Why are HOAs even legal?

Apr 22

4 min read

The legality of homeowners associations (HOAs)—despite their quasi-governmental powers, lack of constitutional constraints, and imposition of non-negotiable rules—is justified through a combination of contract theory, property law doctrines, and legislative support, even as it raises serious normative and policy questions. Below is a short structured explanation of why HOAs are legal, despite the significant powers they exercise over property owners- at times creating tension with national and state constitutional rights.

There is a set of three justifications commonly cited for the legal creation of HOAs. In theory, all three of these conditions exist in Nevada. But, in practice? Let’s quickly consider each justification.

1) HOAs are rooted in the idea that when someone purchases property in a common-interest community, they “agree” to the HOA’s rules and powers by taking title subject to recorded Covenants, Conditions, and Restrictions (CC&Rs). The decision to purchase in an HOA is voluntary and informed.

This is called constructive consent. This means that by purchasing a home in an HOA-governed community, the buyer is deemed to know and accept the HOA rules and agreements. In reality, many buyers do not read the full convenient, conditions, and restrictions (CC&Rs) or understand the extent of the HOA’s authority. The sheer volume of legal jargon and fine print can be overwhelming. While there’s technical consent, there's often a lack of informed consent—homeowners rarely read or understand CC&Rs thus, aren’t fully aware of what they’re agreeing to.
The CC&Rs form a “real covenant” or equitable servitude that “runs with the land”—binding future owners. CC&Rs are treated as private land-use agreements, akin to easements or zoning covenants. Because the HOA’s rules are recorded in the chain of title, courts treat them as enforceable property interests, not statutes.
Buyers in many neighborhoods, especially in suburban or newly developed areas, are governed by HOAs. They have little or no alternative if they want to live in a certain location. The decision to "enter" into a contract with the HOA is less a voluntary negotiation and more a take-it-or-leave-it proposition. This raises questions of contractual fairness—is it fair to bind someone to a long-term, enforceable agreement when there’s minimal bargaining power and power imbalance between developers and buyers?

CC&Rs walk a thin line between legal enforceability and genuine informed consent. While buyers technically agree to the terms, the imbalance of power, complexity of agreements, and lack of meaningful choice spark ongoing debates. Is consent obtained under such conditions truly voluntary or merely a legal formality. Read more here.

2) Homeowners have the power to control their association through the political process.

HOAs are structured as democratic entities (post- declarant control) where owners elect a board that governs. Owners have the power to influence decisions, remove board members, or amend rules. However;
- most HOAs require supermajority approval (often 67%, 75%, or more of all members) to amend CC&Rs.
- owner apathy is common. Many homeowners don’t attend meetings, read HOA communications, or vote. Even if engaged, homeowners might not understand what the changes mean or fear unintended consequences. Attempts to change rules can create or inflame divisions in the neighborhood.
- management companies and attorneys may dominate governance, acting as unelected power brokers.

3) Tailored and equitable dispute resolution processes are in place. Two pieces to examine here. Disputes over the the CC&Rs (the contract) and those over the law (NRS 116). They are treated differently.

Nevada is one of the few states that, in my opinion, has a viable and low cost framework for dealing with disputes of the law (NRS 116). The theory is the Nevada Real Estate Division (NRED) investigates alleged violations. If "due cause" is found, the Nevada Attorney General’s office brings a complaint before the CIC Commission (a seven-member board appointed by the governor) for adjudication, in the name of the State, on behalf of NRED. Pros: It is low cost and does not require (but permits) legal representation. Rulings are appealable via civil litigation- but as noted, defended by the state. If appealed the State is responsible for the defense of the ruling. Cons: The process is depended on the NRED acting appropriately to investigate and bring forward violations for adjudication.
Disputes of the CC&Rs typically start with the owner receiving a violation notice (e.g., for improper landscaping, noise, or exterior modifications). The homeowner is usually given a chance to correct the violation or respond. There may be an informal meeting or hearing with the board or a designated committee to present their case. Pros: Fast, cheap, keeps things internal. Cons: HOA board acts as judge and jury, which can feel biased.

Summary: Buyers are presumed to have constructively consented, Nevada statutes expressly authorize and regulate them, and courts treat them as private property contracts, not governments. Lastly, while not a justification for HOA legality, public policy generally favors decentralized governance and cost-sharing in residential development.

Conclusion: The hybrid public-private structure of HOAs demand stronger procedural protections and state oversight—especially where homeowners lack meaningful choice or redress. I believe Nevada HOA law does not adequately address these points. Work is needed.

Commentary- I believe HOAs could be a good idea. To achieve success, HOA owners are dependent on the third justification- a tailored and equitable dispute resolution processes- properly functioning. Nevada's "captured" regulator- the Nevada Real Estate Division (NRED) is problematic. Legislative reforms are needed to address accountability, transparency, the proper exercise of enforcement mechanisms, and "re-activation" of currently dormant tools. Read more here- Cost-shifting HOA justice: Time to Draw the Line .