What Is an HOA in New Construction?

A homeowners association (HOA) is an organization that governs a residential community. In new construction, the builder typically creates the HOA and controls it until most homes in the community are sold.

The Short Answer

A homeowners association (HOA) is an organization that manages common areas and enforces community rules (called covenants, conditions, and restrictions or CC&Rs) in a residential development.

In new construction communities, HOAs are extremely common. The builder creates the HOA, sets the rules, and controls it during the initial development phase.

Builder Control Period

When you buy in a new community, the builder typically controls the HOA board until a certain percentage of homes are sold (often 75-90%). During this period, the builder makes decisions about HOA spending, reserves, and rule enforcement.

This means the builder may not adequately fund reserves, may defer maintenance, or may make decisions that benefit the development process rather than existing homeowners.

HOA Fees and Special Assessments

Monthly or annual HOA fees cover maintenance of common areas (pools, parks, roads), community insurance, and management costs. Fees can range from $100 to $500+ per month.

Special assessments are additional charges levied when the HOA needs to fund unexpected expenses (major repairs, legal costs, reserve shortfalls). These can be thousands of dollars.

When the HOA transitions from builder control to homeowner control, underfunded reserves may result in significant fee increases or special assessments.

What to Review Before Buying

Read the CC&Rs, bylaws, and budget documents before signing the purchase agreement.

Understand the current monthly fees and whether they can increase.

Ask about the HOA's reserve fund and whether a reserve study has been conducted.

Find out when the HOA is expected to transition from builder control to homeowner control.

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