They are formed either ipso jure (such as in a building with multiple owner-occupancies), or by a real estate developer for the purpose of marketing, managing, and selling homes and lots in a residential subdivision.
[2] In most cases, a person who wants to buy a residence within the area of a HOA must become a member, and therefore must obey the governing documents including articles of incorporation, CC&Rs (covenants, conditions and restrictions) and by-laws—which may limit the owner's choices, for example, exterior design modifications (e.g., paint colors).
These were the children of deed restrictions in a new kind of planned subdivision, and they established the national legal precedent for zoning districts exclusively for upscale, single-family residences.
Private restrictions normally included provisions such as minimum required costs for home construction and the exclusion of all non-Caucasians, and sometimes non-Christians as well, from occupancy, except domestic servants.
[13][page needed] The Arroyo Seco Improvement Association in Pasadena was founded around 1905 by Henry Huntington, a transit magnate who developed several whites-only housing divisions.
[citation needed] A racial covenant in a Seattle, Washington, neighborhood stated, "No part of said property hereby conveyed shall ever be used or occupied by any Hebrew or by any person of the Ethiopian, Malay or any Asiatic race.
According to Donald R. Stabile, the explosion in the number of CIDs (many of which were based on homeowners' associations) was strongly influenced by a 1964 publication (TB 50) by the Urban Land Institute.
As a result, nearly all residential developments had to construct detention or retention areas to hold excess storm water until it could be released at the pre-development flow level.
[24] Other examples include CC&Rs which prohibited sales of property to certain racial groups; the Fair Housing Act rendered all of these also to be unconstitutional and unenforceable.
[26] To gain a clear understanding of the responsibilities of the HOA board, community members need to read their association's CC&Rs, Articles of Incorporation and Bylaws, and other rules.
Depending on the governing documents or state law, the HOA may have the authority to place liens on a property (for non-payment of assessments and/or noncompliance with CC&Rs, an example would be the costs to remove a non compliant structure such as a mobile home on a lot restricted to "site built" housing) and to, ultimately, foreclose on it.
Homeowners have the ability to defend against such actions, and are usually entitled to sue HOAs for contractual or statutory violations, or for a legal determination as to the enforceability of a provision in the governing documents.
Those who join can bypass the public system: homeowners who fear crime do not have to vote for tax dollars to attack the root of the problem; they can build a gate to keep the criminals out.
Opponents maintain that the erosion of public support, reflected at the ballot box, leads to further deterioration of municipal services and reductions in local revenues.
[40] In The Voluntary City, published by the libertarian Independent Institute, Donald J. Boudreaux and Randall G. Holcombe note that the association's creator (e.g. a developer) has an incentive to set up a government structured in such a way as to maximize profits and thus increase the selling price of the property.
[citation needed] A 2007 decision in New Jersey held that private residential communities had the right to place reasonable limitations on political speech, and that in doing so, they were not acting as municipal governments.
In 2002, the 11th Circuit Court of Appeals, in Loren v. Sasser, declined to extend Shelley beyond racial discrimination and disallowed a challenge to an association's prohibition of "for sale" signs.
[52] In 2008, a soldier, who was serving in Iraq, was informed that his fully paid-for, $300,000 home in Frisco, Texas had been foreclosed on and sold for $3,500 to recover unpaid HOA dues of $800.
"[54] HOA boards can also collect special assessments from its members in addition to set fees, sometimes without the homeowners' direct vote on the matter, though most states place restrictions on an association's ability to do so.
If, for example there is a ruptured sewer line, the Board could vote a substantial assessment immediately, arguing that the matter affects public health and safety.
The large budgets and expertise required to run such groups are a part of the arguments behind mandating manager certification (through Community Association Institute, state real estate boards, or other agencies).
The HOA's budget, size and terms prescribed in covenants and bylaws[61] often act as decisive factors when determining whether an audit is obligatory for a particular board.
However, the need for an unscheduled examination can arise in cases of major changes, like a transition to a new board or management company, implementation of a large-scale improvement project, receipt of a significant sum of money under unusual circumstances, suspicion of fraud or embezzlement, or other misconduct.
Letters routinely express a frustration and outrage easily explainable by the inability to secure the attention of boards or property managers, to acknowledge no less address their complaints.
The North Carolina Planned Community Act,[68] for example, requires a due process hearing to be held before any homeowner may be fined for a covenant violation.
This part of the civil code[69] also ensures that any dissenting individual who seeks a director position must be fully represented to the membership and that all meetings be opened and agenda items publicized in advance.
Also, the antenna must be of a design to receive local, not long-distance signals and must not extend any higher than twelve feet above the top roof-line of the home, unless an exception is granted by the HOA due to extenuating terrestrial interference.
In spite of the law, at least one homeowner has faced harassment and threat of fines from an HOA for having insufficient grass after landscaping his yard to reduce water usage.
[76][77] Residents in Colorado have continued to call for regulation to protect xeriscaping, citing HOAs that require the use of grasses that consume large quantities of water and threaten fines for those who do not comply with the covenants.
In the latter scenario, the landowner has a stronger incentive to maximize the value of all the governed property in the long term (because they are the residual claimant of it all) and to keep the residents happy, since their income is dependent on their continued patronage.