Home Owners Associations (HOA's). What's the deal?

What are they, and why do we have them?

The fastest growing type of housing today are common-interest developments (CID's), or planned unit developments, which include condo's, TIC's and cooperative apartments. HOA’s or Home Owners Associations are corporations with formal by laws, which are created by the developer for the purpose of outlining and enforcing rules, maintaining the property, setting reserve fund amounts etc. All owners are mandatory members; however, active interest is not. A lot of CID's hire property management companies to handle the day to day matters, outsourcing of landscaping and taxes.

Being a legal entity, HOA's have the authority to enforce deed restrictions, and Covenants, Conditions & Restrictions (CC&R's) in these documents, a potential buyer will find rules and regulations that were established in order to maintain or enhance the quality and value of the properties.

Owners are charged monthly fees, called HOA dues, which are separate from their personal mortgage payment. These dues are not to generate profit, but pooled to pay building expenses and create a cash reserve to cover unforeseen costs. Dues are calculated from a projected annual budget, and divided by either square footage or percentage of ownership.

Fee's cover expenses such as, different types of insurance insurance, specific utilities, repairs, common area maintenance, and reserve funds. It's important to remember that no two properties are exactly alike, each have different needs, concerns, and histories. HOA dues vary greatly and CCR's will as well.

If you're looking to buy in a common interest property the major question is....

How much are HOA dues, when are they do, what do they cover and is it worth it?

Each property is different. A 42 unit development with a pool and gym in the financial district will have different fees and regulations than a 2 unit historic building in Pacific Heights.
The new 26 story Bridgeview in South Beach SF has an average selling price of $919, 00 with HOA dues of $535 per month.

161 Castro St, SF, an 8 units building, unit priced at $399,000 have HOA dues of $283 per month.

There is no 100% answer to that question for properties across the board.


It's all about asking the right questions!


1. What will the dues cover? What won't they cover?
2. Are there any current or upcoming assessments or liens on the building?
3. What can I realistically afford?
4. Who are the other people in the building? Do you get along? If there is a problem how will it be handled and by whom?
5. Are there any major renovations or repairs in the works?
6. What is currently in the properties reserve fund? Have the cash reserves been met in the past 3 years? If not, why?
7. What are the average HOA dues for other similar properties in the area in the past year?
8. Is there earthquake insurance? Does the building need it? (Earthquake insurance alone often raises fees by about 30 percent.)

Where do I get the answers?

Every home buyer should have a real estate agent, and a good mortgage broker. Finding someone who you like to work with, who is knowledgeable, responsive and has great referrals when they don’t have all the answers is imperative. Have your agent and mortgage broker go over the CC&R's and the disclosure package with you in detail, and dont be afraid to ask questions.