Joining a homeowners association can seem like a great idea until you run afoul of its rules.

While the rules of the homeowners association, also called an HOA, are meant to keep a community tidy and uniform looking while protecting neighbors from doing something that would lower property values, they can be seen as a way to stop individuals from expressing themselves. Violating the rules can lead to large fines for members who don't follow them.

For example: A Florida man was fined $5,000 for planting two trees that were too short. Another Florida man who is a veteran was asked by his HOA to remove a statue of a soldier on his front lawn. A Virginia couple is being sued for $300,000 by its HOA for various violations, including not trimming vegetation and problems with their backyard Koi pond.

Fines are limited by state laws, and are meant to be reasonable, says John Stone, CEO of Community Association Services, which oversees management of 220 homeowners associations in North Carolina.

"The purpose of the fine isn't to generate income for the association. It's meant to generate compliance," Stone says.

Disputes among neighbors can happen in areas without an HOA. The difference is that something that might not be illegal under city laws can be illegal under the HOA, such as paint colors, having too many pets, and having a commercial vehicle.

"There's a general rule that the closer you live to people, the more restrictions there are, because what they do can hurt you," Stone says.

In the 323,600 communities in the U.S. that have HOAs, there are 25.9 million housing units with 63.4 million residents, according to the Community Associations Institute. Before you join one of those communities, here are four things you should do:

1- Read the contract

If you have a company vehicle with the company name painted on it, and the HOA doesn't allow that, then you'll have to either get another car or not live there. That's a real rule at an HOA, says Mike Boyd, president of an HOA in Florida.

"The biggest problem is a buyer not reading the documents of the corporation prior to signing on the dotted line to purchase a home in an HOA,' Boyd says. "If they read the documents, they may find rules and regulations are not compatible to their lifestyle and should not purchase in the development. Don't move in, then say 'I didn't know that,' when it was contained in the documents of the corporation."

Don't be afraid of the documents just because they're a legal contract. Properly written HOA documents shouldn't require a law degree to read them, and should contain terms that a layperson should know, he says.

The restricted covenants, which lay out what can and can't be done with the property, are filed with the county, Stone says, so prospective buyers can check them out before deciding if they want to live there. Bylaws, rules and regulations, which may also list restrictions, aren't recorded with a government entity, and will have to obtained from the HOA.

2 - Know your costs, and where the money goes

HOAs have annual dues to help pay for insurance, new roofs, lawn mowing and other communal expenses. Find out if they're capped and how often they can be raised.

It's also important to check the association's financial reserves, especially in a condo, says Paul Licata, director of business development for Seacrest Services, a property management firm in Florida. Licata suggests checking if the reserves are fully funded and if there's enough money for emergencies.

Related to that, you also want to know where your money goes, he says. Is the association up to date on maintenance work? When was the last time the concrete was restored? When were the windows last checked?

Ask for a copy of the budget to make sure line items are properly funded. "If they are not you will see assessment fees go up year after year because costs are not being covered," Licata says.

3 - Check insurance coverage

Catastrophic insurance against disasters such as fire, tornadoes and storms is generally covered by an HOA, but it's a good idea to check how much insurance your HOA has. You'll need personal property insurance in case your home is broken into, but the outside of your property should be covered by the HOA.

Insurance can also be used to protect as association against lawsuits, such as the reported $1 million settlement a homeowners association made in a wrongful-death claim by the parents of Florida shooting victim Trayvon Martin at the subdivision where he was killed.

4- Reconciling complaints

The HOA's bylaws determine how many seats are on the board of directors, and that number can be influenced by the developers. The fewer board members there are, the better chance a developer has of having a dispute ruled in their favor.

The contract should detail how you can file a complaint. Filing it in writing is probably the best step, detailing it with documentation. For example, if you paid to have work done that the HOA should have covered, have a copy of the bill available for the board.

Some HOA boards are liberal with forgiving fines if the homeowner complies. The HOAs that Stone manages in North Carolina require a hearing when a violation is alleged. If a board director is unreasonable in enforcing the rules, the best solution may be to have a recall election to remove them from the board, Stone says.

Ask your neighbors if they've had similar problems, and how they've resolved them.

You don't want to end up like a California couple who were the victims of vandalism from a fellow condo owner who was upset with an HOA decision. The neighbor was arrested for felony stalking after being caught on video tampering with their car, according to police.

Published on November 18, 2013