HOA fees — they are a staple in any given homeowners association. But, what are they exactly? And what purpose do they serve?

 

What Are HOA Fees?

What is an HOA fee? Also known as HOA dues, HOA fees are fees that homeowners associations collect from its members, i.e. homeowners. When homeowners purchase a property within the HOA community, they agree to a set of covenants and rules set forth by the association. This includes paying HOA fees.

While HOA fees are paid regularly, the exact frequency depends on the association. Some HOAs have an annual payment setup, while others use a quarterly structure. More often than not, though, HOAs charge fees on a monthly basis.

 

What Do HOA Fees Cover?

Homeowners associations require funding in order to operate smoothly and continuously. But, not all HOAs are created equal. As such, the services HOA fees cover can vary from HOA to HOA. Typically, though, you can expect your homeowners association dues to cover the following:

• Maintenance and Repairs. Common areas and shared spaces require regular maintenance and the occasional repair work. In order to keep the community looking great and functioning well, a portion of the HOA fees should be allocated to maintenance and repairs.
• Landscaping. Beautiful landscaping can have a significant impact on curb appeal. When curb appeal is high, property values tend to follow.
• Insurance. Every HOA requires appropriate insurance coverage for various liabilities.
• Amenities and Services. Living in an HOA community grants you access to members-only amenities such as swimming pools, private parks, clubhouses, playgrounds, and fitness centers. HOA fees also usually cover services such as trash removal, snow removal, and security services.
• Reserve Fund Contributions. All HOAs need a reserve fund, which is set aside for future replacements, emergencies, and unexpected expenses.

If you want to know what HOA fees cover, it is imperative to ask the association you intend to join. Therefore, make it a part of your routine to ask for a copy of the HOA’s governing documents, especially the CC&Rs. These documents will contain specific information on restrictions and coverages.

 

How to Calculate HOA Fees

The process of calculating how much to charge homeowners in HOA fees is relatively simple. The HOA board is responsible for determining the amount after planning the annual budget.

They go over what the HOA expects to incur in costs for the upcoming year. This includes maintenance and repair services, insurance, utilities, landscaping, wages, and other vendor services. They also make sure to allocate enough money to maintain the right reserve fund level.

After arriving at the total anticipated expenses, they will then divide this by the number of homeowners in the community. This is the amount each homeowner must pay for the year. If the HOA collects on a monthly basis, the amount is further divided by 12. Keep in mind that board members are not exempt from paying HOA dues.

It is worth noting that not all HOAs divide the total expenses equally. Some homeowners may need to pay a larger fee depending on the size of their property. As always, it is best to check your HOA’s governing documents for confirmation.

 

How Much Are HOA Fees?

While there is no blanket answer to this question, average HOA fees can give you a rough estimate of how much you should set aside. HOA average costs can change depending on your location and the type of community you live in as well as what amenities and services your HOA provides. It could extend anywhere from $100 to $1,000. On average, though, HOA fees tend to play between the $200 to $300 range.

 

Why Are HOA Fees Too High?

There are a few factors that can influence how much an HOA charges homeowners in monthly dues. A high delinquency rate, for instance, can tip the scales.

If there are too many homeowners not paying their dues on time, the HOA board might raise the fees in order to make up for the loss and stay solvent. Emergencies can also cause homeowner association fees to rise.

Sometimes, though, expensive HOA fees are a sign of poor financial management. It could indicate that the HOA is paying too much for services or is in a bad contract with a vendor. There have even been a handful of fraud cases involving HOA funds.

It is essential for the HOA board to remain transparent when it comes to financial activities. The board should always present the annual budget and financial statements to homeowners. This way, homeowners know where their money is going.

If you want to review your association’s financials, you can usually request a copy from the HOA board. After all, homeowners have a right to review the HOA’s financial records. Should the HOA board refuse to comply with a reasonable request, the homeowner can take legal action.

 

Low HOA Dues Can Be Equally Bad

On the other hand, having low HOA dues is not necessarily a good sign either. When fees are too low, it could mean that the association is skimping on essential maintenance and services. In doing so, it fails to provide homeowners with adequate common areas and amenities.

You might not immediately feel the effects of subpar maintenance. But, over time, you will start to notice things around your community not working properly. Furthermore, poor maintenance can affect curb appeal and bring down property values along with it.

Charging HOA fees that are too low can also give way to surprise costs. With a lack of funding, the HOA will be forced to levy special assessments when unexpected expenses crop up. And nobody wants to pay extra for something that should have been covered by the HOA fees from the beginning.

 

What Happens If You Don’t Pay HOA Fees?

