Rule Enforcement Increases Home Values

March 1, 2019 Michele Bruhn

Rule enforcement has a positive effect on home values. Communities that enforce standards pertaining to architectural style, property use, and maintenance standards help increase property values at a higher rate. They also help sell homes faster than in neighborhoods that have no restrictions or don't enforce the rules that are in place. The Community Associations Institute published  The Impact of Community Associations on Residential Property Values by Erin A. Hopkins and found that property values in homeowner associations that enforced covenants increased from 5.64% to as much as 19%.

When a real estate developer creates a community, covenants are established to create and maintain a community standard.  In master-planned communities, there is a trade-off. Owners contractually surrender some of their freedom of expression in modifying their property and accept an obligation to conform to certain architectural and landscaping standards established in their community’s governing documents.  These controls are in place to ensure that the integrity of the original community design is preserved to protect property values.  

Neighborhoods normally have a four-stage life cycle of growth, stability, decline, and revitalization. Each of the various phases has an impact on the value and desirability of homes and the neighborhood.  The decline phase is usually caused by the deterioration of the community infrastructure, amenities and neighborhood support system.  It is during the decline phase when homes experience a reduction in property values.  Neighborhoods with covenants that are uniformly enforced may completely forestall the decline phase, thus protecting property values and promoting community harmony.

Milton Motooka, attorney and senior partner with the Hawaii law firm of Motooka & Rosenberg (which primarily represents master and community associations and condominium associations) said, "When owners purchase a unit in a project, they are buying into a community.  The culture of the community is established by the manner in which the project is operated.  Every owner is provided with the rules of the project before they purchase their unit.  They know what is expected of them and what they can expect from others.  If rules are fairly and uniformly enforced, it enhances the value of the project and creates a positive community culture."

Open communication and education are the keys to success. Associations are encouraged to inform and educate residents through a community website, newsletters or at association meetings. Boards should take every opportunity to listen to owners’ concerns and seek owner input through surveys.

Prospective homebuyers are strongly encouraged to read all governing documents before buying a home in a community with restrictive covenants to make certain that the rules suit their lifestyle. 

About the Author

Michele Bruhn

Michele “Mimi” Bruhn is the director of the covenant compliance inspection (CCI) division at Associa Hawaii. Mimi leads a team of six covenant compliance inspectors who utilize state-of-the-art technology, diplomacy, and fairness to preserve, protect and enhance property values at Hawaii HOAs and condominiums.

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