When buying a home or buying a condominium that has a Homeowners Association, it is very important to read all of the documents provided to you. While this may appear to be a daunting task because the HOA documents can run to hundreds of pages, these documents govern - and sometimes limit - your use of your home as well as your expenses as a homeowner within that Association.
The Covenants, Conditions and Restrictions (CCRs) and By-Laws, are the governing documents of the Homeowners Association (HOA). These documents outline how the HOA is run and the basic rights, duties and obligations of the home owners within the HOA. They also specify any limitations to your use of your home. For instance, they may limit the number and size of pets, your ability to rent the home in the future, whether you can operate a home based business, the procedures you must follow if you wish to upgrade or remodel your home and where you can park your car.
The Rules and Regulations typically cover the day-to-day matters such as the use and expense of the common areas (open space, pools, clubhouse, etc.).
The Minutes of the Board of Directors meetings will contain the details on current and future repairs, improvements, expenses, lawsuits and any increases in monthly assessments. You should receive copies of the minutes for the most recent 12 months.
You should pay particular attention to the Financial Documents from the HOA, specifically the rate of delinquency, adequacy of the financial reserves, operating losses and any current or planned asessments. The financial information can be contained in numerous documents including the Reserve Funding Disclosure, Financial Statement Review, Pro Forma Operating Budget, Assessment Enforcement Policy and Special or Emergency Assessments, if applicable.
It is enormously important that you fully understand the financial condition of the 
Homeowners Association. Have the reserves been adequately funded? Are there many delinquent dues and assessment payments? If there is an assessment on the home you are purchasing, does your purchase contract specify whether the assessment will be paid by the seller or will you be responsible for payments after the close of escrow?
HOA Documents Checklist:
1. CCRs with current Amendments
2. Articles of Incorporation or Association
3. By-Laws
4. Current Rules and Regulations
5. Copy of Minutes for the last 12 months
6. Year-to-date Budget
7. Financial Statments
8. Insurance Summary
9. Association Collection Policies and Practices
Wendy Cutrufelli, Your Real Estate Advocate
925.917.1135
The positions on this site are my own and don't necessarily represent Alain Pinel Realtors' positions, strategies or opinions.
Great points, Wendy! I like that you emphasize the financials - while all of the other items are certainly important, it's important to know the financial health of the HOA you're buying into. Budget shortfalls now may very well mean increased HOA fees later! Another item that comes into play with HOA's is pending litigation - I've seen this stop financing dead in it's tracks!
Finally! A blog post that actually SAYS something! Lots of goood information here and worthy of close Buyer scrutiny. I wish more Buyers would spend a little time on these important documents - they can have implications for your home investment. Great Job!
Troy, I'm glad you made an important point that I didn't emphasize....pending litigation is a huge issue that impacts mortgage financing, even when the HOA is the plaintiff!
Thanks for reading and commenting Bob. You're so right that the HOA docs and the financial health of the HOA have implications for the home investment.
All excellent points and we have close to the same provisions required by contract here in NV!! Lots of HOAs!!