A system governed by rules, but with no enforcement, is bad performance art.
HOA Detective™ | Date: July 7, 2026: For most Americans, homeowner associations appear to be heavily regulated. There are statutes. Administrative rules. Recorded declarations. Bylaws. Rules and regulations. Reserve study requirements. Financial reporting requirements. Election procedures. Disclosure requirements. Fiduciary duties.
The system appears comprehensive; this perception is understandable.
It is also one of the greatest misconceptions in the HOA ecosystem. During the past fifteen years, The Detective and his staff have examined thousands of homeowner associations throughout the country. Prior to that, thousands more have been the subject of a reserve study supervised by the Detective.
One of the first lessons every investigator learns is that there can be an enormous difference between what the rules require and what actually happens when it comes to compliance. HOAs are no different in this regard from a speeding driver who refuses to wear a seat belt.
No harm, no foul; until they get stopped for speeding with the seatbelt dangling at their side.
- People assume the HOA has a current reserve study because state law requires one.
- The same people assume a CPA will review or audit the financial statement because the governing documents or state law require them.
- It is often assumed that a disclosure package will be provided to a buyer, just like a publicly-traded company is required to do, but alas, many states require little from the HOA in terms of disclosures.
Often, people assume somebody is watching, but in the experience of the Detective and his team, the evidence suggests otherwise. The overwhelming majority of the deficiencies uncovered during a CIDA REPORT™ examination are not hidden. They are sitting in plain sight:
- Missing reserve studies,
- Missing auditor’s reports,
- Missing financial reviews,
- Years of missing meeting minutes,
- Expired insurance certificates,
- Outdated reserve studies,
- Reserve borrowing with no documented repayment plan,
- Financial statements that contradict reserve studies,
- Resale disclosure packages are missing the very documents buyers need most.
Volunteer directors rotate on and off boards. Management companies answer primarily to the Board of Directors, and pay little attention to the buyer’s need for current, timely, and complete disclosure materials.
- Owners rarely read the governing documents.
- Buyers typically have only a few days to evaluate hundreds or thousands of pages of disclosures.
- State agencies DO NOT conduct routine compliance audits.
- Civil litigation is prohibitively expensive for most homeowners.
- Penalties for noncompliance are nonexistent.
The result is a governance model that depends largely upon voluntary compliance.
Voluntary compliance works well when everyone is diligent, but it is far less effective when they are not.
A regulated industry is one in which compliance is verified. An industry with rules, but no meaningful verification, simply has a rulebook. Those are not the same thing. Over time, the absence of verification changes behavior.
- Reserve study updates become optional because annual updates have never been completed in the past.
- Financial reporting deadlines become flexible because nobody ever complains when a deadline is missed.
- Maintenance is deferred another year.
- Reserve contributions remain artificially low, and why not? Isn’t the roof leaking right now?
- Surely replacement can be postponed until we have the money?
- Deferred maintenance quietly becomes budget policy.
None of these decisions appears catastrophic in isolation. Collectively, they become systemic until they become increasingly difficult to ignore.
Most large homeowner associations are “professionally” managed by paid administrators. Very few are managed by trained, regulated professionals. The fact is that the barber on the corner is subjected to a far more imposing level of state regulation than the “professional community managers in any state.
Virtually all HOAs are governed by unpaid volunteers. In many instances, the only requirement for serving on the Board of Directors is the willingness to do so and an ownership stake in the Association.
There are no HOA Police, no Reserve Study Police, no HOA regulatory commission in any state in the country, nor is there any such oversight at the federal level. What is a hapless homeowner or prospective buyer to do?
The Accountability Framework: Fixing this part of the Imperfect Machine does not require hundreds of new laws. It requires a renewed commitment to enforcing the laws we already have.
Accountability begins with transparency. It requires complete and timely disclosures, independent financial oversight, meaningful reserve planning, and objective due diligence before a transaction closes. Most importantly, it requires a system that verifies compliance rather than simply assuming it.
The solution is surprisingly straightforward. Quantify success by how consistently existing laws are followed:
- Reward transparency.
- Verify compliance.
- Give buyers better information before they purchase.
- Hold fiduciaries accountable when objective standards are ignored.
Fixing this imperfection in the machine rests on four simple principles:
- Transparency – Buyers deserve complete, current, and understandable information.
- Verification – Compliance should be independently confirmed rather than presumed.
- Accountability – Fiduciaries must answer for persistent failures to meet established standards.
- Education – Boards, homeowners, and buyers need practical guidance, not simply more unenforced statutes.
Fixing the Imperfect Machine does not require the repair or replacement of every part, but it does require the failure points within the machine to be identified, analyzed, and improved. The success of any machine depends on good design, knowledgeable operators, effective maintenance, and monitoring of the machine throughout the performance cycle.
The “HOA Machine” in the U.S. and Canada has never been subjected to anything close.
Because You’re Buying More than a Home™
