When buying property in a common interest development (“HOA”), one automatically becomes a member. Here are 14 items to consider before closing escrow:
- Read the CC&Rs. CC&Rs (Covenants, Conditions & Restrictions) are an agreement between all association members, binding each when they take ownership. Read this document before taking ownership, not after. Look for restrictions regarding how your property is used. Are there pet limits? Can you park RVs in driveways? In a multistory building, are there restrictions against hard floors? You need to know first, not later.
2. Review the reserves disclosures. Prudent associations set aside money each month to offset the ongoing deterioration of major capital components (roofs, asphalt, paint, etc). Associations with little money saved in reserves may require imposition of special assessments against the members to fund major refurbishments. Underfunded reserve accounts are a form of hidden debt not reflected on the balance sheet.