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What Are Restrictive Covenants?
Read These Rules Before You Buy
BY CATHIE ERICSON for Realtor.com
If you’re looking to buy a home in a community run by a homeowners association, or HOA, then you may have also heard that in order to join the club, you’ll have to abide by its restrictive covenants. So what are restrictive covenants?
Although this term may conjure up images of a satanic cult, “restrictive covenants”—also known as CC&Rs (for “covenants, conditions, and restrictions”)—aren’t as ominous as they sound.
Simply put, CC&Rs are just the rules you’ll have to follow if you live in that community. Unlike zoning regulations, which are government-imposed requirements on how land can be used, restrictive covenants are established by planned subdivisions to maintain the attractiveness and value of the property.
Odds are you’re all for rules that keep the real estate you’re buying in good shape! But some CC&Rs don’t always sit well with some residents and are seen as too, well, restrictive. It all depends on your perspective and how much freedom you want over your home—or protection from your neighbors exercising that same freedom in ways you might not like.
Common restrictive covenants
Restrictive covenants differ from community to community, but there are some you can expect to see:
- Permissible colors for exterior house paint
- Minimum property and landscaping standards
- Types of fencing allowed
- Types of window treatments allowed
- Limitations on the type of security lights you can attach to the house
- Controls on installing sporting equipment such as a basketball hoop in the driveway
- Restrictions that limit vehicle storage or recreational vehicle parking
- Curbs on property uses that generate noise or smells (e.g., raising livestock)
- Rules on commercial or business uses of land reserved for residences
While it’s easy to focus on what these rules say you can’t do, try to turn the tables and see the upsides, too.
“A reasonable HOA is like heaven,” says Bruce Ailion, Realtor® and attorney for Re/Max Town and Country in Atlanta. Several years ago he represented a builder of family homes that were sold to investors; with no restrictive covenants in place, the community looked terrible two years later.
By contrast, a nearby community that had instituted an HOA to oversee lawn care and home exteriors was thriving.
“Those properties looked like new, and year after year the gap in price between the two communities has grown,” he says.
When to review your CC&Rs
After your offer to buy a home is accepted, you are legally entitled to receive and review the community’s CC&Rs over a certain numbers of days (typically between three and 10). Warning: Some CC&Rs can be hundreds of pages, but given these are the laws you’ll have to abide by, this is required reading that you skip at your own peril.
If you spot anything in the restrictive covenants you absolutely can’t live with, you can bring it up with the HOA board or just back out of your contract completely (and keep your deposit). It may seem extreme, but if this is the place you hope to call home, living with rules that seriously cramp your style may just not be worth the trouble.
Can you change restrictive covenants?
Restrictive covenants, however, aren’t set in stone. They can be contested and changed with a majority vote of the shareholders, aka neighbors in your development. This can work for or against you depending on where you stand. Ailion says he has seen neighborhoods tighten regulations by issuing fines for cars parked in the streets, bicycles left outside the garage, nonstandard mailboxes, and other potentially petty problems.
“Yes, restrictive covenants keep the appearance of the property up and can prevent eyesores such as wrecked cars, unkempt lawns, and oddball home colors,” Ailion says. But he admits there are times when CC&Rs can be so restrictive that they start infringing on the rights of their residents.
But even in that case, there are things you can do. In January 2016, for instance, when an HOA in Keizer, OR, wouldn’t allow a family to park their RV in their driveway—a necessity for their disabled child—the family fought back with a lawsuit, arguing that the Fair Housing Act requires HOAs to make “reasonable accommodations” for people with disabilities.
The bottom line: Restrictive covenants are meant to protect residents, but they can be changed if they’re out of line. Make sure to review them before you buy a home, and if you disagree, by all means speak up! Many others may be glad you did.
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What Are HOA Fees?
BY LISA MANDELL for Realtor.com
First things first: HOA is an abbreviation for “homeowners association,” which applies to the owners of condos, townhouses, or freestanding homes in a planned community. The fee, which is usually charged monthly, goes to maintain the common areas of that community.
“Because multiple parties live in the same building or complex, all residents must be equally responsible for maintaining the common areas such as landscaping, elevators, swimming pools, clubhouses, parking garages, fitness rooms, sidewalks, security gates, roofing, and building exteriors,” says finance expert Amy Fontanelle. HOA fees also include insurance payments to cover those common areas.
Sure, homeowners already taking on a mortgage may hate coughing up more money for HOA dues. But they actually let you off the hook for a ton of home maintenance work. So before you start kvetching, consider all that HOA fees can do for you.
How much are HOA fees?
For a typical single-family home, HOA fees can cost homeowners around $200 to $300 per month, although they will be lower or much higher depending on the size of your unit and the amenities.
To give you an idea of the range of HOA fees, a 1,000-square-foot condo in Des Moines, IA, with no pool, spa, community room, or gym in the community has an HOA fee of $100 per month, which covers utilities, landscaping, and snow removal.
On the other end of the spectrum, there’s Hollywood’s fancy Sierra Towers condo building, which is filled to the brim with amenities like 24-hour concierge service and valet parking. They charge residents of a 3,400-square-foot condo about $4,000 per month in HOA fees. Suddenly that $250 monthly fee you’re considering feels a bit more reasonable, doesn’t it?
What is an HOA reserve fund?
HOA fees are usually divided into two parts: One portion goes toward monthly expenses, and the remaining money goes into a reserve fund, to save for long-term repairs and replacements such as roofs, plumbing, and exterior paint. Reserve funds also cover emergency expenses that arise when natural disasters, vandals, or just the unavoidable wear and tear strike.
What is an assessment?
Be aware that when your community is hit with extreme maintenance expenses—like a flood in the underground parking lot due to a broken water heater or a pipe bursting—homeowners insurance will cover some of it, but whatever’s left will have to be paid by your HOA.
Typically in these cases the HOA will tap the reserve fund, which may become depleted as a result. As a result, your HOA board may require you and your fellow homeowners in the community to pay a special assessment bill above and beyond your monthly HOA fee. Luckily, though, these assessments are typically temporary until the reserve is back up to a comfortable level.
What happens if I can’t pay the HOA fees?
Rest assured that most lending institutions take the HOA fee into consideration when they write up your mortgage. In other words, they evaluate your monthly income compared with your monthly expenses, and they won’t make a loan on the desired property unless they feel you can safely cover everything: your mortgage payment, taxes, and HOA fees.
But hey, life happens. If you lose your job or are unable to pay your HOA fees, you might be able to work something out with the HOA board. Be sure to talk to it before you miss even one payment. If you fall too far behind, the consequences could be the same as if you fail to make your mortgage payments. Bob Tankel, a Florida attorney specializing in HOA law, says you could be evicted or, in extreme instances, the board has the right to foreclose on your property.
The ins and outs of your HOA fees and what they cover in your new community will be spelled out in the covenants, conditions, and restrictions. Tankel suggests reading your CC&Rs carefully before you even buy your condo, and referring to it frequently once you move in so you’ll always know what to expect.