Before buying a home within a homeowners association, it is crucial to be well-versed both in the benefits and amenities that the association will provide you with, as well as the obligations you will owe.
Benefits and amenities can vary from one HOA to the next, but should generally include the upkeep of common areas, access to shared facilities such as swimming pools, and the general promotion of property values.
As for your obligations, you can expect there to be some basic rules you need to follow, as well as fees you will need to pay. The question is, what kind of HOA fees should homeowners expect? And what exactly are those fees used for?
What is an HOA Fee?
Let’s begin with a quick definition. When we talk about HOA fees, exactly what are we talking about?
Basically, when you own a home within an HOA community, you will owe the association a certain sum of money each month. Note that in most HOAs, you will have the option of making these payments on a month-to-month basis, or of paying in one annual lump sum.
It is required that all residential homeowners within the HOA pay these fees in a timely basis; the association’s governing documents provide the Board of Directors with the power to collect payments and also to take action against delinquencies.
The fees are generally used to assist the association in maintaining common facilities and in enhancing property values.
What are Some Potential Uses of HOA Fees?
More specifically, your HOA might use the fees you pay to maintain any of the following physical assets:
- Community swimming pool
- Sidewalks and roads that run through the association
- Parking lots
- Fitness center
- Clubhouses, community center buildings, and other common facilities
- Tennis courts
- Neighborhood park areas
In addition to maintaining common areas, HOA fees may be used for any of the following expenses that arise in the life of the HOA:
- Paying for the management company. Some HOAs enlist a professional management team to help with things like meeting planning, bookkeeping, financial planning, legal affairs, and more. HOA fees may go toward paying for these managerial functions.
- Making major repairs on common areas. What happens when the air conditioning unit in the clubhouse goes out, or the pool pump needs to be replaced? Your homeowners association fee can help cover some of these unexpected costs. Fees can also help address damage done by major storms or other natural disasters.
- Hiring bookkeepers and other vendors. In addition to the management team, there may be other professionals whose services the HOA pays for. HOA fees can be used to cover these monthly costs. Additional services covered by HOA fees can include pest control, the expertise of a real estate agent, waterway management, and more.
- Hiring security guards. If crime or vandalism becomes an issue, you may wish to hire security personnel within your HOA. Homeowner fees can help pay for the salaries of these guards. Related: The fees that homeowners pay can be used to install and maintain alarm systems around the pool, clubhouse, or other common spaces.
- Keeping up with the insurance policy. Every HOA should have robust insurance, which ultimately helps protect everyone who lives within the community. But of course, you’ll need to pay in order to maintain that policy. (Note: HOAs may need flood insurance in addition to their master insurance policy.)
The bottom line: HOA fees should be used not only to ensure the solvency of the association, but also to improve quality of life for all homeowners.
What About the Reserve Fund?
In addition to HOA fees, which cover some of the day-to-day and month-to-month operational expenses of the association, it’s also important to have a reserve fund. This is money that is specifically set aside to cover any large or unexpected expenses. For example, we mentioned earlier that an unanticipated storm could lead to widespread property damage. Ideally, the HOA will be able to cover these unplanned-for costs from the reserve.
To maintain this financial reserve, HOAs are encouraged to conduct a reserve study every year or two. This is basically a way to assess the current status of physical assets, providing some insight into potential or upcoming repair needs.
What are Special Assessments?
There may arise a scenario in which the association does not have sufficient funds to make much-needed repairs; or, in which the reserve money is deemed insufficient. In these situations, special assessments may be called for. A special assessment is usually a one-time payment that homeowners must make on top of their monthly fees.
While a special assessment may prove necessary at some point, it’s seldom going to be a popular decision among homeowners. A good way for the HOA to avoid the need for a special assessment is to be diligent in their reserve studies. Also ensure that you have a reliable management team to help monitor the financial details of your community, and to help maintain robust financial health.
Can the HOA Make You Pay?
Before you purchase a home in an HOA, you should receive a copy of the rules and regulations, which should also give you information about what you will owe in terms of fees. Keep in mind that paying your fees on time is crucial for maintaining a positive financial situation in the community; failure to pay can ultimately impact everyone in your community.
Ideally, the HOA Board will make it easy for you to pay your fees. They can do this by providing clarity about how fees are used, ensuring that you see a real value from the money you pay. Additionally, the HOA should offer some convenient and flexible means to make your payments. An online payment portal is especially apropos.
With that said, the Board is also empowered to take punitive measures against delinquent homeowners. The specific actions available to the Board vary depending on the contract between the HOA and homeowners; you can consult the governing documents of the association for details.
Generally speaking, though, some of the primary actions available to the HOA include:
- Charging late fees
- Initiating legal action against the homeowner
- Placing a lien on the homeowner’s property
- Foreclosing on the homeowner
How Much Should Homeowners Pay in HOA Fees?
The fees charged within an HOA can vary dramatically from one community to the next; there’s really no “right” answer here, as it can depend on the geographic location, the number of amenities offered, the price range for the single-family houses in the HOA, and more. Some Associations charge as little as $100 monthly, and some charge as much as $1,000. The average is probably toward the lower end of the spectrum, maybe $200 to $300 monthly. Learn more about how much you should pay in HOA management fees by visiting our in-depth article.
Frequently Asked Questions About HOA Fees
With any questions about your HOA fees, make sure you consult the governing documents of your HOA, or simply reach out to a member of your HOA Board with your inquiry. In the meantime, here are a few quick answers to common inquiries:
Who usually pays HOA fees?
All homeowners who live within a true HOA (that is, a mandatory HOA) will be expected to pay HOA fees.
Can you negotiate lower HOA fees?
In the interest of fairness, HOAs need to charge consistent fees among all homeowners. There may be some instances in which the HOA is willing to work with a family experiencing financial hardship, but this should be considered an exception to the rule.
Are HOA fees deductible?
Yes, there may be certain scenarios in which HOA fees can be tax deductible, especially if you are paying HOA fees on a home that you use as a rental property.
Can you be evicted for not paying HOA fees?
The HOA has a number of ways to enforce HOA fees, including placing liens on the home or foreclosing on the property.
How can I avoid HOA fees?
Paying HOA fees is a necessity for HOA owners. Frankly, the way to avoid them is to avoid purchasing real estate in an HOA-governed community.
How much HOA fee is too much?
Again, the specific rate can vary, and may be as high as $1,000 monthly… but in most communities, it’s much closer to $200-$300.
Is the HOA fee included in the mortgage?
Typically, HOA fees are made directly to the HOA, and are not wrapped up with your mortgage payment or escrow.
Are high HOA fees worth it?
This is a question you’ll need to answer individually. For some homeowners, it’s well worth it to have common areas, amenities, pool access, and more. For others, it may not be worth it at all.
Is the HOA fee monthly or yearly?
Most associations will give you the option of paying annually or breaking it up into monthly payments.
Can you opt out of HOA?
If you buy a home in a mandatory HOA, there is usually not a way to opt out.
Can HOA kick you out?
Yes, but only in extreme instances of delinquency and non-payment, and only as a very last resort.