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The Real Deal on HOAs

In the past decades homeowners associations have undergone explosive growth, approximately 50 million people now live in developments governed by home owners associations.

There are several factors that have caused this intensive growth; there has been a tendency of older adults moving from the home where they raised their children to luxury condominiums where they do not need to worry about the maintenance. Most of this tendency is recurrent in the baby boomer generation as they are reaching retirement and looking for a different life style.

Another factor for the appearance of HOAs is the growth of the cities, when the cities become larger, the buildings become higher leading to the large-scale conversion of apartment buildings to condominium or cooperative ownership.

And finally, the developers are building complexes with common recreational amenities and provision of some services, this kind of development will require an association to manage the common amenities, maintenance and services.

A homeowners association is a governance function of a common interest development, this governance is created by the real estate developer, organized on a democratic model to enforce the covenants, conditions, and restrictions of managing the common amenities of the development. The association provides services, regulates activities, levy taxes and impose fines. The association boards are elected by the members of the development, who pay a share of common expenses, usually per-unit or based on square footage.

The benefits of having a homeowners association is to maintain, enhance and protect the common areas and interest of a development. The most significant benefit is the track record home owners association has in maintaining or enhancing property values; Ana Minondo a certified real estate agent from Re/Max Baja agrees to this statement, she mentions; “It is very important that all the homeowners are organized in an association so they can maintain their development…that they are aware of the fees they have to pay for the proper maintenance of the common areas of the development in which they live and by doing this maintaining value for their properties.”

The association provides certainty that the community will remain physically attractive over time by enforcing rules and assessments for the maintenance of landscaping, architecture and common areas.

Another benefit found in the creation of HOAs is that they often provide recreational amenities for home owners that they could not normally afford on their own, such as swimming pools, Jacuzzis, gyms, clubhouses, movie theatres, just to mention a few.

A homeowners association offers the residents a sense of safety because they are established in gated communities that restrict the access to people who are not residents of the development. More than 8 million Americans now live in over 20,000 gated communities.

One of the disadvantages of an HOA could be the control over several aspects of the development, there is a mandatory membership for residents, so if one resident does not agree with a majority decision or a decision made by a board member there is really not much to do but accept the decision.

Another problem faced by prospective home purchasers is that they are commonly uninformed about the degree to which the use of their home or condo will be constrained by the association. This is the reason why he developer, seller or broker should make an effort to emphasize the potential benefits of the association while minimizing the disadvantages.

“For a potential buyer it is very important that there is a well organized HOA, in which all of the condo owners cooperate with each other. This gives them security as they can participate directly and have an influence in the association. When owners are paying a fee they have a good feeling to know there is going to be 24/7 security, among other things. It is as important to have an HOA for people who are going to buy as for people who already own,” said Minondo.

Another concern which can affect in some extent the residents who agree with most of the rules and policies established by the association, is the possibility of arbitrary administration by the board members.

“The City Council is working on setting up a new department to coordinate the HOA of the different developments, to solve internal problems between residents, the HOA and the developer. Before the developer establishes the HOA the new department appointed by the City Council will check the regulations and then give its authorization to go ahead and establish it. Raúl Aragón, council member of Rosarito and businessman has made a lot of effort for this to happen; he is also assisting the Rosarito Realtors Association and obtaining a licensed requirement to practice real estate in the city of Rosarito.” Gustavo Torres, President of AMPI, commented on the subject. The new department will have the obligations to create reorganization and modernizing programs, annual income and expense reports, administrative manuals, it will keep a statistical control, impose sanctions in case of violation of the law, inspections and notices when applicable, it will supervise the appointment of board members, security and management; it will also establish the budget for common expenses, types of payment and a reserve fund.


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