HOA Documents in Escrow: What California Buyers Must Review Before Removing Contingencies

In California real estate, reviewing HOA documents during escrow isn’t a formality — it’s a financial protection strategy.

If you’re buying a condo, townhome, or home in a planned community in Orange County, the Homeowners Association (HOA) governs far more than landscaping and pool hours. These documents reveal the financial health, rules, risks, and future costs tied to your investment.

Here’s what smart buyers should be reviewing — in detail — before removing contingencies.

1. HOA Financials: Is the Association Healthy?

Reserve Study

This document shows:

• How much money the HOA has saved

• How much it should have saved

• Upcoming major repairs (roof, elevators, pools, exterior paint, etc.)

🔎 Key question:
Is the HOA at least 70% funded?

Low reserves increase the likelihood of:

• Special assessments

• Deferred maintenance

• Higher future dues

In Orange County, older condo communities (especially 1970s–1990s builds) can face major capital projects. Buyers should understand whether those costs are coming.

Annual Budget

Look for:

• Operating income vs. expenses

• Percentage allocated to reserves

• Insurance costs

• Delinquency rate (how many owners aren’t paying dues)

High delinquencies can:

• Hurt lending approval

• Signal financial instability

2. Pending or Past Special Assessments

This is one of the most critical areas.

Ask:

• Are there current special assessments?

• Are future assessments being discussed?

• Has the HOA board approved large projects?

Even if an assessment hasn’t been formally issued, board meeting minutes may reveal upcoming costs.

Example:
If the roof replacement is planned but reserves are underfunded, a $10,000–$25,000 assessment per owner may be coming.

That impacts affordability — and resale value.

3. HOA Meeting Minutes (Last 12 Months)

This is where the real story lives.

Meeting minutes often reveal:

• Litigation

• Neighbor disputes

• Structural concerns

• Insurance claims

• Budget stress

• Major repair discussions

Buyers should read these carefully — not just skim them.

4. HOA Insurance Coverage

Since recent California insurance changes, this is crucial.

Review:

• Master policy coverage

• Deductibles (some are extremely high now)

• What is covered: walls-in or walls-out?

• Does the HOA carry adequate liability and property insurance?

High deductibles can mean owners are responsible for significant repair costs in certain claims.

Lenders are scrutinizing HOA insurance more than ever. Weak coverage can delay or kill financing.

5. CC&Rs (Covenants, Conditions & Restrictions)

These are the community’s governing rules.

Buyers must understand:

• Rental restrictions

• Pet limitations

• Remodeling approvals

• Parking rules

• Short-term rental bans

• Quiet hours

• Architectural control requirements

If a buyer plans to:

• Rent the property

• Install hardwood floors

• Remodel a kitchen

• Add EV charging

• Keep large dogs

They need to confirm it’s allowed.

6. Rules & Regulations vs. Bylaws

• Bylaws govern how the HOA operates.

• Rules & Regulations govern how owners live.

This may include:

• Balcony use restrictions

• Holiday décor limits

• Patio furniture guidelines

• Guest parking limits

What feels minor in escrow can feel major after move-in.

7. Litigation Disclosure

If the HOA is involved in active litigation, lenders may:

• Require additional review

• Deny financing

• Increase scrutiny

Litigation can involve:

• Construction defect lawsuits

• Insurance disputes

• Vendor contracts

This affects:

• Loan approval

• Marketability

• Future resale value

8. Rental Cap & Owner-Occupancy Ratio

Many Orange County communities have rental caps.

If the community is:

• Over the rental limit

• Near the cap

It can impact:

• FHA approval

• VA approval

• Future investment flexibility

This matters even for buyers who don’t plan to rent — because it affects resale liquidity.

9. Maintenance Responsibilities

Buyers should clearly understand:

Who maintains:

• Roof?

• Exterior walls?

• Windows?

• Balconies?

• Plumbing lines?

• Slab leaks?

California condos vary widely.

What seems like an HOA issue may legally be the homeowner’s responsibility.

10. Why This Review Is So Important

In California, buyers typically have a 3–5 day review period after receiving HOA documents.

Removing this contingency without careful review is risky.

These documents tell you:

• If your monthly dues are stable — or about to increase

• If a $20,000 assessment is around the corner

• If your renovation plans are permitted

• If the HOA is financially solid

• If lenders will continue approving loans in the community

HOA communities can offer:
✔ Beautiful maintenance
✔ Amenities
✔ Strong resale demand
✔ Community stability

But only when financially healthy and well-managed.

The Bottom Line for Buyers

HOA documents are not “extra paperwork.”
They are a financial and legal blueprint of your investment.

In Orange County’s competitive condo and townhome market, buyers often focus on price and interest rate — but the HOA’s financial health can impact your long-term wealth just as much.

A thorough review protects:

• Your budget

• Your financing

• Your renovation plans

• Your future resale value

The smartest buyers don’t just fall in love with the property.
They understand the association behind it.