What Is an HOA? Pros and Cons of Homeowners Associations

The main things people consider when buying a house are the location, cost, facilities, and accessibility. One thing people may tend to overlook is how the community will be managed once they move into it.

If you have explored foreign real estate markets, you would have definitely stumbled across the term "HOA" or Homeowners Association. The idea of an HOA is prevalent more in the U.S but is picking up more in the Indian market with the increase in gated communities, townships, and apartment complexes which have begun gaining popularity and become well-managed.

Learning the ways an HOA works may help a buyer make a smarter decision before making a purchase.

What is an HOA?

A Homeowners Association or an HOA is an organisation to manage a community. Members contribute maintenance fees, used to maintain the shared areas, overlook maintenance, manage the facilities available, etc.

The equivalent in India would be a Resident Welfare Association (RWA) / Apartment Owners Association (AOA) / housing society management committee.

The purpose in both cases would remain the same which is to maintain the shared infrastructure and enhance the living standards of all residents in the community.

Why do HOAs exist?

Today's housing communities consist of more than just an individual house. These facilities are often Club House, Park, Swimming pool, elevators, security systems, landscaping, internal roads and many more, which require maintenance time after time.

Without proper management of these areas, the maintenance could be a problem. So an HOA serves as a body that takes responsibility for these maintenance aspects and maintains the community's shared areas properly.

Advantages of living in an HOA-managed community:

Better maintenance:

A major benefit of having an HOA is to ensure well-maintained common areas such as gardens, corridors, lifts, and other facilities available within the complex or development.

Improved security and organization:

Some HOAs may use these maintenance charges for providing security guards, CCTVs, or a management system to handle all the entries and exits smoothly.

Protection of property values:

A property that is well-managed and maintained will hold its value well. In most such communities buyers might be willing to pay a premium compared to those without HOAs.

Availability of amenities:

The services of facilities like the clubhouse, swimming pool, gym, sports facilities, landscaped parks etc which are normally available these days, will be available to you long after the developer has handed over the property.

Drawbacks of HOA:

Compulsory maintenance charges:

Living in an HOA managed community means paying regular maintenance charges.These charges might be very high in posh complexes and could escalate from time to time.

Rules and restrictions:

Most HOAs come with rules about parking, making any changes to the property, pets or renting of property, etc.While the rules ensure a certain discipline in the community, they can be frustrating for certain individuals.

Governance issues:

It is not necessary that every HOA will be well- managed; differences over maintenance, funding or spending may arise between residents.

Unexpected costs:

Major repairs or replacement of any infrastructure in a complex might cause additional charges to be levied on all owners beyond the normal monthly maintenance bill.

What should buyer check before purchasing property:

Before buying a property in a community that has an HOA or equivalent system, understand how it works:

Ask about:

• Current maintenance charges and how they have been priced in the past.
• Rules and restrictions for residents.
• The general condition of the complex facilities.
• How larger expenses like major repairs are covered.
• Get feedback on HOA management from other residents.

These aspects will surely impact your daily lifestyle.

Final thoughts

An HOA can be either the best or the worst feature of a community; while the HOA takes care of maintenance of communal facilities and property values are likely to be good, it could create a feeling of restriction to many and bring about fights over spending and maintenance. For buyers it is therefore very important to understand the management structure of a property that they are buying as much as they understand the property itself, since living there would require you to become a part of that community.