What is an HOA fee? It can be hard to grasp the concept of HOA fees if you’re unfamiliar with homeowners associations. Even those who live in planned communities might not always know what they’re for. Let’s break down what these fees are and what they’re for.
What Is an HOA Fee?
Homeowners associations will often ask for HOA fees. But, what are HOA fees anyway? Moreover, what are HOA fees used for?
Put simply, HOA fees are the amount homeowners association members need to pay. It’s similar to condo association dues and co-op association maintenance fees. They’re often paid monthly or quarterly to the HOA. The HOA manager or board collects these fees to help with common area maintenance and general operations.
What Do HOA Fees Cover?
Each homeowners association will have different responsibilities and duties they must fulfill. For most HOAs, a big part of their duties is maintaining common areas. These include maintaining and repairing pathways, sidewalks, roads, elevators, and street lamps. It may also entail maintaining amenities such as parks, swimming pools, or clubhouses.
In addition, homeowners associations can offer various services. Many offer garbage collection and snow removal services. Some may also handle utilities like water, internet connection, and electricity.
However, these services often require professional help. After all, the HOA board members cannot do these tasks themselves. Thus, they hire third parties for janitorial services, tree trimming, pressure washing, and more. How do HOAs fund them? Through HOA fees.
Apart from repairs, maintenance, and services, HOAs will also use HOA fees to cover the cost of insurance. This may seem unnecessary to some, but insurance helps keep the HOA financially healthy. At times, it may also be required by law. For instance, California requires some level of Directors and Officers (D&O) insurance for certain associations.
Finally, homeowners associations must also maintain a reserve fund. The HOA’s reserve fund pays for unforeseen or irregular expenses. It’s often used to pay for unexpected repairs due to degradation, accidents, or natural disasters.
How Are HOA Fees Calculated?
What is an HOA fee calculation like? Unfortunately, there’s no straight answer to this question. Each HOA will have a different calculation based on the legal requirements and the provisions within the governing documents.
However, monthly HOA fees generally fall between the $100 to $1,000 range. They usually cost $200 to $300 on average per month. Nonetheless, the amount can be higher or lower depending on the location and general cost of living.
Moreover, a homeowner’s pay can vary depending on the HOA’s size, amenities, services, and limited common elements. The more perks the homeowner gets, the higher the fees they pay.
Special Assessments and Fines
Apart from standard HOA fees, homeowners may also need to pay other charges. These generally include special assessments and fines. Special assessments are charges made to residents for major projects, non-routine maintenance, and unexpected expenditures. They may also be used to fund the reserves.
Meanwhile, fines are the penalties homeowners must pay when they violate HOA rules. For instance, an HOA may impose fines for violations of their parking rules. Many also impose fines for late or delinquent HOA due payments.
State law may regulate the amount an HOA can charge in special assessments and fines. Generally speaking, these fees must be reasonable and not arbitrary. Furthermore, the governing documents may impose their restrictions and calculations.
What Happens if You Don’t Pay HOA Fees?
The moment a homeowner purchases a home, they agree to be part of the homeowners association the home is in. Hence, they are legally obligated to pay HOA fees, special assessments, and fines. Failure to make these payments can have several consequences.
1. Nonpayment Notice and Late Fee
The first thing homeowners will receive is a notice of nonpayment. This notice may come with a late fee that will be added to the homeowner’s debt. Usually, the notice demands payment within 30 days. Otherwise, the HOA may increase the fine.
2. Suspension of Privileges
Persistent nonpayment may result in the suspension of rights and privileges. The homeowner may lose the right to vote in HOA elections and other community matters. Moreover, they may be temporarily stripped of their right to access community amenities such as the clubhouse or swimming pool.
3. Legal Action
Homeowners associations often have many legal options to force homeowners to pay. They may put a lien on the homeowner’s property. This can make it hard for the homeowner to sell their home, as it can affect the property title. The lien may also eventually lead to a foreclosure.
Apart from this, the homeowners association may take legal action and file a lawsuit against the resident. This can be expensive for the HOA and homeowner, so it’s often used as a last resort.
Are HOA Fees Tax-Deductible?
No, homeowners association fees are generally not tax-deductible if the property is the owner’s primary residence. However, they may be deductible if the home is a rental property. This would make the HOA fees a part of rental expenses.
Can Homeowners Waive HOA Fees?
Some homeowners might think they can waive their fees if they don’t use the HOA’s amenities. However, homeowners often do not have the right to waive their fees. They agreed to abide by the HOA’s rules and covenants. Thus, they usually cannot opt out of fees.
On the other hand, some homeowners may opt-out if the HOA is a voluntary association. The downside is that they can no longer access common areas and amenities like community clubhouses and pools.
Every Member’s Obligation
What is an HOA fee? After answering this question, homeowners should have a better idea of what these fees are and how they’re being used. Ultimately, these fees are necessary to maintain the community’s shared spaces and provide services. It’s a requirement for all members— and non-board members alike.
Does your HOA need help managing its finances? Why not hire a professional management company like First Equity Property Management? We offer industry-leading HOA management services in California. Call us today at 650.349.7233 or contact us online for more information!