Some homeowners might not want to pay HOA fees for whatever reason. When that happens, the HOA has multiple recourse options. Provided state laws and the HOA’s governing documents allow it, these options include but are not limited to the following:

• Late Fees. The HOA board can charge late fees when a homeowner misses a deadline for paying association dues.
• Suspension of Rights. Delinquent members may have their rights revoked until they settle their balance. This includes the right to use community amenities and the right to vote.
• Small Claims Court. With the help of an HOA attorney, the board can choose to take the delinquent homeowner to a small claims court to force the member to pay.
• Lien. Placing a lien on the homeowner’s property usually happens in more serious cases, but it remains a possibility even for smaller debts.
• Foreclosure. When the homeowner still refuses to pay their overdue HOA fees (plus any late fees), the HOA can foreclose on the lien and seize your property. Foreclosures can also affect your credit score.

 

How to Get Out of Paying HOA Dues

Homeowners agree to abide by the covenants and rules of the HOA when they purchase their property. Part of that is consenting to the payment of regular HOA fees.

By now, you already know that there are certain consequences of refusing to pay HOA dues. You could even lose your home. If you are struggling financially, consider talking to your HOA board and asking them to set up a payment plan that works for you. But, unless you want to face the repercussions of defaulting on your dues, it is best to continue paying them.

 

A Symbiotic Relationship

Living in an HOA community offers many benefits. These benefits, though, come with a price — HOA fees. Sometimes, people only rebel against something because they don’t understand it. Now that you know what HOA fees are for, you can think of it as quid pro quo. Your HOA provides you with value in the form of maintenance, services, and amenities in exchange for your diligent payments.

Collecting HOA fees can be a hassle if you lack the proper tools. With HOA management software from Condo Manager, you can streamline processes with ease. Schedule a free demo, call us at (800) 626-1267, or contact us online for more information.

 

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Part of hiring an HOA property management company is paying a set fee in exchange for services to the association. But, how can you separate the reasonable fees from the questionable ones? The key is to understand how an HOA management fee works.

 

What Is an HOA Management Fee?

Homeowners associations don’t run on their own. They require a set of directors, the HOA board, to oversee and ensure the smooth operation of the community. These board members, though elected into their positions, don’t receive compensation for carrying out their duties. In essence, they are volunteers.

Because HOA board members usually have full-time jobs and personal lives outside of the association, they don’t always have the time or skill to perform day-to-day tasks. This is why many HOAs and condo associations turn to management companies for help.

But, hiring a management company does not come free. This is where HOA management fees come in. An HOA management fee is an amount charged to homeowners associations by HOA property management companies in return for services.

Who pays for the HOA management fee, though? Simply put, the association — and, by extension, the homeowners — pays for the management fee. The HOA board includes the management fee in the annual budget, which is then divided among all the homeowners in the community, board members included.

 

Does My HOA Need a Management Company?

Many HOA boards struggle with the fulfillment of their daily responsibilities either due to a lack of time or expertise. If that situation sounds familiar to you, then perhaps it is time to receive help from a professional HOA management company.

Usually, when you hire a management company, the company pairs your community with an HOA manager. This HOA manager will assist you with the day-to-day operations and act as a liaison between you and the management company.

Although the services offered can vary, most companies provide the following services:

 

1. Accounting and Financial Management

Not everyone is equipped to do accounting or handle the finances of an entire community. An HOA management company can take care of bookkeeping, advise you on financial matters, and assist with financial reports. Some companies perform the accounting tasks in-house, while others partner with third parties.

 

2. Collections

Managing the collection of HOA dues can come as a challenge, especially when you have a lot of delinquent accounts. A management company typically offers collection services in addition to financial management. Some companies don’t handle collections on their own and, instead, refer you to a collection agency they trust.

 

3. Rule Enforcement

HOA managers can conduct inspections for violations and coordinate with the board to enforce the rules. This can range from sending out violation notices to towing an improperly parked vehicle. Of course, HOA managers don’t take action without consulting the board first. The board still retains decision-making authority.

 

4. Homeowner Communication

Communication is paramount to maintaining transparency — a valuable facet of running a community. HOA managers can use a wide range of communication tools to disseminate information to homeowners. They can also handle complaints, send notices, and manage newsletters.

 

5. Legal Assistance

Though not all companies offer this service, some do. An HOA management company can help you navigate the often-confusing world of HOA laws and ensure you remain compliant. This can include federal laws such as the Fair Housing Act and Americans with Disabilities Act as well as state and local laws. If nothing else, a management company can refer you to an attorney with experience handling HOA communities.

 

6. Vendor Management

From creating and sending RFPs (request for proposal) to coordinating with existing vendors, an HOA manager can do it all. As with rule enforcement, though, HOA managers don’t get to pick the vendors for your community. The HOA board still has the final say on which vendor to choose, and an HOA manager can only offer advice.

