We hear the term “Due Diligence” used in many different contexts, but what does it mean? According to Merriam Webster, it is the care that a reasonable person exercises to avoid harm to other persons or their property. A common transaction where this term is used is in the purchasing of a home. While many of us think of due diligence as obtaining inspections, appraisals and checking out the neighborhood and schools, one should also research if the property is located within a covenant controlled community.
If the property is in a covenant controlled community, a careful review of the Association’s covenants, policies and procedures and any rules and regulations should be part of a prospective purchaser’s due diligence. It is far too common where the first time a homeowner has actually reviewed the Association’s covenants is after a violation has occurred or an assessment has gone unpaid and the homeowner receives a notice from the Association regarding the issue. For example, my friend recently expressed interest in purchasing a home within an HOA. He has four pets and after reviewing the Association’s governing documents, he found a provision that only allowed two pets.
He really wanted to buy the house, but was not willing to give up the pets that he considers his kids. He talked to the Association’s management company and found out that the Association had never enforced the pet limitation. However, while the Association had not historically enforced the pet limitation, it is not uncommon for new Boards to work to revive previously-ignored declaration provisions. It’s an Association’s obligation to enforce its governing documents. The Board doesn’t have the power to eliminate a declaration provision without a vote of the membership, and my friend wasn’t willing to risk that the Association, under a new Board, would decide to enforce the limitation.
He managed to work it out with written assurances from the Board that, if ever the Association decided to enforce the pet limitation, his pets would be grandfathered in. This protects him, while allowing the Association to undertake its duties under the governing documents.
If you want to live happily ever after too, make sure you do your due diligence before purchasing a home – read the covenants – it can save you time and money in the long run and help you to take pleasure in where you live.