Buyers of property in HOAs generally search for the most appealing homes or vacant lots, but not all HOAs are managed in accordance with federal, state, local laws, and Boards of Directors of HOAs can either be unfamiliar their own governing documents; or they amend their governing documents in a manner that violates these laws and their own governing documents. Usually, HOAs that are self-managed by members have the highest risk of violating these laws and their own governing documents because HOA's members who serve on their Boards of Directors may only partially read their governing documents and have misinterpreted them. Moreover, in lawsuits filed against self-managed HOAs for violating laws or their governing documents, the Courts usually rule in favor of a Board's decisions or its actions, unless it can be proven that these activities reflected fraud, were self-serving or removed the valuable rights of a single member. The latter refers to lawsuits heard on appeal when the U.S. Supreme or Appellate Courts ruled that if a required percentage an HOA's members amend their governing documents that changes the stated purposes of the HOA, then 100% of the members must approve the amendment.
Filing lawsuits against an HOA can be very expensive because many law firms do not have the expertise to address a Board's self-serving or fraudulent activities. Similar to hiring a bookkeeper when a CPA is needed, if the wrong law firm is hired, chances are your legal fees will accomplish nothing even though you have a strong legal case to present to a judge.
Therefore, selecting the right HOA in order to protect yourself against a possible self-serving Board of Directors that manages the HOA, or an attorney who is not an expert in real estate laws that govern HOAs:
1. Carefully read the governing documents and decide if these documents satisfy you.
2. Ask if the original HOA's governing documents have been amended, who amended them; and why the amendments were needed?
3. Decide if the purposes of any amendments benefited every member which is required in most State laws that govern HOAs.
Finally, If all of the answered questions satisfy your concerns; ask to review the HOA's reserve plan for maintenance and capital improvements.