A homeowners association (HOA) is a subdivision organization that creates and enforces rules relating to properties within its control. When a property is purchased within an HOA, the property owner and the property automatically become a member of the HOA and often are required to regularly pay fees.
Typically, when a property is purchased within an HOA, the property owner and the property automatically become a member of the HOA and often are required to regularly pay fees.
HOAs can have a great legal impact on the property and the property owner’s rights. What type of fence can be built, how tall can that fence be, what color the house can be painted, what kind of landscaping can the property have are just some of the many different ways a property can be regulated by an HOA. Therefore, a buyer must take great care to understand any obligations, limitations, fees or the like when considering the purchase of a property in an HOA. The rules and regulations of HOAs are often included in a document referred to as “covenants, conditions and restrictions,” sometimes called CC&Rs, or subdivision covenants or deed restrictions.
The Wisconsin REALTORS® Association supports action by the state legislature in 2022 creating a simple, straightforward statutory structure for HOAs that allow those living in, or purchasing properties within, an HOA, to understand their contractual obligations as well as learn about the HOA relating to the property before purchasing.
The Wisconsin REALTORS® Association supports the following proposed statutory structure:
- Scope— Applies to all existing associations and new associations created to manage, regulate, or to enforce covenants/restrictions that apply to at least one residential lot.
- Recording/registration requirements—Require the association to record covenants/restrictions with the county register of deed and register with the Department of Financial Institutions (DFI)
- DFI Registration Form— Require the DFI to create a form to be filed by the association that must contain basic information about the association as well as the contact information of an individual to request copies of the covenants/restrictions, other information, and documentation related to the association.
- DFI searchable database— require the DFI to create a searchable database of all associations registered, like https://www.wdfi.org/apps/CorpSearch/Search.aspx.
- Cap on document fees— Create a fee cap that can be charged by the DFI to file registration forms (no more than $25 by DFI) and by association to deliver documents to property owners (covenants and restrictions, if not posted on a website.
- Public notice for meetings— Institute a 48-hour notice that must be provided to association members as to upcoming meetings as well as decisions of the board.
- Enforcement— Provide if the association fails to comply with the law, one-time fees resulting from the transfer of the property and any late fees that could be charged are unenforceable.