Questions to Ask Before Buying Into an HOA

Colorado Common Interest Ownership Act

The Colorado Common Interest Ownership Act (“CCIOA”) defines a Common Interest Community as “real estate described in a declaration with respect to which a person, by virtue of such person’s ownership of a unit, is obligated to pay for real estate taxes, insurance premiums, maintenance, or improvement of other real estate described in a declaration.” The associations formed to oversee and govern these communities are generally called Homeowner’s Associations, or “HOAs.”

HOA Communities in the US

Approximately 26% of the US population live in HOA communities – this is over 74 million people. Roughly 40.5% of Colorado’s population live in HOA communities. This is 24% of Colorado homeowners, amounting to about 2.35 million people. According to the most recent US Census, 82% of newly built homes sold in 2021 were part of an HOA. They are increasingly becoming more common. It’s wise to educate yourself on what they are and what functions they perform.

Typically, HOAs manage local, private amenities and enforce expectations for property usage in the community. This is often done in the same way governments do for public amenities. For instance, HOAs may maintain parks, roads, and swimming pools, which many people attach value to, and may not otherwise have access to or afford on their own. HOAs may also regulate the aesthetic characteristics of a neighborhood. This may include landscaping requirements, regulating paint colors for the houses in the community, restricting the building of certain structures and/or preventing excessive vehicles/items from being kept on the property.

As new developments increase across our lovely state, prospective buyers may be interested in residential properties subject to an HOA – whether it be a condominium, townhome, or single-family home. Before purchasing property within this type of community, you may want to consider the following factors which accompany HOA homeownership.

1. HOA Covenants, Conditions and Restrictions (CC&Rs)

HOAs are established and must abide by a set of governing documents that generally include their CC&Rs (and any amendments), Bylaws, Policies, and/or Rules. Depending on the authority granted in these CC&Rs, HOAs have varying degrees of oversight and responsibilities. It’s helpful to familiarize yourself with these documents prior to owning a home and being subject to the covenants within them. Reading the CC&Rs carefully will help you understand these obligations in relation to your own preferences before entering into an agreement for the neighborhood where you will live.

Some questions prospective homeowners should ask:

    • Am I okay with complying with restrictions on building improvements? How I may modify/decorate my home, or store items on my property?
    • Do I see a benefit in having an HOA monitor the upkeep and appearance of my/my neighbors’ property, and enforcing standards related to that appearance?
    • Is it important to me that the character and feel of my neighborhood remain relatively consistent over time?
    • Do I mind restrictions on how I may use my property, which may include my ability to rent/lease my property to others?

2. Fees and Assessments

HOAs require funding to operate successfully. These funds are acquired through fees paid by community members. They can vary by location and property type, even within the same community. Most multiple listing services (MLSs) include the HOA fees in a property listing. You may obtain a historical record of the fees/budget for an association either from the current owner or as a condition of the purchase contract. Current owners can request them from the association. Educating yourself and setting expectations for ongoing obligations, including the potential for special assessments (which may relate to maintenance or emergency incidents such as fires/flooding/hail), will help guide you in your decision.

Some questions prospective homeowners should ask:

    • How willing am I to contribute some portion of funding for the maintenance of common areas shared by my neighborhood, even if I don’t use them?
    • Can I afford to pay these fees in addition to my ordinary life expenses, considering they may continue to increase over the years?

To ensure you are making an informed decision, we recommend reviewing the CC&Rs of your potential community. Visit the community and speak with neighbors/your realtor about the character and feel. Ask yourself whether the shared benefits of community living outweigh any restrictions on you or your property. You will want to take your own individual circumstances, perspective, and life plan into consideration.

More Resources for Your Questions

Here’s a handy checklist for individuals buying a condominium. It covers many of the same key points in decision-making outlined above. We also have a great Frequently Asked Questions section on our website for CCIOA. It defines and clarifies terms contained within the statute.

For more information, please visit the Department of Regulator Agency’s (DORA) website for the Division of Real Estate, which oversees the HOA Information and Resource Center.

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