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What You Really Need to Know About a Home Owners Association

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By : Gloria Singer    99 or more times read
Don't underestimate the power of an HOA. Many associations are quite easy to get along with, but some are downright power hungry. If you're late or miss a payment on your dues, you can be fined. Let your dues lapse for 90 days and they can place a lien on your home. If you have any sort of discrepancy with the board or their rules, make your payment first, then argue the situation.

Boards are not quick to share information and are often unwilling to release information due to confidentiality policies. The budget should be open and available for all homeowners to view. If you are being denied access to these records, put your request in writing in the form of a letter to the board. If they still refuse, ask for a letter from their attorney explaining why you can't view the information. If that doesn't work, hire your own lawyer and sue them.

Boards will claim that taking homeowners to court a last resort action. This isn't always true. In California, it's estimated that 75% of the homeowners associations are involved in a legal dispute. In Chicago, close to 60% of all condo boards and HOA's have taken homeowners to court.

Pay attention to the reserve fund. All associations have a reserve fund set aside that they can draw from on a rainy day. Its value should be proportionate to the size of building and cost of repairs they may be facing. A reserve fund totaling $100,000 for a large condominium is about one tenth what it should be. When expensive repairs have to be done and the reserve fund is not adequate, unit owners are subject to an increase in dues.

Ensure that 20 to 25 percent of your dues are being applied to the reserve fund. In addition, there should be long term schedule for the reserve fund set up in the budget that includes possible future repairs and expenses. The account should contain a minimum of 70% of the projected reserve budget. If it doesn't, expect your monthly dues to go up.

Don't take those board rules as gospel. When you invest in a building and receive the set of association rules, keep in mind that these are not cast in stone. The board can change them whenever they want, with or without your approval.

Just because someone is on the board, doesn't mean they're qualified to be there. Their bookkeeping abilities may leave something to be desired, or they're ineffective in dealing with contractors. Keep your own records when it comes to amounts owing, you may have to back it up if there is a dispute.
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