In my last post, “Real Estate Alphabet Soup: G is for Guaranty” I continued my primer on the “alphabet soup” of real estate. This post continues to stir the “alphabet soup” with the letter “H.”
H is for “homeowners association.” A homeowners association or “HOA” is an incorporated or unincorporated association which has the authority to govern a group comprised of individual lot owners or home owners within a development of properties, often referred to as a subdivision. The rights afforded to homeowners associations are codified in the Annotated Code of Maryland, Real Property Article, Title 11B. The regulations, covenants and restrictions governing the lot owners of the development are set forth in a Declaration of Covenants, Conditions and Restrictions (the “Covenants”), prepared by the original owner and developer of the larger property comprising the development. The Covenants are recorded among the Land Records of the county in which the real estate development is located and apply to all of the land which makes up the development or subdivision. The Covenants “run with the land” so that as each individual subdivided lot is developed and sold by the developer to an individual lot owner, the land or lot remains subject to the Covenants. The home owners then elect a group of the individual lot owners to act as the governing body of the HOA to enforce the Covenants.
The HOA is responsible to collect HOA dues or fees from each home owner for his or her proportionate share of the expenses to maintain the common areas of the development. The “common areas” may include areas such as parks, open spaces, landscaping, recreational facilities such as swimming pools and playgrounds, and other facilities intended for the common use and benefit of all of the home owners in the development. The HOA has the ability to enforce the rules, regulations and restrictions established by the HOA and as set forth in the Covenants. If the Covenants allow, the HOA has the further ability to enforce and collect on any unpaid HOA fees or dues under the Maryland Contract Lien Act. The Covenants also generally provide for an architectural review committee to enforce maintenance requirements for the individual lot owners in order to keep and maintain a uniform, neat appearance of the development and the individual homes.
There can be both benefits and burdens to owning a property that is subject to a homeowners association. The benefits include living in a neighborhood where owners are required to maintain their properties, and having access to facilities and amenities, such as a swimming pool and recreational facilities, that one otherwise may not have. But the burden that comes with those benefits includes the requirement to pay HOA dues or fees, whether you make full use of all of the facilities or not, and having to comply with regulations established and enforced by others as to what you may or may not do on your private property.
In my next post, I will move on to the letter “I”, the next letter in this real estate “alphabet soup.”
Opinions and conclusions in this post are solely those of the author unless otherwise indicated. The information contained in this blog is general in nature and is not offered and cannot be considered as legal advice for any particular situation. Any federal tax advice provided in this communication is not intended or written by the author to be used, and cannot be used by the recipient, for the purpose of avoiding penalties which may be imposed on the recipient by the IRS. Please contact the author if you would like to receive written advice in a format which complies with IRS rules and may be relied upon to avoid penalties.
