Have you found the perfect condo or townhome, and are ready to purchase and sign on the dotted line? You may want to slow your roll just a bit; when you purchase a condo or a townhome, you will likely have a homeowners association (HOA) and HOA fees that will be included in your monthly payments.
Before you sign a contract to buy a new condo or townhome, it’s important that you know about the HOA’s declaration of covenants, conditions, and restrictions, or CC&Rs. CC&Rs will outline everything you need to know about the rules or guidelines you’ll need to abide by as a resident of the condo building or townhome community, as well as how much the monthly fee will be.
Before we explain where to go to find your potential new condo or townhome CC&Rs, you should understand how an HOA comes to exist in your community. The builder or developer will fund and establish the HOA as a not-for-profit corporate entity that will operate and maintain the building or townhome community, as well as common areas. This entity, made up of volunteer residents in the community, take over the operations of the HOA as elected board members.
Want a deeper dive into how HOAs actually function? Check out our HOA 101 guide.
So, Where Exactly do you find this Information?
That’s simple! If you are buying a newly built condo or townhome, you can learn more about the HOA from your builder or developer. In the same way that you’ll ask about amenities, price, and other aspects of a unit you are interested in, you can also ask about the HOA’s CC&Rs. You may be able to find the CC&Rs online, but in some cases, you will have to request those documents directly from the builder or developer.
When you have those CC&Rs, it’s important to read them closely so that none of the guidelines catch you off guard. For example, if a condo HOA only allows for residents to have one pet, would you be okay with that? If your townhome HOA limits the paint color of your window trim to just three, could you abide by those three choices? In addition to what rules are contained in the CC&Rs, it’s also important to note HOA dues, if those dues will increase, and by how much.
It’s also necessary to understand what is not covered by HOA dues, so you can plan for financial needs that may arise due to your new home. All of that information is included in the HOA’s governing documents, so read them carefully and prepare a list of any questions or concerns you may have to discuss with your builder or developer.
Chad McCloskey, president and owner of Royal Real Estate Services in Brentwood, Tennessee, also recommends that buyers ask about the HOA board meeting minutes and the HOA’s financial documents. “[These] will also show how well-prepared the HOA is to handle future expenses related to common area assets,” he explains.
“If that is not funded well, it could be a sign the new buyers may be asked to cover a special assessment, in addition to regular monthly assessments (HOA dues) to cover a shortfall in budget to handle a major expense, like perhaps a new roof for the building or complex,” he says.
It’s best to read and understand all of these documents prior to purchasing, but in some states, owners can change their mind after closing, explains Laura Schwartz, a Realtor with McEnearney Associates, Inc. in McLean, Virginia. “In Virginia, buyers have a three-day right of rescission period when they receive HOA or condo documents,” she says. Absolutely ask your lender about these periods to ensure you have time to think over any buying decisions you make. Finding information about a condo or townhome HOA starts with communicating with your builder or developer. Before signing any contracts, you should feel at ease asking about any rules or guidelines for your condo building or townhome community, as well as about HOA dues and the financial health of the HOA to guarantee you are making the best home purchase for your lifestyle and budget.