Is the HOA the Fairest of All? The Types of HOAs you may encounter in San Francisco

This Week‘s Question:

What are the pros and cons of a homeowner’s association?

Answer:

The core strength of a Homeowners Association (HOA) lies in its communal governance. Ideally, an HOA manages collective building issues, funds for repairs and amenities, and administrative tasks with minimal intrusion into residents’ lives. Before buying a property with an HOA, it’s crucial to understand the nature of the HOA, as it will impact your living experience.

The pros of an HOA include maintenance and upkeep of common areas, access to amenities, and potentially increased property values. The cons can include high and ever-increasing dues, restrictive rules, and variable management quality.

Over the years, we’ve encountered a wide range of management styles. Some HOAs operate so smoothly it feels like a fairy godmother is at the helm, seamlessly making things happen. Others can feel like they’re under the rule of a wicked witch, where rules are enforced harshly in an informant state. And then there are those that resemble Sleeping Beauty’s realm, where nothing happens until it does.

When considering a property with an HOA, investigate all available materials, such as meeting minutes, agendas, and online forums. Talking to current residents can be valuable, as they may be your future neighbors and co-HOA members.

This appeared in the Sunday, June 16, 2024 edition of the San Francisco Chronicle and on SFGate. 

Specifically... 

While not complete (nor necessarily applicable in every case, these are the things buyers should be provided with when considering a condominium purchase. There are lots of variations to these standards especially if there is new construction involved, probate, or litigation. 

• The Financial Disclosure Form (aka the condo cert). The standardized form that lists regular dues, how an HOA is managed, operating account balances, reserve account balances (i.e., long-term upkeep/rainy-day fund), number of rental units, if anyone in the HOA is in arrears, transfer/move-in fees, and contact information for management/HOA officier. If it is a small 2-3 unit HOA, it is usually just the other neighbor. Lenders like seeing this form filled out by other people in the HOA and not the seller directly. Most lenders have their own in-house version of this form that needs to be completed during escrow.
• The current version of the CC&Rs (which are recorded with the county) and any recorded addenda, restatements or amended versions
• House Rules, Bylaws or Owner Handbooks (if they exist, more likely in new-build developments.
• The Reserve Study (if any). This is the document common to larger buildings where a qualified professional will calculate what monies an HOA needs to set aside for replacement costs of certain building and common area components along with studies of utility consumption and whether or not scheduled assessments will be sufficient going into the future.
• The current budget and any future ones (proposed and actual). Many smaller HOAs will not have this.
• The HOA’s current bank account statements for 1 year (usually a joint bank account at a bank you would know)
• Any discussion or notices of assessments (upcoming or planned special assessments) within HOA meeting minutes, emails or within the condo cert document.
• 1-years’ worth of HOA meeting minutes. If there aren’t any, what people will usually provide are the email exchanges HOA members had with each other.
  
  • Whatever form it takes prospective buyers need to have a sense of what the HOA has been considering, weighing, and addressing most recently
  • Any ongoing kind of issue or question that a prospective buyer would want to know, then this MUST be disclosed. If you need to craft a summary document that may be advisable too but this is key as this is where buyers get the most nervous.Some examples: Leaks in other units that impact the common areas or are a result of issues in the common areas of an HOA (including proposed fixes, estimates, reports or assessments); capital projects or improvements the HOA has been considering like new doors, gates, paint, windows, etc.; issues related to the crime, quality of life or the neighborhood; rowdy neighbors, breaking elevators, reduction of amenities, planned increases, etc.

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• The HOA’s Master Insurance Policy and/or insurance summary in its entirety for the current policy hear and/or any renewals or policy binders PLUS the insurance company/broker’s contact information
• Any website and sign-on information/credential for the HOA, and, if the above wasn’t comprehensive enough, 
• Anything else you would have like to have seen when you bought
• If there’s any litigation or anticipated litigation
• Any construction plans, reports, receipts, invoices related to HOA common areas that impact the unit’s value (so, routine inspection notices aren’t needed per se, but estimates for work to be done or reports saying that X and Y have to be done to the building or common area are relevant)