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Questions to ask when drafting an HOA agreement

On Behalf of | Jan 27, 2018 | Real Estate Transactions |

An HOA agreement is binding for homeowners who want to live in the community. Though they may own their homes, these rules can be similar to those faced by people living in apartments.

One big difference is that the HOA agreement is not just a code of conduct or a list of rules. It also establishes set fees that homeowners have to pay, on top of the mortgage, to fund the HOA.

When drafting an HOA agreement, here are a few important questions to ask:

  1. What should happen when someone does not pay? Nonpayment issues are serious, but that person may still be up to date on his or her mortgage. What action can the HOA realistically take?
  2. When can the fees change? When the HOA offers new services — adding snow clearing services, for instance — the costs may go up substantially. When and how can the fees be adjusted? What steps does the HOA have to take, and do homeowners have to agree to the increase?
  3. Does the HOA have rules about lawn care? For instance, to get a perfect-looking lawn, residents may need to use fertilizer and weed killer. Some homeowners don’t want to use products that aren’t natural on their lawns. How would that get resolved?
  4. What cosmetic issues does the agreement govern? Does it just say that the home has to be in good repair, or is it going to govern little things like what color the shutters are or whether or not people can get a satellite dish?
  5. What happens if someone buys a home and the previous owner let it fall out of compliance? Perhaps that noncompliance was even why the owner decided to sell. Is the new owner required to pay for any necessary changes? If so, how long does he or she have to make those changes, and what happens if they’re not made?
  6. What does the conflict resolution process look like? Things aren’t always going to go smoothly. Disputes happen. When they do, what steps should each side take? Which HOA officials get involved? Laying the process out in writing makes it faster and easier to get through these disputes.
  7. What can residents do if they have a complaint? Whom should they talk to if snow doesn’t get cleared away in time, for instance? Residents will want to know where they stand.
  8. What type of insurance does the HOA need to buy for the property? What type of insurance will the homeowner buy? It’s critical to be very clear about coverage and fees.

By no means is this a comprehensive list of all the things a contract should address, but it is a great place to begin. It’s important to know exactly how to draft, file and share paperwork with all prospective homeowners.