’s HOA is important to understand. Just as you would tour the golf course, visit the fitness center and sample the cuisine, you should also take a close look at the community’s governing body, its HOA.
Here are some specific questions and considerations that will help you do that:
1. Can the HOA offer a clear statement of its fiscal approach and financial conditions?
When we see a prominent nation like the United States lose control of its financial structures, it’s obvious that any governing entity could do the same—including a master-planned residential community. The HOA of Daniel Island –still supported by the development firm The Daniel Island Company—has employed a fiscally conservative plan from the start of development more than a decade ago and says that philosophy now 
provides residents the best assurance of their community's ongoing stability.
"We haven't reacted to the current economic situation with specific measures other than to restate our belief in the value of good old-fashioned conservative planning practices," said Carolyn Lancaster, vice president–marketing for The Daniel Island Company.
"We prudently budgeted for the ongoing maintenance of common areas, we put in place reasonable and sustainable infrastructure plans, and we've operated largely without debt. That philosophy helps ensure that our residents' contributions to POA dues continue to represent strong value relative to the level of amenities and programming they enjoy," Lancaster added.
2. How Does the HOA Oversee Membership Process? A great advantage of club membership is knowing that like-minded, well-mannered people will be your companions on the links and in the dining room. But selectiveness for club membership needs to be balanced against the free flow of buyers and sellers into and out of the community.
Quail Ridge, in Boynton Beach, Florida, clearly states in its bylaws that “two Quail Ridge members are required as sponsors” for any new member to gain entrance. That’s a reasonable level of filtering from both standpoints. In the case of Mirabel, a Scottsdale, Arizona, community, it is clearly stated that club memberships “may be transferred through the Club to the subsequent purchaser of a member's residence or homesite.”
3. How will the HOA handle the sale of your home? The building and selling of homes in a planned community will involve any number of construction firms and realty companies, depending on the developer’s business model and the custom’s of the real estate market in that region. When a developer has severed ties and moved on, the question of who handles the resale listings will fall to the community homeowners.
In some instances, they will work through their HOA to establish a dedicated real estate sales entity through which all transactions will be conducted. The Florida community of Mariner Sands, member-owned with 36 holes of golf, is an example of the one-agency approach. Find out what advantages this approach conveys, and weigh it against any possible disadvantages.
4. Is the structure of the HOA sufficient to meet the complex tasks of management? A well-functioning HOA is composed of committees governing specific and important facets of community life. For example, the HOA at Admirals Cove, in coastal Florida, has committees covering Architectural Design Review, Landscape, Lakes, Legal & By-Laws, Finance, Security, Communications. For a community with so much waterway frontage and boat use by members, special expertise is needed on the committee that covers those issues.
5. How Does the HOA Balance Quality of Administration with Quality of Life Issues? Despite all the self-governing and legalistic concerns of an HOA, most of the time when you hear of their activities, it’s in reference to organized social events. Ideally, the community you buy property at would achieve an easy balance between the nuts and bolts of maintenance and the social interactions that give community life that extra measure of enjoyment.
A good example of that balance is River Landing, a North Carolina community that takes pride in its crowded social calendar and its creative energy in bringing members together for fun and competition. The mindset of a River Landing is that self-government comes more easily when there is plenty of group synergy to begin with.
To read Part II in this series, click here.
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