If you’re building or investing in new town homes or condos and you’ve decided to make the investment, there is no doubt you performed all the due diligence needed before you made the decision to move forward. Perhaps you hired accountants, lawyers and real estate agents to assist you in gathering all condos and litigationthe needed data and you’ve got your financing lined up.

You’re all ready to go, right? Maybe. Did you remember to check out the homeowner’s association? The HOA? Why would anyone need to do that in the first place?

The HOA is the entity that is in charge of making sure all the town home or condo rules are followed by the property owners and tenants. One of the main functions of an HOA is to keep property values up where they should be. That means not only making sure that proper maintenance of the complex is in order but also fixing things when they need fixing. The HOA will collect the HOA dues, pay the management staff and overall make sure that the property owners are keeping their units in good shape.

Yet there are some rather aggressive HOAs that are usually led by one or two individuals that have a tendency to pick fights with third  parties. That means legal issues. Say that a plumber came to fix a leak in the pool. The plumber fixed the leak, the HOA paid the bill yet three weeks later the lead appears yet again. The pool company said it was a new leak, not the old one but instead of working out the issue, the HOA files a lawsuit. Later, a property owner and the HOA disagree on the understanding of the rules and the HOA threatens to sue the owner. Sure enough, a suit is filed. But these suits aren’t free. There are legal fees involved and countersuits are often involved.

An overly litigious HOA may think it’s working in the best interest of the project, but frequent lawsuits that could have been avoided are bad for the project. When there is evidence of any legal action, it can hamper sales. In fact, lenders will refuse to finance a unit during active litigation. Lawsuit-happy HOAs will then drive down the value of the project, not increase it. Before you decide on the investment, get a history of legal issues. Once you’ve done that, your due diligence is complete.