If you buy a home, like a single-family home, in a planned, covenanted community, you'll most likely be required to be part of a homeowners’ association (HOA). The rules of the HOA community are described in what's called the Declaration of Covenants, Conditions, and Restrictions (CC&Rs). The CC&Rs describe the requirements and limitations of what you can do with your property. The goal of the CC&Rs 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 downright 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 park your car in the garage or restrict what you can do with the garage space. Or, maybe you're planning to add a fence around your yard to contain your dog. But after reading the CC&Rs, you find out that the community doesn’t allow fences. Likewise, if you’re planning a big project later on down the line—say painting your house a new color—you’ll probably need to check with the CC&Rs to ensure that the paint color you have chosen isn’t prohibited.
If you violate the CC&Rs, you could face penalties, like fines and various other consequences.
People who close escrow on a home in a planned community generally sign a series of papers, one of which states that you've read the CC&R's and agreed to abide by them. The HOA enforces the CC&Rs.
CC&Rs typically include restrictions and requirements on how you:
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.
If you violate the CC&Rs, the penalties might include:
Example. Suppose you try to sneak your large dog into a community despite the rule limiting the maximum weight for pets to 30 pounds. You could be fined, and possibly forced to give up the dog or find a new place to live because changing the rules is usually difficult. For this reason, you should read the CC&Rs before buying a home in a planned community.
When a homeowner doesn’t pay an HOA-imposed fine, the organization might have the option to place a lien on the owner’s property if state law allows it. An unpaid fine doesn't automatically become a lien, which differs from unpaid dues and assessments (see below).
Before placing a lien on the home, the HOA must file and win a lawsuit against you in court. After getting a money judgment from the court, the HOA may record that judgment in the county records as a lien against your property. Then, depending on state law and the HOA’s governing documents, the HOA might foreclose that lien.
Some states, however, forbid liens for unpaid fines, and some also restrict or prohibit foreclosures when the HOA lien consists only of unpaid fines and related costs like attorneys’ fees.
Homeowners residing in covenanted communities are usually required to pay monthly dues and occasional special assessments to the HOA. The types of dues, assessments, and penalties for nonpayment—like late charges and interest—can be found in the CC&Rs.
If you fall behind in those dues and assessments, the HOA can normally get a lien on your home. The lien will usually automatically attach to your property, typically as of the date the dues or assessments became due. Sometimes, an HOA records the lien with the county recorder to provide public notice that the lien exists, regardless of whether recordation is required.
If an HOA initiates a foreclosure against you—or imposes penalties you feel are unfair—consider talking to a foreclosure attorney to learn about different options that could be 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 immediately to begin a payment program to pay off your fines or other unpaid amounts in exchange for the HOA’s agreement to hold off on foreclosure.