Community Association Facts

These are the facts your realtor won't tell you about the quality of life and property in Community Associations, Homeowner Associations (HOAs), Property Owners Associations(POAs), and all community interest developments.

Saturday, August 27, 2005

Are Private Gated Communities for You?

When you buy into a gated community you are buying into a dream. In some cases that dream can turn into a nightmare. Know the facts before you fall in love with the dream.

The dream that developers weave into their slick advertising has 7 important sales points.

(1) Prestige
(2) Security
(3) Privacy
(4) Maintaining Property Values
(5) A sense of Community
(6) Fun and Outdoor Adventure
(7) Service

Here Are the Facts:

1. Prestige: It’s true that many important and high profile people often live in mansions behind well-guarded gates. Today, however, more and more developers are opting to put in gated communities for median income homes in average neighborhoods. As a matter of fact, several municipalities, such as Atlanta, are even creating single-family, low-income, gated community housing. Like everything else in life, when everyone has it, it’s not all that unique or prestigious.

2. Security: Gates offer a sense of security. Today, however, 97% of gated communities only use keypad entry systems. Key pads are fairly easy to defeat. If the gates are actually guarded 24/7, you will be paying very high community association fees. In addition, it may take police and emergency services longer to get to the residence because of the gates.

3. Privacy: Gates do keep down drive-by traffic. But remember that when you purchase a home or land in a Private Gated Community, you are buying into a private community with private community services and facilities. The roads, all common areas, and all of the amenities are privately owned.

Private communities are like company towns where many of the civil rights we have come to expect in municipalities and local governments do not exist. You know that you don’t have the right to say just anything when you are on the job in a corporation. Well, when you live in a private community, which is governed by corporate law, you may have severely limited rights of free speech. As a matter of fact, many of your rights will be severely limited – even you’re right to vote.

Private Communities are private governments. These private governments are not at all similar to your city or county governments. Imagine if your right to vote in local or national elections was dependent on how much property you owned? That’s hardly the American dream, right? Many community associations actually give more votes to those who own more land.

Private means that the community will be governed by an association with very extensive restrictions. It also means that, in most cases, municipalities and/or counties will provide fewer services because you will be paying for these private services through your association fees.

4. Maintaining Property Values – It is true that homes in most gated communities have been maintaining stable property values. This is especially true in large metropolitan areas where the surrounding land may be going down in value.

Today, more and more gated communities are calling themselves, Master Planned Communities. That means that, like all gated communities, they are planned but they are bigger and they offer many more amenities and services. These Master Planned Communities usually show up in scenic rural areas around lakes, mountains, or on the seashore where property values are already soaring and the land is even more valuable than the improvements. So the gated community does little to improve or maintain already high values. As more and more developers jump on the gated community money train, the future of gated community property value maintenance remains to be seen. In some cases, gated communities can even detract from land values if their restrictions severely limit the enjoyment of the natural setting which other residents in the surrounding community enjoy.

5. A Sense of Community - Studies have shown that gated communities are not idealized small towns where everybody knows and cares about each other. On the contrary, the oppressive atmosphere of many community associations creates situations where neighbors are watching and turning each other in for restriction violations. This is because you are not free to do as you like on your own property - your neighbors control what you do on your property.

6. Fun and Outdoor Adventure –Many gated communities offer the dream of leisurely outdoor fun, but more often than not, the restrictions are so oppressive that the best part of the dream is the view. Even the view can be spoiled when you are gazing out your window at all of the other folks in the surrounding area doing what you can’t do on just as beautiful land without your restrictions.

7. Service – At some point in time your association board will get a visit from a management firm that wants your association’s business. They sell your board on the idea that a professional management team can do a much better job of managing the association than a bunch of novice homeowners.

Your board hires the management firm. Up go your association fees. Then the management firm tells your board that your association needs more insurance coverage, and the management firm brings in some buddies from the insurance industry. Up go your association fees.

The management firm has buddies in many contract service industries. They recommend that your board change the CC&R’s to reflect that all services a homeowner contracts for must be approved by the board. Now the Management firm makes sure that only their buddies will be “approved” as service providers or contractors. Up goes your management fees as well as the price you pay for services.

So eventually the homeowners in your association get wise and decide to vote the management firm out. But wait! You can’t do that. If the management firm was set up by the developer when he created the POA, then every homeowner’s mortgage has a “HOA rider” attached to the mortgage. Many riders say that homeowners will be prohibited from firing the management firm and if they do vote to remove the management firm, their mortgage may be recalled immediately.

It’s really a nice deal for everyone except for you - the homeowner.

"The price of freedom is eternal vigilance." -- Thomas Jefferson

The 10 Most Important Terms You Must Understand Before Forming or Buying Into a Community Interest Development

(Note: A Community Interest Development (CID) is any development controlled by a community association: HOAs, POAs, Condos etc.)

1. Amenities – are all the added benefits of living in a Common Interest Development: golf course, club house, community pool, conservation areas, and the list goes on . . . Just remember that with every added amenity and service, your fees will rise. Your fees will never be locked in with your purchase. If the POA/HOA decides to add a new amenity down the road, you will pay more. How will you budget for such an unknown factor?

