An HOA Member’s Guide to HOA Fees
If you join an HOA, you must pay fees to live in the community.
These recurring fees cover different services (and amenities) depending on the specific HOA.
If you join an HOA, it’s important to understand how these fees work.
In this article, we’re going to talk about everything you need to know about HOA fees before you join one of these communities.
HOA Fees are Mandatory
First things first, the fees are mandatory. If you purchase a property in an HOA, then you agree to pay all fees associated with that HOA. These recurring fees usually occur on a monthly, quarterly, or annual basis, and failure to pay results in late fees, interest, legal action, or even foreclosure.
HOA fees cover the cost of maintaining and managing the community’s common areas and amenities. These fees can also be used to fund long-term projects, such as the repair or replacement of community assets like a clubhouse, swimming pool, or tennis court.
It’s important to note that the HOA board is responsible for determining the amount of HOA fees and how they will be allocated. The board may adjust the fees to address unexpected costs, increases in services, or other factors that impact the community’s financial health. Homeowners must pay HOA fees promptly to avoid late fees, interest charges, or legal action.
It’s crucial to understand the amount of the fees, what they cover, and the consequences of not paying them before you move into an HOA community. Homeowners should also review the HOA’s financial statements, budget, and bylaws to understand how the fees are allocated and how you can participate in the decision-making process.
HOA Fees Cover Different Services Depending on the HOA
HOA fees don’t always cover the same features and services. Some common examples of things that are covered, though, include:
- Pool maintenance
- Snow and debris removal
- Trash removal
- Electricity and utilities for common areas
- Fire alarm systems
- Security guards
- Pest control for common areas
Naturally, the more services an HOA provides, the more costly your HOA dues will be as a member of the community.
HOA Fee Amounts Vary
How are HOA fees calculated? There isn’t a one-size-fits-all formula. These fees vary depending on several factors, such as the location, size, type of housing, and the level of services provided. Some HOAs charge a few hundred dollars per year while others charge thousands of dollars per year.
The reason for this disparity comes down to the services offered and the board’s discretion. For the sake of an example, let’s say you’re looking at two communities. One is a bit older and doesn’t have tennis courts or a pool. The other is full of modern amenities like a clubhouse, fitness center, and tennis courts. I’m sure you see where this is going. Obviously, the more modern, amenity-laden HOA will probably cost more in fees. And it might cost substantially more because it has a lot more to offer members.
The size of the property and the type of housing also affect HOA fees. For example, larger properties like single-family homes may have higher HOA fees than smaller properties (I.e., condominiums or townhouses). This is because larger properties typically require more maintenance, service, and upkeep.
Another factor that can significantly impact HOA fees is the level of service provided by the HOA. Communities that offer a wide range of services, such as 24-hour security, trash removal, landscaping, and snow removal, may charge higher fees than HOAs that offer basic services.
It’s essential to note that HOA fees are not set in stone. Thus, the board can raise them at any time. Typically, however, the board will hold an annual meeting where members can vote on the budget and proposed fee increases. You should review the proposed budget and fee increases carefully and participate as much as possible in the decision-making process.
HOAs can Raise Fees
Can HOA fees go up after you move in? This is something many homeowners want to know. And the answer is yes, an HOA has the right to raise regular assessment fees. An HOA board determines how much to raise the fees based on annual expense projections and budget reports. That said, there are things the HOA must keep in mind if it wants to increase fees:
- Governing documents: An HOA’s governing documents, mainly the CC&Rs, usually have provisions in place concerning the collection and assessment of regular fees. This includes having an assessment limit when it comes to increases. Before increasing dues, an HOA must first refer to its governing documents.
- State laws: In some states, certain laws may prevent increases, or the amount of the increase allowed. Some states have laws that prohibit raising fees over a certain percentage. For example, in Arizona, HOAs may not increase fees over 20% per year without a majority vote from the members of the community.
You can now see the importance of reading an HOA’s Covenants, Conditions, Restrictions, and Easements (CC&Rs). You want to see if the HOA has limits in place when it comes to fees. Particularly in older developments, the CC&Rs often contain limitations on how much the HOA can increase dues and assessments. For example, the CC&Rs might limit increases in periodic dues to 2% per year, or assessments to a maximum annual dollar amount.
The only way to determine whether there are dues or assessment limitations in the development you’re considering moving to is to review the CC&Rs.
If the CC&Rs do limit increases, however, it’s not always good news. Severe limitations may prevent the HOA from making positive changes. For instance, a 2% annual limitation on increasing fees might be a problem if cost of living increases are well above that number. A shortage of funds can mean that the development’s common areas fall into disrepair. This can hurt property values in the entire development. So, while you might keep some coin in your pocket because of lower dues, the value of your home might decrease.
Your best option, whether your HOA has limitations or not, is to understand how your board works and actively participate in the HOA’s budget process however you can.
It’s extremely common for the homeowners in a development to have a right to comment on the HOA’s annual budget. If you want to impact the fees, attend the HOA’s budget meetings and participate. The adoption of the annual budget is typically subject to the approval of a certain percentage of homeowners. If you disagree with budgeted items, voice your objections to your fellow homeowners, and do what you can to prevent the budget from passing until excess expenditures are removed.
Remember that the HOA’s board of directors are homeowners and must also pay increased dues. Furthermore, the board is often conscious that most homeowners don’t want large increases and assessments. Most boards keep the budget in check and avoid large fee increases or assessments.
That said, however, a gratuitous budget or the need for assessments might be due to a fiscally irresponsible board. In instances like this, if you and other members can band together, you may be able to get bad board members removed. The CC&Rs and other governing documents typically provide guidelines to remove board members. The process is often long and complicated, though, so try to focus on opposing or changing the budget first.
HOAs can Place Liens on Your Property
Treat HOA fees like rent payments. Pay on time and in full. Past due payments and similar issues can come with profound consequences.
Many HOAs have strict policies related to late payments, and many charge late fees that will add up quickly if you don’t pay on time and in full. So, it’s key to understand the payment schedule to avoid penalties. Many HOAs allow you to set up automatic payments with your bank or through the HOA, which is a good idea if this option is available to you.
If you’re going to be late on a payment, it’s essential to communicate with the HOA board right away. Some HOAs may offer payment plans or other options to help you if you’re in a tough spot. It’s also important to review the HOA’s bylaws and policies to understand the consequences of missing payments.
In some cases, if you fail to pay HOA fees for a while, the HOA may take legal action to collect the fees. This legal action often includes placing a lien on your property, charging late fees and interest, or even foreclosure.
Thus, it’s critical as a homeowner to avoid any unnecessary fees or legal action to keep a positive relationship with the HOA and prevent foreclosure.
Conclusion
HOAs fees aren’t rocket science. By learning the basics and understanding how they work, you can make your experience in an HOA community better.
