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In the United States, a homeowner association (or homeowners’ association, abbreviated HOA, sometimes referred to as a property owners’ association or POA) is a private association often formed by a real estate developer for the purpose of marketing, managing, and selling homes and lots in a residential subdivision.[original research?] Typically the developer will transfer control of the association to the homeowners after selling a predetermined number of lots. Generally any person who wants to buy a residence within the area of a homeowners association must become a member, and therefore must obey the governing documents including Articles of Incorporation, CC&Rs (Covenants, Conditions and Restrictions) and By-Laws, which may limit the owner's choices. Homeowner associations are especially active in urban planning, zoning and land use, decisions that affect the pace of growth, the quality of life, the level of taxation and the value of land in the community.[1] Most homeowner associations are incorporated, and are subject to state statutes that govern non-profit corporations and homeowner associations. State oversight of homeowner associations is minimal, and it varies from state to state. Some states, such as Florida[2] and California,[3] have a large body of HOA law.[original research?] Other states, such as Massachusetts,[citation needed] have virtually no HOA law.[original research?] Homeowners associations are commonly found in residential developments since the passage of the Davis–Stirling Common Interest Development Act in 1985.

The fastest-growing form of housing in the United States today are common-interest developments (CIDs), a category that includes planned unit developments of single-family homes, condominiums, and cooperative apartments.[relevant? ][4] Since 1964, HOAs have become increasingly common in the United States. The Community Associations Institute trade association estimated that in 2010, HOAs governed 24.8 million American homes and 62 million residents.[5]

Certain s

Certain states are pushing for more checks and balances in HOAs. The North Carolina Planned Community Act,[45] for example, requires a due process hearing to be held before any homeowner may be fined for a covenant violation. It also limits the amount of the fine and sets other restrictions.

California

California law has strictly limited the prerogatives of boards by requiring hearings before fines can be levied and then reducing the size of such fines even if the owner-members do not appear. In California, any rule change made by the board is subject to a majority affirmation by the membership if only five percent of the membership demand a vote. This part of the civil code[46] also ensures that any dissenting individual who seeks a director position must be fully represented to the membership and that all meetings be opened and agenda items publicized in advance. In states like Massachusetts, there are no laws to prohibit unilateral changes to the documents by the association board.

Most homeowners are subject to property taxation, whether or not said property is located in a planned unit development governed by a homeowners association. Such taxes are used by local municipalities to maintain roads, street lighting, parks, etc. In addition to municipal property taxes, individuals who own private property located within planned unit developments are subject to association assessments that are used by the development to maintain the private roads, street lighting, landscaping, security, and amenities located within the planned unit development. A non-HOA property owner pays taxes to fund street repairs performed by the city; the HOA property owners pay these same taxes, and benefit from their use of public roads, etc. without the local government (i.e. taxpayers) having to pay for the HOA's private roads, etc. which the non-HOA property owner cannot use. The proliferation of planned unit developments has resulted in a cost savings to local governments in two ways. One, by requiring developers to build 'public improvements' such as parks, passing the cost of maintenance of the improvements to the common-interest owners; and two, by planned-unit developments being responsible for the cost of maintaining infrastructures that would normally be maintained by the municipality.[47][unreliable source?]

Financial risk for homeowners

In the US, auditing requirements

In the US, auditing requirements vary from state to state, as well as from HOA to HOA. Some associations are obliged to audit their financial statements on an annual basis or once every few years. For others, it is enough to conduct a review, a compilation or an agreed-upon procedures engagement.

The HOA’s budget, size and terms prescribed in covenants and bylaws[57] often act as decisive factors when determining whether an audit is obligatory for a particular board.

Audit Frequency<

The HOA’s budget, size and terms prescribed in covenants and bylaws[57] often act as decisive factors when determining whether an audit is obligatory for a particular board.

An audit at the end of each fiscal year is deemed to be a good rule of thumb. However, the need for an unscheduled examination can arise in cases of major changes, like a transition to a new board or management company, implementation of a large-scale improvement project, receipt of a significant sum of money under unusual circumstances, suspicion of fraud or embezzlement, or other misconduct.[58]

Auditing ProcessThe auditing process for HOAs can be divided into four stages[59]:

Planning

An HOA board makes an

An HOA board makes an initial inquiry to an accounting specialist about the need to conduct an audit. A consultation is held to negotiate the objectives, timeframe, report deadlines, and cost of the examination.

Risk AssessmentThe Supreme Court of Virginia has ruled that a HOAs power to fine residents is an unconstitutional delegation of police and judicial power in the case: Shadowood Condominium Association et al., v. Fairfax County Redevelopment and Housing Authority - June, 2012.[61][62]

Prior to the Telecommunications Act of 1996, HOAs could limit or prohibit installation of satellite dishes. Many communities still have these rules in their CC&Rs, but after October

Prior to the Telecommunications Act of 1996, HOAs could limit or prohibit installation of satellite dishes. Many communities still have these rules in their CC&Rs, but after October 1996, they are no longer enforceable. With a few exceptions, any homeowner may install a satellite dish of a size of one meter or smaller in diameter (larger dishes are protected in Alaska). While HOAs may encourage that dishes be placed as inconspicuously as possible, the dish must be allowed to be placed where it may receive a usable signal. Additionally, many HOAs have restrictive covenants preventing a homeowner from installing an OTA (over-the-air) rooftop antenna. These restrictions are also no longer enforceable, except in some instances. For example: the antenna may be installed at any location unless it imposes upon common property. Also, the antenna must be of a design to receive local, not long-distance signals and must not extend any higher than twelve feet above the top roof-line of the home, unless an exception is granted by the HOA due to extenuating terrestrial interference.[63]

In Florida, state law prohibits covenants and deed restrictions from prohibiting "Florida-Friendly Landscaping,"[64] a type of xeriscaping. In spite of the law, at least one homeowner has faced harassment and threat of fines from a homeowners association for having insufficient grass after landscaping his yard to reduce water usage.[65] Similar legislation was introduced and passed by the legislature in Colorado but was vetoed by governor Bill Owens.[66][67] Residents in Colorado have continued to call for regulation to protect xeriscaping, citing HOAs that require the use of grasses that consume large quantities of water and threaten fines for those who do not comply with the covenants.[68]

An alternative to CIDs is the multiple-tenant income property (MTIP). CIDs and MTIPs have fundamentally different forms of governance. In a CID, dues are paid to a nonprofit association. In an MTIP, ground rents are paid to a landowner, who decides how to spend it. In both cases, certain guidelines are set out by the covenant or the lease contract; but in the latter scenario, the landowner has a stronger incentive to maximize the value of all the governed property in the long term (because they are the residual claimant of it all) and to keep the residents happy, since their income is dependent on their continued patronage. These factors are cited as arguments in favor of MTIPs.[11]

See also