2. Association Fees - Failure to pay your association fees will result in foreclosure. In many states, associations use non-judicial foreclosure. That means that you don’t even have the option of going to court before your home is taken. Luxury homes have been taken in a matter of weeks for only a few hundred dollars in back fees or fines. There is no law controlling how high your association fees and/or fines may rise every year. For every added amenity - for every added service - your fees will rise. What looks reasonable today may bankrupt you tomorrow.

3. CC& Rs
– are Covenants, Conditions and Restrictions. This is the property owner’s bible. Know your CC&R’s by heart. According to, “The covenants, conditions and restrictions (CC&Rs) are the governing documents that dictate how the homeowners association operates and what rules the owners -- and their tenants and guests -- must obey. These legal documents might also be called the bylaws, the master deed, the houses rules or another name. These documents and rules are legally enforceable by the homeowners association, unless a specific provision conflicts with federal, state or local laws.”

4. Community Association Law – Attorneys who specialize in Community Association Law (a very lucrative legal specialty) represent community associations –not the individual homeowner. Your association fees pay for these CAL attorneys to be retained by your association just in case the association wants to foreclose on you. As a matter of fact, it’s almost impossible for homeowner’s to find any attorneys with expertise in community association law to represent them. Why? Because CAL attorneys have ongoing relationships with community associations but litigation for the individual homeowner is a one time thing. It’s all about money. If you find a CAL attorney willing to represent a homeowner, you’ve got to be wondering just how successful his practice really is. So the home owner’s best bet is to find an attorney with expertise in Corporate Law and in Open Meeting/Open Records issues.

5. Conservation Easements- are permanent deed restrictions that limit some types of intrusive development. Because it’s a lucrative sales tool, developers usually set aside a certain amount of common land for the owners’ exclusive use. It’s usually the least desirable land or land not suitable for homes. The developer makes a bundle in write-offs for doings this, but wasn’t it nice of your developer to set aside all that land just for you? All you have to do is help maintain it through your association fees and it will always there for your exclusive use. Or it will be there until the conservation easement is removed. Never buy into the “It will always be there” myth.

According to the Washington Post, “Landowners "donate" the easements to a nonprofit land trust or a government agency that, in effect, certifies that the restrictions are meaningful and provide some public benefit, such as preserving open space or protecting wildlife. That allows the donor to seek federal income tax deductions for the reduction in the land's market value. . . By taking such steps to limit construction, the owners of vacation resorts, country manors and dude ranches can seek big write-offs, too. . . Luxury-home builders in North Carolina paid $10 million for a tract in the mountains, developed a third of the land, then claimed a $20 million deduction . . .”

Oh by the way, . . . “Meanwhile, companies and individuals claiming huge write-offs face little risk of audit. . . . "It's complete smoke and mirrors," said John Echeverria, a former general counsel of the National Audubon Society. " Donations of conservation easements generally do not really give any value away."

For details on how it works read the rest of this article, “Conservation Easements: Developers Find Payoff in Preservation,” at

6. Consumer Protection –If you already live in a community association and you have become disenchanted, were do you go? Well just do a search on the internet for consumer protection and community associations. Guess what you will find? More often than not, you will find a link to the CAI (Community Associations Institute). The CAI is the largest trade organization lobby promoting community associations. The CAI is not the homeowner's friend! Realtors, Management Firms, Mortgage Bankers, Insurance Companies, Attorneys, Builders, Developers, Landscapers, and many, many peripheral service companies belong to the CAI. Every one of these professions stands to make a lot of money offering their services to community associations. So do you imagine that you will get a true picture of community associations from them??? Not likely. Best bet – contact your legislators and demand legislation. Write letters to the Editor. Tell all of your friends what you have learned.

7. Foreclosure –is when your home and property is legally taken away from you. Foreclosure is always downplayed by mortgage bankers, realtors, and developers, but it happens all too frequently in community association developments. What happens when you’ve been cited by your POA/HOA with a violation and you disagree and fail to pay your fines? Forclosure. You could lose you home in a matter of weeks and more often than not, the POA/HOA doesn’t even have to take you to court.

8. Master Planned Development – A Gated Community that’s got even more amenities and services and is usually owned by a mega corporation that will never run out of money if you are taken to court.

9. HOA – is a Home Owners Association. Once the developer turns over the POA to the homeowners it will become a HOA. The existing CC&Rs are the governing documents. Homeowners will elect a board. The board usually consists of homeowners in your development. Often it’s the homeowners with the most land that get elected. The board exerts a tremendous amount of control over every aspect of your life. Once elected, it’s difficult to remove a board member. CC&R’s can be changed – but each association operates differently. Many states are starting to enact legislation to control the many abuses by POA/HOAs boards across the country. Unfortunately, the CAI (see Consumer Protection above) is fighting homeowner protection tooth and nail in every state!

10. POA – is a Property Owner’s Association. Actually, this is a misleading name. It should more accurately read “Developer’s Association”. When you buy into a new development, the developer and his hand-picked business associates will run the POA. After a certain percentage of properties are sold, the developer will usually turn over the association to the homeowners. But this often takes years and years. In many cases, the developer will maintain total control until all the properties are sold. Until then, it is best to remember that your developer is the King of your community. He may change your CC&R’s or raise your fees at will. Until then, you have absolutely no say or control over anything.

"Those who are willing to trade freedom for security deserve neither freedom nor security." – Benjamin Franklin