If you buy a home, like a single-family home, in a planned, covenanted community, you'll most likely be part of a homeowners' association (HOA). The rules of the HOA community are described in the Declaration of Covenants, Conditions, and Restrictions, also called "CC&Rs." The goal of CC&Rs in real estate is to protect, preserve, and enhance property values in the community.
Most of the time, the rules make sense and are easy to accept; it's pretty easy to agree with a covenant that requires you to mow your lawn and keep it weed-free. But other rules might interfere with your plans or seem unreasonable to you.
Perhaps you want to park your car in the street and turn your garage into a home office. The HOA might require you to keep your car in the garage or restrict what you can do with the garage space. Maybe you want to put up a fence around your yard. After reading the CC&Rs, you find out that the community doesn't allow fences.
If you violate the CC&Rs, you could face various penalties, including fines.
Covenants, conditions, and restrictions (CC&Rs) describe what you can and can't do with your home. For example, the CC&Rs might limit what color you can paint your house, prohibit you from leaving your laundry out to dry, or describe what type of mailbox you may install.
CC&Rs in real estate typically include restrictions and requirements on:
And, of course, the HOA might have other requirements as well. The CC&Rs could restrict the height of your fence, require a defensible space for fire protection, or prohibit political signs, among other things.
And if you're planning a big project or home addition, like adding a swimming pool, you'll need to check with the CC&Rs to ensure the project isn't prohibited.
People who close escrow on a home in a planned community generally sign a series of papers, including one that says they've read the CC&Rs and agree to abide by them. The HOA usually enforces the CC&Rs and might penalize you if you violate them.
If you violate the CC&Rs, potential penalties might include:
Example. Suppose you have a large dog despite a rule limiting the maximum pet weight in the community to 25 pounds. You could be fined, and possibly forced to give up the dog or find a new place to live. Don't count on changing the rules, which is usually difficult.
So, read the CC&Rs before buying a home in a planned community.
Homeowners living in covenanted communities usually must pay monthly or annual dues and occasional special assessments to the HOA.
The CC&Rs describe the types of fees the community requires, how special assessments work, and the penalties for nonpayment, such as late charges and interest.
The HOA can normally get a lien on your home if you fall behind in dues or assessments (called an "assessments lien"). This kind of lien usually automatically attaches to your property, typically as of the date the fees or assessments became due. Sometimes, an HOA records the lien with the county recorder to provide public notice that the lien exists, even if they don't need to record it.
Having an HOA lien on your property could lead to a foreclosure. But even after an HOA foreclosure, you might be able to get your property back after the sale by redeeming it, depending on state law.
Also, if you don't pay an HOA-imposed fine, the organization might have the option to place a lien on your property if state law allows it. Some states have a law that says an assessments lien may include fines. But sometimes, an unpaid fine doesn't become a lien automatically. The HOA might have to file and win a lawsuit against you in court to get a money judgment.
After getting a judgment from the court, the HOA may record that judgment in the county. Taking this step creates a lien against your property. Then, depending on state law and the HOA's governing documents, like the CC&Rs, the HOA might foreclose that lien.
However, some states forbid liens for unpaid fines. Others, like Colorado, restrict or prohibit foreclosures when an HOA lien consists only of unpaid fines and related costs like attorneys' fees.
If an HOA initiates a foreclosure against you or imposes penalties you feel are unfair, consider talking to a foreclosure attorney to learn about the options available to you.
You might be able to ask for, or the HOA might require, a preforeclosure meeting to discuss the violation. At the meeting, you might be able to negotiate a resolution to the problem, such as agreeing to begin a payment program to pay off your fees, fines, or other unpaid amounts.