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F I S C A L I M P A C T R E P O R T

SPONSOR Stewart

ORIGINAL DATE

LAST UPDATED

3/5/2007

3/8/2007 HM 65/a HHGAC

SHORT TITLE Study Homeowners’ Associations

SB

ANALYST McOlash

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

NFI

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

SUMMARY

Synopsis of HHGAC Amendment

The proposed amendment by the House Health and Government Affairs Committee adds the

following to House Memorial 65:

Homeowners' associations are distinguished from other community associations, including

neighborhood associations, by their ability to assess dues, to impose regulations on things such

as a home's appearance and to levy fines on homeowners who violate those regulations.

Synopsis of Original Bill

House Memorial 65 resolves that the Legislative Council be requested to direct the appropriate

interim committee to study homeowners' associations in New Mexico, including the reviewing of

state statutes relating to homeowners' associations; reviewing homeowner complaints, lawsuits or

other controversies relating to homeowners' associations in New Mexico; and researching responses

to similar problems of homeowners' associations in other states.

House Memorial 65 also resolves that copies of this memorial be transmitted to the co-chairs of the

New Mexico Legislative Council.

House Memorial 65/a HHGAC – Page

2

FISCAL IMPLICATIONS

NFI

SIGNIFICANT ISSUES

House Memorial 65 recognizes the primary purpose of a homeowners' association

is to manage a neighborhood's common areas, such as roads, parks and pools and are distinguished

from other community associations, including neighborhood associations, by their ability to assess

dues, to impose regulations on things such as a home's appearance and to levy fines on homeowners

who violate those regulations

The memorial also recognizes that some homeowners' associations have assumed much

broader powers and as homeowners' associations become more prevalent in New Mexico, New

Mexicans are entitled to fair covenants, conditions and restrictions when they purchase property

governed by a homeowners' association.

According to Wikipedia, the fastest growing form of housing in the United States today are

common-interest developments, a category that includes planned-unit developments of single-

family homes, condominiums, and cooperative apartments. Before the first unit is sold in one of

these developments, the developer records restrictive covenants on all of the properties.

Restrictive covenants limit the property rights of individual homeowners, by contractual

agreement.

Since 1914 builders of common interest developments and firms and companies that sell services

to homeowner associations have said that deed restrictions protect property values — a rationale

that remains the most common justification for the loss of freedom inherent in a development run

under a regime of restrictive covenants. For example, these covenants may authorize the board or

a designated committee to approve the color a house is painted, or the types of flowers and

shrubberies planted, and even regulate the conduct of homeowners. Restrictive covenants run

with the land, meaning that they bind subsequent purchasers.

Since 1964, homeowner associations have become increasingly common in the USA. The

Community Associations Institute trade association estimated that HOAs governed 23 million

American homes and 57 million residents in 2006.

Like a city, associations provide services, regulate activities, levy taxes (assessments), and

impose fines. Unlike a municipal government, however, most homeowners associations are

incorporated as non-profit corporations, and are therefore governed by a board of directors. The

board carries out tasks which would otherwise be performed by local governments or require

private legal action under civil law. Boards appoint corporate officers, and may create

subcommittees, such as "architectural control committees", pool committees and neighborhood

watch committees.

BM/mt