Legal Matters & Taxes Can You Refuse To Join a Homeowners Association? Here’s What Investors Should Know by Ramonelle Zaragoza October 4, 2021October 4, 2021 by Ramonelle Zaragoza October 4, 2021October 4, 2021 Can you refuse to join a homeowners association? It depends on your patience and willingness to be litigious. You may have grown up in an HOA neighborhood or have heard horror stories about this organization from your friends. As a real estate investor, this is one of the important aspects to be careful with when purchasing a rental home. Many would prefer to avoid HOA communities or at least look into its bylaws first since they tend to have strict rules that could hinder them from maximizing their investments. But what if you found a property that you think would generate a lot of income but is part of an HOA neighborhood you do not like? Can you refuse to join the homeowners association? It is possible, but you will have to be familiar with the respective HOA’s bylaws and go through a very tedious process. In this article, you will learn what an HOA is, the pros and cons of having a rental property in an HOA neighborhood, and what you can do to get out of one without selling your rental home. Related: The Best Tips for Real Estate Investors to Deal with an HOA What is an HOA? HOA stands for “homeowners association”. It is an organization in a residential community that makes and enforces rules for the neighborhood and the properties and residents within it. These associations are composed of and run by the community’s residents who are elected by their neighbors to enforce and oversee the HOA’s bylaws. An HOA’s bylaws are specified in a document called the Declaration of Covenants, Conditions, and Restrictions (CC&Rs). This document sets the provisions for its member-residents about the maintenance of their homes. These could include structural restrictions such as the type of fence they can use as well as minor aesthetic choices like the paint color of the exterior of your home. The CC&Rs could also have answers to the burning question, “Can your refuse to join a homeowners association?” The CC&Rs document may also state the penalties for violating the rules. These range from fees you need to pay to forced compliance or even litigation. Many homeowners and property investors view HOAs in a negative light as some of them tend to make very restrictive and specific rules on what their members can do with their homes. So do you have to join HOA? That will depend on the type of association established in the neighborhood. Related: Are HOA Fees Worth It? A Guide for Property Owners Mandatory HOA vs. Voluntary HOA If you have been asking this question over and over: Can I be forced to join a homeowners association? You first need to know what kind of HOA is in the neighborhood that you are looking into. Joining an HOA is mandatory in more neighborhoods now, but you might still encounter a community that makes membership into one optional. In summary, residential developments that have been built in the last 10 years or so are more likely to require HOA membership. Meanwhile, older neighborhoods might not even have an association, or if they do, it would most likely be voluntary. Mandatory HOA Can you refuse to join a homeowners association? Not if the neighborhood has a mandatory HOA. Just as its name suggests, this association requires all homeowners who have properties in their neighborhood to join and follow all of the rules described in their respective CC&R. New homeowners purchasing a property located in a neighborhood governed by a mandatory HOA must also sign a contract with the association. This contract states that they agree and abide by the association’s documents and accept the stipulated assessments, fees, and penalties as soon as they close on the deal. If you fail to pay the mandated HOA fees, you may be fined or even forced into foreclosing your home. All homeowners must also remain to be members for as long as they own the property or until the HOA is dissolved, which almost never happens. But how can an HOA, an organization run by your neighbors, compel you to join and follow their rules? This is because of how it was legally formed. To establish a mandatory HOA, a real estate developer or a significant majority of current homeowners must create the CC&Rs that outline the association’s bylaws. They must then file this document with their respective county land records office. The CC&Rs then become part of a package with owning land in that neighborhood, making it legally binding on all future purchases of any property within that HOA community. Voluntary HOAs Meanwhile, voluntary HOAs do not require homeowners in their community to join. New homeowners can also decide whether or not to sign up at the time of closing or shortly thereafter. So if membership is not required, then what does a voluntary HOA do? They function in a similar way to mandatory associations. They also create rules and regulations, elect board officers, and sometimes collect assessments, but they can only enforce on homeowners who joined by signing a legally binding contract. Without this, the voluntary HOA cannot fine, place liens, or collect assessments from their members. The CC&Rs also state what the voluntary HOA can and cannot do, such as raising fees and enforcing assessments. But in case this becomes an issue in the community, members can vote to amend the bylaws. So do you have to join an HOA? Only if it is mandatory in the neighborhood where you want to buy a property. Therefore it is best to add the question, “Is HOA mandatory here?” in your list when you are looking at potential investments. Pros and Cons of Living in an HOA Neighborhood Now you know that voluntary HOAs are a thing, and some neighborhoods do not even have this association formed. So why do some homeowners and investors still purchase properties in an HOA-governed neighborhood? After all, you have heard complaints (or you may even have your own say) about their oddly specific and very meticulous restrictions. Believe it or not, there are benefits to having an HOA in your neighborhood: Many HOAs handle the upkeep of your community and even the exterior of your home. They do tasks like mowing the lawn and landscaping, pest control, and trash pickup. A 2019 study found that houses in HOA-governed neighborhoods sell for 4% higher than similar houses that are not in such communities. This is because HOAs maintain the upkeep of their neighborhood through their bylaws and actions (see previous