 

7. Insurance

Every HOA needs sufficient protection in the form of insurance. An HOA management company can connect you with the best insurance providers and handle claims on your behalf. Keep in mind, though, that most management companies charge extra for insurance services.

 

How Much Do HOA Management Companies Charge?

It is important to understand that not all companies offer the same services and have the same fee structure.

Therefore, it is difficult to blindly determine how much you should expect to pay in HOA management company fees. What you can do, though, is rely on average costs.

Typical HOA management fees consist of the following charges:

 

Initiation Fees

This is the start-up fee or how much you should expect to pay for the company to assume the daily management of the HOA. To calculate this fee, the HOA management company considers the workload involved, such as file transitions, banking, bookkeeping, and software changes. Because this fee is reliant on workload, small communities usually pay smaller initiation fees (perhaps a couple of thousand dollars), while larger communities might pay $30,000 or more.

 

Ongoing Management Fees

The ongoing management fee is the regular fee an HOA pays, usually on a monthly basis. This fee is included in the contract and usually negotiated between the company and the HOA beforehand. On average, companies charge an HOA manager fee of $10 to $20 per unit per month in exchange for management services. Though, the amount can vary depending on the location and size of the community.

 

Exit Fees

If your HOA switches from one management company to another, expect to pay an exit fee. This is the fee charged by your current company to help with the transition process. The exit fee amount can vary wildly depending on the company. Make sure to go over the contract with your management company to see how much you should expect to pay for the transition. Perhaps you can negotiate to a lower price.

 

Caution: Suspicious HOA Management Fees

While you may want to believe that all HOA management fees are reasonable, the unfortunate truth is that some companies have hidden charges. To make matters worse, these hidden HOA management company costs are usually questionable in their purpose. Here are some examples of suspicious fees that some companies bill to HOAs:

 

1. Meeting Fees

It is common and rational to assume that your HOA manager should attend board meetings. After all, they need to know what is happening in the community to help run it. Some companies, though, will charge you extra for sending a representative to such meetings.

Thus, it is imperative that you ask your management company about their policy on meeting attendance. You might ask your HOA manager to come and be surprised about an additional fee at the end of the month. Some companies charge extra if you meet more than once a month, while others bill $50 to $100 per hour if your meetings take place after regular work hours.

 

2. Fees Per Instance

Some management companies charge a set fee every time they need to perform an activity. This activity, whatever it may be, can change depending on the company. Some charge you a fee per collection, while others charge you a fee for each demand letter they send.

To protect your HOA from this kind of questionable fee, you must stay vigilant and review your contract before signing it. This will save you a lot of time, headaches, and money. After all, you don’t want to increase HOA dues or levy special assessments just to make up for an oversight you committed.

 

3. Miscellaneous Fees

Other fees management companies can charge include newsletter printing costs, general contractor fees, inspection fees, document preparation fees, and the like. Some companies get really creative with their hidden fees and find new ways to charge you extra for something you thought was already included in the fixed HOA management fee.

Again, the best way to avoid surprises is to do your due diligence and review your management contract thoroughly. In addition, you can ask the HOA management company directly if they charge any other fees outside of the initiation fees, ongoing management fees, and exit fees.

 

Making a Decision

When assessing whether or not an HOA management fee is worth it, weigh the price against the services the company provides. Sometimes, the extent and quality of a company’s services justify the more expensive prices they charge. Just remember to work within your budget and make sure you get the services you need. And don’t forget to check for extra or hidden fees!

Management software can significantly reduce the amount of time and work needed to run an HOA or condo association. Both management companies and self-managed communities can benefit from Condo Manager USA. Schedule a free demo, call us at (800) 626-1267, or contact us online for more information.

 

RELATED ARTICLES:

• Management Software For Self-Managed HOAs: How Can It Help?
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What is an assessment fee? Contrary to popular belief, HOA assessments are not exactly the same as HOA dues. It is essential to learn the difference between the two, especially if you are considering moving into an HOA community.

 

Separating HOA Assessments from HOA Fees

Before moving into any community governed by a homeowners association, it is imperative to evaluate any related fees that you might need to shoulder. No two associations are the same, so one HOA might charge a higher fee than another.

What is the difference between dues and assessments? To understand the distinction between these two terms, you must first understand how a homeowners association works. Homeowners associations exist to maintain the community, hence, keeping property values high. To carry out this type of work, HOAs naturally need to source their funds from somewhere. Enter you, the homeowner.

 

What Are HOA Fees?

HOA dues, which are sometimes referred to as HOA fees, are recurring fees homeowners pay to the homeowners association. The association uses these fees to cover the cost of maintenance and repairs required to keep the community’s common areas in good shape.

This includes landscaping expenses, insurance premiums, legal fees, utilities, and the like. Additionally, homeowners receive access to community amenities, such as clubhouses, pools, and tennis courts, in return.

 

What Are Special Assessments?

