What to Look for in HOA Documents Before Buying

Reviewing HOA documents before purchasing a home is one of the most important steps in the homebuying process. These documents contain crucial information about your future responsibilities, costs, and restrictions. Here's your complete guide to what to look for in each type of HOA document.

For a deeper dive into specific topics, check out our guides on reading financial statements, reserve studies, and special assessments.

Financial Statements

The HOA's financial health directly impacts your investment. Request at least three years of financial statements to identify trends. For a comprehensive guide, see How to Read HOA Financial Statements.

Key Items to Review:

1. Operating Budget

   • Compare actual expenses to budgeted amounts
   • Look for consistent overages in certain categories
   • Verify adequate contingency funds
   • Check if assessments cover all operating costs

2. Balance Sheet

   • Review total assets and liabilities
   • Verify cash reserves match budget requirements
   • Check for outstanding loans or liens
   • Look for unusual or unexplained entries

3. Reserve Fund Status

   • Compare actual reserves to reserve study recommendations
   • Review funding schedule and contribution history
   • Check for any reserve fund loans or transfers
   • Verify separate accounting for reserve vs. operating funds

4. Collection Status

   • Review delinquency rates and trends
   • Check for large outstanding balances
   • Verify collection policy effectiveness
   • Look for write-offs or legal collection actions

Expert Tip: A well-managed HOA should have reserves equal to at least 70% of its fully funded balance and delinquency rates below 10%.

Bylaws and CC&Rs

These governing documents outline how the HOA operates and what rules you must follow.

Covenants, Conditions & Restrictions (CC&Rs):

1. Use Restrictions

   • Residential vs. commercial use limitations
   • Rental restrictions and requirements
   • Pet policies (types, sizes, numbers)
   • Vehicle restrictions (types, parking, storage)

2. Architectural Guidelines

   • Exterior modification approval process
   • Color and material restrictions
   • Landscaping requirements
   • Solar panel and energy efficiency allowances

3. Maintenance Responsibilities

   • What HOA maintains vs. owner responsibility
   • Exterior vs. interior maintenance boundaries
   • Shared utility responsibility
   • Emergency repair procedures

4. Assessment and Fee Structure

   • Regular assessment amounts and payment schedule
   • Special assessment provisions and voting requirements
   • Late payment fees and penalties
   • Lien and foreclosure procedures

Bylaws:

1. Governance Structure

   • Board composition and term limits
   • Election procedures and voting rights
   • Quorum requirements for meetings
   • Member participation rights

2. Meeting Requirements

   • Annual and regular meeting schedules
   • Notice requirements for meetings
   • Owner attendance and speaking rights
   • Executive session limitations

3. Amendment Procedures

   • Voting thresholds for changes
   • Notice requirements for proposed amendments
   • Owner approval vs. board authority
   • Timeline for implementation

Red Flag: Be cautious of bylaws that make amendments difficult (requiring 75%+ owner approval) or give excessive power to the board without owner oversight.

Meeting Minutes

Meeting minutes provide insight into current issues, future plans, and how the board operates.

What to Look For:

1. Recent Discussions (Past 12 Months)

   • Maintenance projects planned or in progress
   • Financial concerns or budget adjustments
   • Rule violations and enforcement actions
   • Owner complaints and how they're addressed

2. Voting Patterns

   • Board member participation and engagement
   • Split votes and dissenting opinions
   • Owner attendance at meetings
   • Controversial decisions and rationale

3. Financial Decisions

   • Special assessment discussions or approvals
   • Major expenditures and vendor selections
   • Fee increase justifications
   • Reserve fund usage

4. Compliance Issues

   • Building code violations
   • Insurance claim history
   • Legal disputes or pending litigation
   • Management company performance concerns

Reserve Study

A reserve study is a long-term financial planning document that projects future major repairs and replacement costs. This document is crucial for understanding special assessment risk.

Essential Components:

1. Physical Analysis

   • Condition assessment of all major components
   • Estimated remaining useful life
   • Replacement cost estimates
   • Deferred maintenance items

2. Financial Analysis

   • Current reserve fund balance
   • Funding recommendations
   • Projected income and expenses
   • Special assessment likelihood

3. Component Inventory

   • Roofing systems and expected replacement dates
   • Painting and siding maintenance
   • Paving and concrete work
   • Mechanical systems (elevators, HVAC, pools)
   • Landscaping and irrigation

Best Practice: Reserve studies should be updated every 3-5 years and conducted by a qualified professional reserve specialist.

Funding Models:

1. Full Funding - Maintains reserves at recommended levels (preferred)
2. Baseline Funding - Keeps reserves above zero (risky)
3. Threshold Funding - Maintains minimum balance (very risky)

Rules and Regulations

Day-to-day operational rules that supplement the CC&Rs.

Categories to Review:

1. Common Area Usage

   • Pool and amenity hours
   • Guest policies and restrictions
   • Noise ordinances
   • Event space reservation procedures

2. Parking Rules

   • Assigned vs. first-come spaces
   • Guest parking limitations
   • Vehicle restrictions (commercial, RVs, boats)
   • Enforcement procedures

3. Waste and Recycling

   • Collection schedules
   • Container requirements
   • Bulk item disposal
   • Hazardous waste guidelines

4. Behavioral Standards

   • Quiet hours
   • Smoking policies
   • Holiday decoration guidelines
   • Moving procedures

Insurance Policies

Understanding HOA insurance coverage protects you from unexpected costs.

Master Policy Review:

1. Coverage Types

   • Property insurance coverage limits
   • General liability limits
   • Directors & Officers (D&O) insurance
   • Flood and earthquake coverage (if applicable)
   • Umbrella policy details

2. Assessment of Coverage

   • Deductible amounts (who pays?)
   • Coverage gaps or exclusions
   • Claims history
   • Premium trends

3. Owner Responsibility

   • What's covered by HOA policy
   • What requires separate owner policy
   • Loss assessment coverage needs
   • Personal liability requirements

Your Action Checklist

Before making an offer, ensure you've completed these steps:

• [ ] Reviewed at least 3 years of financial statements
• [ ] Read CC&Rs completely
• [ ] Examined most recent reserve study
• [ ] Read at least 12 months of meeting minutes
• [ ] Reviewed all insurance policies
• [ ] Understood architectural guidelines
• [ ] Verified rule enforcement consistency
• [ ] Checked delinquency and litigation status
• [ ] Confirmed assessment history and upcoming changes
• [ ] Toured the community at different times/days

Get Expert Help

Analyzing HOA documents requires expertise and time. HOA Analyst provides comprehensive document analysis in minutes, identifying risks and opportunities that could affect your investment.

Our AI-powered platform, combined with 20+ years of HOA management experience, delivers actionable insights including:

• Financial health assessment
• Red flag identification
• Special assessment risk analysis
• Reserve adequacy evaluation
• Specific recommendations for negotiations

Related Guides:

• 10 HOA Red Flags Every Homebuyer Should Know
• How to Read HOA Financial Statements
• Understanding HOA Delinquency Rates

Don't leave your largest investment to chance. Upload your HOA documents today for a professional analysis before you sign. View pricing or see a sample report.