Denver Real Estate Law and Family Law Blog. (Vol 1.67 )
November 2, 2015
By Craig Franklin Chambers Esq. 7851 S. Elati Street #204, Littleton, CO 80120
The Littleton Lawyer.
As a real estate and divorce attorney, practicing in Denver ( Lakewood, Littleton, Highlands Ranch, Ken Caryl, South Jeffco) and the surrounding areas including Arapahoe, Douglas, and Jefferson County, I am often asked: What should I look for before I decide to buy a home in a Homeowner's Association.
Most brokers show a home -- whether it is a condo, a town-home or a home in an homeowner's association --- and remark about the price, the floor-plan, the condition, and the location, and other factors buyers look for when purchasing a home. Just as important: the health and welfare of the homeowner's association.
A homeowner in a homeowner's association --- which is a non-profit corporations run by volunteers --- is subject to the rules and regulations of that association. This is another layer of government for to which you must account as a homeowner. Here are seven things to consider before deciding if you want to join the association by buying a home that requires you to be a member.
First, review the by-laws, rules, and regulations and governing documents of the association. These are the rules you must abide by, and, under the standard CREC contract, the title company will provide these to you soon after you place the home under contract. The covenants and rules also likely available online, at the website for the Homeowner's association. Any questions about the rules, or their enforcement, call the members of the board or the property management company directly and ask them. Get a feel for how responsive the board is to its members or potential members.
Next, review the minutes from the HOA meetings and the monthly newsletters. See what issues the association has with the homeowners, whether the rules are being enforced, if the owners are content, and how rigorously the HOA is enforcing the rules. Check out the management company and get a general idea of the flavor and culture of the HOA.
Third, review the association's financials. Review the history of monthly dues, and what they are assessed for. The accounts receivables for the association. In other words, are the homeowners paying the dues, what do the dues go for, and how often are they raised? Consider the financial reserves of the association and if they will suffice to maintain the amenities being offered. Dues will increase, but it is unlikely they will ever decrease.
Fourth, on top of the monthly dues, review the history of special assessments which are one-time assessments to make maintenance and repairs for problems which were not in the budget and not covered by the monthly dues.
Fifth, make sure the repairs and the maintenance as specified in the monthly dues and special assessments were actually completed. Is there documentation showing the work was complete? Some Homeowner's Associations have a history of poor management, and if the dues and special assessments are excessive, inflated, or the work is simply not being done, it is best to pass on the property.
Sixth, check on the tenure of the board and the tenure of the management company. If the board is comprised of the same few people over and over again, that's usually a bad sign. The election of the board members requires a majority of the homeowner's present at the annual meeting for the election. That's called a quorum. If the meeting doesn't have a quorum the officers on the board simply re-appoint themselves on the board again and again.
The problem is, once a board like that gets into office, it is almost impossible to get rid of them. And if they are poor managers, you are generally stuck with their poor decisions without the intended recourse of an election.
Lastly, before you buy a home in a homeowner's association, go to an HOA meeting and talk to some of the other homeowners. Then wait by the mailboxes, and talk to the ones who didn't attend the meeting. Ask them if there are any problems with the management or the association. These are your new potential friends and neighbors, after all, and as a member of the association, you will be forced in some way to interact with them. This is probably one of the most effective ways of determining if the HOA is working as intended or if buying into the area is buying into a host of problems.