A property owners association might include rules or services you don't want. Learn what a property owners association is and what it does.
If you’re considering buying property, it’s important to understand what a property owners association is, what it does and how it works. Put simply, it’s a governing body made up of property owners in a region. This guide will help you decide if the fees and potential benefits are worth the investment.
What is a property owner’s association (POA)?
A property owners association (POA) is a governing body comprised of property owners in a region. The residents, usually property owners in the territory, elect a board of directors to establish and uphold rules and regulations in the community.
How does a POA work?
Most POAs have a standard structure. “POAs will usually have a document called the Declaration, which is written by the property developer (or their legal team) and determines things like how many people will be on the Board of Directors, what titles and powers they hold, when meetings should be held, what geographical area the POA covers, and who has voting rights,” said Jeff Lessey, a South Carolina real estate agent who has been managing properties and POAs for over three decades. “Another document called the ‘By-Laws’ outlines where POA responsibility ends and individual homeowner responsibility begins.”
What does a POA do?
Along with everyday management, the POA also looks at development opportunities for the property owners and the area. “Think of it as a social organization with the purpose of promoting a specific region and ensuring its growth for generations to come,” said Jon Kozesky of DC-based association management consulting firm Jon Thomas Consulting.
What’s the difference between an HOA, COA and POA?
An HOA, COA and POA are different organizations with similar goals. Here’s how each works.
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An HOA or Homeowners Association is a group of homeowners who own a lot or home in a particular residential community. “An HOA manages and regulates homes within that community, and maintains the aesthetics of the buildings as well as common areas like the pools and playgrounds,” said Lynne Martin, owner of homebuying company Cash For Houses.
A COA or Condominium Owners Association is similar to an HOA, except that a COA is made up of condo owners. Like an HOA, “the association manages the condos and common areas shared by each individual unit,” Martin said. “They set rules that every member must comply with or face the board for punishment.”
A POA or Property Owners Association is an umbrella term that may include both an HOA and a COA. “Imagine that three neighboring HOAs share a complex with a pool, lazy river and fitness center,” Lessey said. “A POA may be formed to hold funds and create rules for the upkeep of this shared facility, or to create one set of rules for all three HOAs.”
HOAs vs. COAs vs. POAs:
There are three areas where HOAs, COAs, and POAs typically differ:
- Property ownership: “You don’t need to own a property to be a member of a POA, whereas you need to be a homeowner to be a member of an HOA and COA,” Martin said.
- Fees: HOA fees are due monthly while POA fees are paid annually.
- Compulsion to join: “POAs are not always mandatory; they can be voluntary depending on the region in which they function,” Kozesky said. On the other hand, “HOAs are nearly always mandatory and the fees are non-negotiable.”
Can a home or property be part of an HOA and a POA at the same time?
A POA is a larger, overarching structure that can include one or more HOAs, so a property can be part of an HOA and a POA simultaneously.
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“An HOA could very well fall within a POA, given the potential extended geographical reach of a POA,” Kozesky said. “Because of this, it is entirely possible (although mostly unlikely) that a homeowner could find themselves paying both a monthly HOA fee and an annual POA fee.”
How much are POA fees?
POA fees vary per region. “Often the fees depend on the size and structure of the POA as older facilities will have higher fees as they require more maintenance and upkeep,” Kozesky said. However, this doesn’t necessarily mean that POA fees for all brand-new structures will always be lower. “Many new structures are coming with very expensive amenities (pools, gates, bars, clubhouses) that all directly increase the related fee.”
But who determines these fees? “The appointed board of directors and related management companies are responsible for determining how much money it will take to maintain the property, add any improvements, pay the management company and other vendors, pay insurance and utilities, and set aside an adequate reserve,” Lessey said. “This amount is set forth in a budget, and usually divided among the members of the POA.”
However, it’s important to note that these POA fees aren’t static. “POA fees can and do increase over time based on the economy, age of the property, and other factors,” Lessey added. For example, “If the road is destroyed by an earthquake, and the POA doesn’t have adequate reserves to repair it, the board of directors may opt for a special assessment [to increase the fee as needed].”
Who can join a POA?
Unlike HOAs, you don’t need property ownership to join a POA. “Business owners, residents, property owners, property managers, and others who have a vested interest in a specific area or region tend to be a part of the POA,” Kozesky said. “You may also find elected officials or community leaders who directly represent or serve the region of the POA as members.”
Even owners of empty lots can join a POA, but HOAs and COAs only include home and condo owners in the region.
Do you have to join a POA or property owners association?
Typically, POAs are not mandatory, but it can be beneficial for homeowners to join. “Maintaining a home, condominium, or a business can be expensive and time-consuming but joining an association like a POA can remove these burdens and give you peace of mind,” Martin said. “Although joining comes with some trade-offs like additional fees, your property is well-maintained and the community feels safe.”
Another benefit: members can also have access to some services and programs initiated by the association.
Property owners associations are organized groups of property owners that work together to develop the region. For a fixed fee, all association members enjoy additional benefits like property management, educational programs and communal amenities. The exact rules and fees for POAs vary by region, so it’s best to contact your local association for specific details.