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Condos are marketed as great places to live. They frequently feature amenities that are financially out of reach for the average homeowner. Condos can include perks like pools, basketball courts, tennis courts, and immaculate gardens. Other homeowners associations provide for services like private trash collection or private roads.
Condo HOA Rules
These extras are paid for with monthly or yearly dues. Since everyone pitches in anywhere from a few hundred per year in rural communities to a few thousand per month in prime city areas, condos can provide these desirable benefits to all residents.
Not all is rosy, however. Anyone purchasing a condo must agree to abide by the condominium’s bylaws and rules. The term for these rules is Covenants, Conditions, and Restrictions, which is usually abbreviated as CC&Rs.
You will be given a copy of these rules and regulations during the escrow process. Given all the paperwork that buying a property entails, you may be inclined not to pay close attention to these rules.
That is a big mistake. These bylaws will govern what you can do with your property and may have a significant impact on your overall enjoyment in the condo. Before you sign on the dotted line, look over your CC&Rs for these big red flags.
1. Egregious Penalties and Aggressive Foreclosure Options
Many condo buyers have no idea that HOAs can put liens on their properties and initiate foreclosure proceedings. There are numerous stories online of homeowners being foreclosed upon for a few hundred dollars in fees.
Penalties also count as valid bills for which liens can be placed. Consider the following extreme example. Suppose a homeowners association had a $100,000 fine for any piece of trash that was left overnight on the front yard and also includes language within the CC&Rs about having effortless power of foreclosure to collect on those fees.
Now suppose you take the garbage out one night and a few things fall out of the bin. You don’t notice it. Next day, you get a $100,000 bill due in 7 days. If you don’t pay the $100,000, the HOA has the right to place a lien on your property and initiate foreclosure.
While no condo is going to have such an egregious fine for such a minor infraction, there have been cases where chipped paint has led to a monetary penalty and eventually foreclosure. All states permit HOAs to tack on legal fees and interest.
HOAs are also rarely required to accept partial payment. A $500 monthly bill can balloon into $10,000 by the time all the extra charges are added. Before purchasing a condo, it’s vital that you carefully study the penalty and foreclosure sections of the bylaws.
If a condo seems to have a lot of aggressive penalties defined and a quick foreclosure process, you’ll likely want to stay away.
2. Pet Restrictions
A condo’s CC&Rs can restrict pets. Large dogs are commonly restricted from residing in the owner’s home or being on the premises. While this may seem harsh, it likely stems from the condo’s insurance policy.
If you own pets or think you may ever want to own pets in the future, ensure that you read this section carefully to find out what is allowed. The last thing you want to do is ruin your excitement about moving by having to give away Fido.
3. Bad Parking Policies
If you like cars or if you have lots of guests over, you’re probably going to need space to park on the street. HOAs can enforce street parking rules on private, community-owned roads.
Improperly parked cars can accrue fines. Worse, if you have more cars than space available in your driveway and garage, you may find yourself having to sell those vehicles after purchasing the property.
Some condos have parking lots with designated parking spaces. Your unit will be assigned one or more of those spaces. See how many stalls you’re assigned and if those will fit your needs. Some condos will let you rent additional parking spots for a monthly fee, but others won’t.
If you have three cars but have only one designated space, your condo purchase may quickly turn into a bad nightmare.
4. Renting Is Forbidden
HOAs have the authority to prohibit you from renting out your property. This includes non-conventional renting options like Airbnb. If you are purchasing the condo as an investment property, a clause like this completely eliminates your ability to make money off the investment.
It can still be a problem even if you’re buying the condo as your principal residence.
If you decide a few years later to move elsewhere, you’ll have to leave your place vacant or sell it. A clause prohibiting rentals also makes the unit much harder to sell because investors won’t be interested.
Stay away from HOAs that have rentals forbidden unless you’re confident that the condo you are buying will be your home forever.
5. Too Low Dues or High Delinquency Rates
While outrageously low monthly dues may seem attractive, it’s problematic HOA policy in the long run. The purpose of collecting those payments every year or month is to pay for expenses.
If the HOA experiences a shortfall either by not receiving enough or having people not pay, the homeowners will have to make up the shortfall through special assessments.
This makes budgeting extremely tricky. Look for HOAs that take in a reasonable amount of money each month to support the common areas. If the rules are too lenient in terms of collecting those payments, you’re likely going to be the one bearing the brunt of those costs.
Condos are fantastic purchases, whether it’s your primary residence or it’s an investment property. When you’re handed a copy of the bylaws in escrow, make sure you take the time to review them.
Look for big red flags. These include outlandish penalties, aggressive foreclosure clauses, and restrictions on pets, cars, and rentals. Look to make sure that the HOA is dutifully collecting the right amount of money to fund the common areas.
Think about whether the rules you’re reading sound both fair and compassionate. The best condo associations are the ones that encompass both of these qualities!