point). Newly built subdivisions with HOAs offer fun amenities like swimming pools, tennis courts, and playgrounds that only members of the association can access. HOAs in these areas also host social gatherings to foster community spirit. Of course, there are negative aspects to living in an HOA-governed community as well: Recent research discovered that HOA fees average $2,800 per year, which can affect your income. You can factor this in the rental fee, but it might give you a hard time finding tenants who would be willing to pay the price. Because the HOA’s bylaws are legally binding, you are obligated to pay any scheduled fees and follow the rules, or else you will risk paying a fine. If you do not pay these fees, they can place a lien on your property. There are HOAs enforcing very particular guidelines, which include restrictions on exterior paint color and the location of your garbage can. You will need to check the CC&Rs every time you want to make any changes on your rental property to avoid violations. Related: Homeowner’s Association: 10 Real-Life Horror Stories How You Can Refuse to Join a Homeowners Association Even though they offer benefits to homeowners, it is still up to you to decide whether to buy a property in an HOA neighborhood. And if you do, make sure that you look into their CC&Rs before closing on the deal. But what if you really want to buy a certain property that is in an HOA neighborhood? Can you opt out of HOA and still own that house? That will depend on your persistence, as it could be an expensive and time-consuming process. If you still want to do this, here are five ways you can get out of the association while keeping your property: Look for the de-annexation clause in the CC&Rs. Some HOAs include a de-annexation clause in their legal documents. This explains how members can leave the association. Enforcing it might require a majority of HOA members to approve your request to leave, which is unlikely to happen as your leaving could result in them paying higher fees. But you can still use this to withdraw from the association. You just have to prepare a good case and you need to be extra kind to your neighbors. Prove that the HOA is not doing its job. The most common complaint that homeowners may have with their HOA is the associations’ failure to enforce its respective CC&Rs. If this is happening to you, you could take them to court over it. However, this legal battle may take years. And because the court will be monitoring the HOA in the meantime, the association might actually start doing the job that you accused them of neglecting just to win the case. You can still use this argument, but it is recommended that you first gather hard evidence against them and hire a good lawyer. Show that the HOA is treating you unfairly. Because the HOA is run by your neighbors, it is not unheard of for at least one of them to abuse their authority against members they are not too fond of. Doing this would be in violation of their legal formation as the association is supposed to act in the best interests of everyone in their community. They also cannot discriminate against you based on your race, ethnicity, disability, national origin, familial status, gender, religion, and sexual orientation. If you are going through this, then you can take the HOA to court. But even if the judge agrees with you, you might just be awarded damages to be paid for by the HOA instead of being allowed to leave the association. Demonstrate that your house should have never been in the HOA. The first three points require you to become a member first. But can you refuse to join a homeowners association as you close on the sale of the affected property? It is possible. If the rental home that you want to purchase is at the edge of the HOA community, you could argue that the property should not have been included in the first place. This could work if the house lies outside the community gates or if you believe that you or your tenants will not receive the same services as the other members. Attest that you were never informed about the HOA. As a real estate investor, you purchase a lot of properties. So there might come a time when you buy a house and the seller never told you about the neighborhood’s HOA. If you think you were tricked or misled into joining an HOA, you could convince the judge to let you leave. But the burden of proof is on you, so it is important that you review all of the paperwork that you signed as well as your correspondence with the seller and their agent. So Can You Refuse to Join a Homeowners Association? Yes, but it will be an uphill battle. Whether or not your HOA has a de-annexation clause, you need to: Have a compelling reason for wanting to leave; Prove that the HOA is not doing its job; Show that the HOA is discriminating against you; Demonstrate that your house should have never been part of the HOA in the first place; or, Attest that you were never informed about the HOA. But whatever you think of HOAs, you do not have to avoid such neighborhoods when purchasing a property. The first thing you need to consider instead is which area has rental homes that can generate the best possible income. You can complete this task in 15 minutes with the help of Mashvisor’s Property Search. The Property Search tool will give you a detailed summary of any neighborhood within the US. You can see the median home price, cash-on-cash return, rental income, occupancy rate, and optimal rental strategy for each neighborhood. Click here to get access to these crucial data that will help you improve your investment game. Start out your 7-day free trial with Mashvisor now! Start Your Investment Property Search! START FREE TRIAL NeighborhoodProperty Search 0 FacebookTwitterGoogle +PinterestLinkedin Ramonelle Zaragoza Ramonelle Zaragoza is a Content Manager for Mashvisor. She helps property investors and first-time homebuyers and sellers learn more about the US real estate market with in-depth research and easy-to-understand articles. Previous Post Find Top-Performing Investment Properties Quickly and Easily (INVESTHER) Next Post Selling a House As Is in NJ: Here Is What You Should Consider Related Posts New Tax Day 2020: What Real Estate Investors Need to Know How the 2018 Tax Reform Affects Real Estate Investors How to Lower Property Taxes: 10 Tips and Tricks Learn How to Do Taxes on an Investment Property Condo Insurance: What Every Condo Owner Needs to Know Special Assessment Tax: What is it? 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