My Perfect Mortgage
Self-Employment and Buying in HOA Neighborhoods
5 minute read
June 19, 2023

A neighborhood within a Homeowner's Association (HOA) presents a special challenge for self-employed homebuyers.

Depending upon what type of business you operate, you may find HOA neighborhoods to be something less than welcoming. In a worst-case scenario, it can even turn into a legal confrontation.

That’s why you need to know exactly what you’re getting into if you’re self-employed, and considering buying a home in an HOA neighborhood.

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HOA covenants, restrictions and bylaws

All HOAs have covenants, restrictions and bylaws. They are generally intended to maintain the integrity of the neighborhood. Many home buyers and homeowners prefer to live in HOA neighborhoods for precisely this reason. The HOA enforces proper use and maintenance rules on all homeowners in the neighborhood.

The covenants, restrictions and bylaws are the legal documents that spell out the specific rules, regulations and restrictions within the neighborhood. If you’re in violation of any of the rules, it will be just a question of time before you will be hearing from the HOA board.

HOA neighborhoods and the self-employed

Specific rules for the self-employed are common in HOA neighborhoods. For better or for worse, HOAs enforce a certain level of conformity on a community and its residents. There is a strong preference for people who work in occupations that are essentially invisible within the neighborhood.

What HOA neighborhoods frown on are people who are self-employed, and maintain a visible business presence in their homes. This presence is thought to diminish property values in the neighborhood and is therefore discouraged or prohibited.

Some of the potential self-employment activities that are commonly prohibited in HOA neighborhoods include:

  • Use of business signs on or near the home
  • Entertaining clients in the home
  • Storing commercial inventory in the home or on the premises
  • Storing or operating business equipment in the home or on the premises
  • Parking business vehicles on the property

Unfortunately, such restrictions can easily exclude common trades, such as carpenters, plumbers and electricians. They may also specifically exclude wholesale or retail operations. And any form of manufacturing, no matter how minor, will almost certainly be prohibited.

This doesn't mean HOAs exclude anyone who is self-employed. If you have an at-home business, that’s handled entirely online or by phone, and doesn’t require the storing of inventory or business vehicles or equipment, you won’t have a problem.

But if you operate the type of business that will in any way have a visible presence on the property, you will almost certainly have issues.

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HOA powers to enforce covenants and bylaws

This is an unpleasant side of the HOA discussion, but it’s one that you must be aware of if you have a visible self-employed business.

HOAs have the force of law behind them. As long as they are acting within the covenants, restrictions, and bylaws it will be almost impossible to mount a legal challenge against them. At the same time, their potential remedies against you can range from a friendly reminder to what amounts to an eviction notice.

Potential remedies by the HOA board – usually implemented on an escalating basis – include:

  • A friendly reminder that your business is in violation of the covenants, restrictions and bylaws, citing the specific section of the governing document. This is effectively a “cease and desist” order.
  • The implementation of a limited amount of time for you to comply with the board’s request.
  • The threat (and eventual imposition) of fines for noncompliance. Be aware that fines can be imposed on a daily basis, until the required action has been taken by you.
  • The right to enter your property, to make certain that you are in compliance.
  • The placing of a lien against your property.
  • A legal action to force you to vacate the home.

Scary stuff? It’s meant to be.

Get a copy of the covenants, restrictions and bylaws BEFORE you buy

Anyone who is buying a home in an HOA neighborhood needs to obtain a copy of the covenants, conditions, and restrictions (often called CC&Rs) and read them thoroughly.

HOA boards can be a friend if you’re in compliance. But if you’re not, they can quickly turn into your worst nightmare (for all of the reasons listed above).

You can choose not to read the governing documents before you close on the home and move in. But that will not exempt you from following the rules. And that’s why you need to know what they are before you even close on the home.

When in doubt, get an opinion from the HOA board

If you’ve obtained a copy of the governing documents, and you’re not entirely sure if your business will put you in violation, you should get an opinion from the board before you close on the home. That opinion should be in writing, in case there is any question later on.

Understand that when it comes to HOA neighborhoods, your occupation could be in conflict with the neighborhood rules. The HOA will prevail if there is any conflict. Should that happen, you may find yourself having to make a choice between your occupation and
your home.

That doesn’t have to happen – if you know the rules, and you’re fully prepared to comply. It’s one of those situations where an ounce of prevention truly does equal a pound of cure.

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Our advise is based on experience in the mortgage industry and we are dedicated to helping you achieve your goal of owning a home. We may receive compensation from partner banks when you view mortgage rates listed on our website.