Every month, the residents of a planned community need to pay fees to the HOA. However, what is the HOA fee anyway? What does it cover, and how does it benefit the homeowners? Let’s find out.
What Is HOA Fee?
HOA fees, also known as HOA dues or assessments, are the amount of money homeowners must regularly pay to the homeowners association. Homeowners associations typically collect these fees monthly, but some can collect the fees annually or quarterly.
What are HOA fees for? Generally, HOA fees assist the homeowners association with common area upkeep and improvement. HOAs determine the fees based on several factors, including the community’s needs and the number of amenities. It can also depend on the homeowner’s unit size and access to limited common areas.
What Do HOA Fees Cover?
A homeowners association can use the HOA fees for various expenses. What do HOA dues cover specifically? Here are the most common expenditures for which an HOA will use assessments.
1. Common Area Maintenance
What does an HOA cover? One universal trait among community associations of all kinds is that they are generally responsible for common area maintenance. This may include, but is not limited to, the following tasks:
- Common area pest control
- Facilities and equipment repairs and maintenance
- Amenity cleaning, repairs, and maintenance
- Snow removal for shared parking spaces and roads
- Road, sidewalk, and walkway maintenance and repairs
- Landscaping and lawn care for common green spaces
- Common area utilities
- Security
2. Municipal Services
Homeowners associations are often responsible for civic amenities like security, water, wastewater management, and garbage disposal. The homeowners pay for these through their HOA fees, allowing them to reduce the number of monthly bills.
3. HOA Insurance
Apart from services and maintenance, what are the HOA fees for? One of the most important things HOAs need to pay for is insurance. Every homeowners association needs some form of insurance to protect the community. It pays for accidents on HOA premises and damages to common elements. The HOA can avoid making hefty payments for repairs, medical expenses, and even lawsuits with proper insurance.
4. Services and Amenities
Some homeowners associations have special amenities like fitness centers, community pools, and co-working spaces. The association uses HOA fees to pay for upkeep and operations. In addition, the HOA pays for other services like security cameras, door attendants, security guards, and community lighting. If the HOA is a high-end community, HOA fees may even pay for luxury services such as valets, rooftop lounges, and luxury training centers.
5. Reserve Funds
Part of the HOA fees will go to the association’s reserve funds. These funds act like emergency funds in case of unexpected expenses. For example, an HOA can dip into the reserve funds to cover the cost of major repairs after a devastating flood.
How Much Are HOA Fees?
The amount each homeowner needs to pay will vary based on the community’s needs, size, and services. Generally, larger communities with more amenities have higher HOA fees. The same is true for homeowners associations that provide more services. HOA fees can range from $100 to $1,000 monthly. On average, they cost around $200 to $300 a month.
How Are HOA Fees Determined?
Every HOA will calculate fees differently. The amount is not arbitrary and is often based on the HOA’s annual budget. At the start of the year, the board will consider all the costs of maintenance, repairs, vendor services, administration, and operations.
Once considered, they will determine how much they need to cover all the HOA’s expenses — including the reserves. The board will then divide the needed amount by the number of homeowners. However, some HOAs will have special considerations, such as the size of a homeowner’s unit or their access to limited common elements.
Do Homeowners Need to Pay Other Fees?
Apart from HOA fees, homeowners can pay for other things. These include special assessments and fines.
Special Assessments
If a homeowners association lacks the funds (including the reserve funds) for major unexpected expenses or maintenance work, it may charge a special assessment. Special assessments often fall outside of the HOA’s annual budget. The board can levy them by collecting a large one-time payment or several smaller installments.
However, the board’s authority to levy special assessments may depend on state law and the governing documents. These may restrict how much and often the board can ask for special assessments.
Fines
HOAs can charge homeowners who violate the rules fines. This ensures compliance and deters residents from violating the community’s regulations. HOAs can also charge fines or late fees if a homeowner falls behind on their monthly dues.
What Happens If You Fail to Pay HOA Fees?
Homeowners are obligated to pay their HOA fees. They agree to pay the community’s dues when they purchase their home or unit. Failure to pay can result in significant consequences.
Firstly, failure to pay can lead to late fees and interest. Moreover, fines may increase the longer a homeowner fails to pay. Sometimes, the HOA may also suspend the homeowner’s rights and privileges. For example, the HOA may deny the homeowner access to the community clubhouse or gym.
HOAs may even place a lien on the property for serious delinquencies or take legal action. A lien can prevent the homeowner from selling their property as it blemishes the title of their home. If the HOA initiates foreclosure action, the homeowner may even lose their property.
Are HOA Fees Tax Deductible?
Generally, HOA fees are not tax deductible if the property is the homeowner’s main residence. However, if the property is a rental home, the homeowner may be able to deduct the HOA fees as part of their rental expense.
What Is HOA Fee? Answered!
Now that you know what you’re paying for, it may be much easier to pay the amount you owe to the HOA every month. Non-payment can lead to serious consequences, including the loss of your home.
Does your community need help with HOA management? Personalized Property Management offers excellent management services in in Southern California. Call us now at 760-325-9500 or contact us online to learn more!