What is a special assessment? An HOA special assessment, also known as simply assessments, is a one-time fee imposed by a homeowners association to its members. Typically, HOAs only charge special assessments when unanticipated expenses arise.

For example, if a disaster occurs that affects the community, the HOA would usually turn to its insurance provider. But, if the HOA’s insurance is not enough to cover the cost of the associated expenses, it might need to levy special assessments. Another instance where an association may need to charge homeowner assessments is if the HOA board made inaccurate budget projections.

It is worth noting that homeowners associations should have a reserve fund with sufficient money to cover unexpected costs as well as major repairs and replacements. This is why it is important to perform a reserve study every few years to keep a healthy reserve level. Special assessments are usually the last resort for HOAs.

 

Calculating HOA Assessments vs HOA Dues

How are HOA dues calculated? The association calculates how much homeowners should pay based on the annual budget. Typically, the HOA board drafts a budget for the upcoming fiscal year consisting of projected expenses.

From this total amount, the board will divide it either equally or according to certain terms across all homeowners. You can find specific provisions for calculating HOA dues within the association’s governing documents. State laws may also play a role in determining your HOA dues.

How are HOA assessments determined? Most of the time, the amount the association needs to cover the cost of the unanticipated expenses will dictate how much it levies against homeowners.

For example, if the HOA requires $10,000 to pay for uninsured damages, it will split that amount among all the members of the association. The formula used to split the charge, though, will depend on the association’s HOA special assessment rules. To learn how your association divides up assessments, refer to your governing documents.

 

Assessments and Dues: Are There Limits?

Many factors can influence the cost of HOA dues. For instance, if you live in an affluent neighborhood, your HOA dues are likely higher than the average association. The nature and extent of an association’s amenities and common areas can also affect dues amounts because there are more expenses involved.

Can an HOA raise the fees? Yes, though there is usually a limit as to how high an HOA can increase its dues. You will normally find such stipulations within the HOA’s governing documents or state laws. Associations in Arizona, for instance, cannot raise dues by more than 20 percent without securing a majority vote from members.

Many CC&Rs also have regulations limiting the amount of the special assessment HOAs can charge. Some associations have a fixed amount, while others work on a percentage basis. It is necessary for homeowners and board members alike to familiarize themselves with the HOA’s governing documents. This way, you know what to expect and when an HOA board is in breach of its authority.

There are also some states that have laws that impose an HOA special assessment limit. In California, Civil Code Section 5605 mandates that associations cannot charge assessments that exceed 5 percent of the preceding year’s budgeted gross expenses without obtaining approval from members. Check your state laws to see if any regulations apply to your HOA assessments.

 

Can HOA Special Assessments Be Written Off?

Are special assessments tax deductible? In a word, no. You usually cannot deduct special assessments from your taxes. But, if you use the home as a rental property, you may be able to write it off. It is always best to check with your tax adviser first, though, to avoid any problems with your taxes.

 

Can I Get Out of Paying HOA Assessments?

Many homeowners wonder how to fight a special assessment or their monthly dues. Unfortunately, there is generally no way around these.

Homeowners agree to follow the covenants and rules within their association, including paying fees and assessments. So long as the HOA is exercising its power to levy assessments correctly, then you really have no choice but to pay it. Keep in mind that board members are not exempt from paying HOA assessments.

There will always be delinquent homeowners, though, in any given HOA. In case you fail to pay your dues and assessments, the association can force compensation through a number of means.

• Impose a Late Fee. Can an HOA assess fines? Yes, many associations do have the ability to charge penalties or fines if a homeowner has violated a covenant or rule. This includes defaulting on dues and assessments.
• Revoke Privileges. In some cases, an HOA may suspend your rights and privileges as a consequence of nonpayment. This can include anything from your right to vote on association matters to suspending access to community amenities.
• Take Legal Action. An HOA can file a lawsuit against delinquent homeowners to force payment.
• Attach a Lien. When you fail to pay your dues and assessments, a lien will automatically attach to your property. If you live in a super-lien state, the HOA’s lien has superiority over all other lien holders.
• Foreclose. An association has initiate foreclosure on a lien, causing you to lose your home.

 

The Importance of HOA Assessments

As a homeowner, you might feel that HOA assessments are unnecessary when there are already monthly dues to cover the association’s expenses. But, as in life, many things can go wrong in an HOA community. The board can make budgeting mistakes or unexpected costs might arise. And special assessments allow HOAs to source funds when the going gets tough.

Stay on top of your association’s dues and assessments with the help of Condo Manager’s state-of-the-art management software. We make dues and assessment payments a breeze for any size HOA. Give us a call at (800) 626-1267 or reach out to us online for a free demo.

 

RELATED ARTICLES:

• When Should Your Association Levy HOA Special Assessments?
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