Considerations When Condemning HOA Property

While there are many benefits to owning property in a common interest community, most people love to hate them. Condemnors should be especially wary when seeking to acquire property owned by a homeowners association. Here are a few things to consider:

1. Are CC&Rs considered property or contracts in your state? The Declaration of Covenants, Conditions, and Restrictions, or CC&Rs, is a document recorded on the property that sets out rules for ownership in the community. The covenants are reciprocal, meaning the owner of each lot has obligations to every other lot, as well as a right of enforcement against every other lot. Most states consider CC&Rs compensable property interests since they are recorded and transfer with each sale of the property. However, some states view them as contractual rights and obligations that are not compensable in eminent domain.
2. What rights do HOA members have in common areas? Every Declaration is unique, but most grant each member easements of use and enjoyment in the common areas, subject to the association’s right to regulate and restrict uses. Easements may be positive, such as allowing members and their guests to enjoy activities in the common area. Or easements may be negative, such as preventing use of the common area for anything but open space. If compensation is owed, the valuation will depend upon the extent of the rights granted, so read the CC&Rs carefully.
3. Can the HOA board get enough votes to sell the property? Even if the public agency can make a deal for a voluntary acquisition, the decision to sell will most likely be put to a vote of the membership and require a certain percentage of votes to pass. There is often a lack of interest in HOA activities, so the board may not be able to get the required number of votes. In that case, friendly condemnation will be necessary.
4. What happens when lots are removed from the association? If the public agency acquires a residential lot in an association and puts it to public use, it may trigger compensation rights for the HOA and/or the other lot owners. In most states, the government cannot be required to adhere to the restrictions imposed by CC&Rs but may be required to pay compensation for doing so. If the acquisition is voluntary, this may be avoided by negotiating terms that the sale will not be subject to the CC&Rs. Aside from compensation for violation or termination of the CC&Rs, the association will also likely incur administrative costs for revising its governing documents and replatting.
5. Who should be named in a condemnation action? Generally the homeowners association will hold title to the common area and will be the proper party. The few courts that have addressed the issue hold that it is not necessary to name every association member in the action, especially when the CC&Rs provide that the association is authorized to represent the homeowners in legal actions, which is typical.
6. What kinds of damages are available to HOAs? Valuation of common area owned by a homeowners association is as straightforward as that of any other property. Valuation of the individual homeowners’ property interests in the common area is more complex. Easement value is measured by the difference in value of the dominant tenement (the property benefitted by the easement) with and without the easement. In the case of State v. Foothills Rsrv. Master Owners Ass'n, Inc., 562 P.3d 866 (Ariz. 2025), 590 owners in a homeowners association claimed proximity damages to their individual residential lots when the state department of transportation condemned common area for a freeway and thus extinguished their easement interests therein. The Arizona Supreme Court concluded that the homeowners’ easements were part of a larger parcel that included the homeowners’ physical real property, and that the Arizona statute authorized payment of severance damages. It is still too early to tell how this opinion will impact the condemnation landscape when it comes to the larger parcel analysis. Read your state’s severance damage statute and definitions carefully.

Condemning HOA property may require a little extra attention, but it’s worth putting in the time to consider these additional questions to avoid being blindsided later on in the case.