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 is called the Declaration of Covenants, Conditions, and Restrictions (CC&Rs).
Read on find out what you need to know about CC&Rs if you're considering purchasing a home in a planned community or if you already live in one.
The CC&Rs are the rules of your neighborhood. They describe the requirements and limitations about 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. For example, it is 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. For example, perhaps you want to park your car in the street and store your extra belongings in the garage. The HOA might, however require you to park your car in the garage. Or, perhaps you are counting on the fact that you will be able to fence the yard to contain your dog, but after reading the CC&Rs, you find out that the community doesn’t allow fences. Not to mention the fact that some HOA communities don’t allow certain sizes or particular breeds of dogs, which means that if you have a 120-pound Rottweiler, you might need to look at buying a home in a different neighborhood because changing the rules is usually difficult.
Likewise, if you’re planning a big project later on down the line—say painting your house a new color)—you’ll need to check with the CC&Rs to make sure that the paint color you have chosen isn’t prohibited. (Learn more in Homeowners' Associations (HOAs) and CC&Rs: Know What You’re Getting Into.)
When you close escrow on a home in a planned community, you'll sign a series of papers, one of which states that you have read the CC&R's and agreed to abide by them. (The HOA enforces the CC&Rs.) If you violate the CC&Rs, the penalties might include:
For example, suppose you try to sneak your large Rottweiler into a community despite the rule limiting the maximum weight for pets to 30 pounds. In addition to fines, you could be forced to give up the dog or find a new place to live. For this reason, you should read the CC&Rs before purchasing a home in a planned community. (Find out more about taking a closer look at what's in your HOA's governing and other relevant documents, see Before Buying: How to Read the CC&Rs or Homeowners' Association (HOA) Documents.)
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, which could lead to a foreclosure. (Learn more about homeowners’ association liens and how they can be foreclosed in HOA Liens & Foreclosures: An Overview.)
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 might be available to you.