Living in a homeowners association comes with the responsibility of paying HOA fees. Homeowners should understand what these fees are, their purpose, and the potential consequences of nonpayment.
What are HOA Fees?
Homeowners in an HOA must pay fees. But how do you define HOA fees in the first place?
Also known as HOA dues, HOA fees are recurring payments that homeowners are required to make to their homeowners’ association. Homeowners pay these fees regularly, typically on a monthly, quarterly, or annual basis. The HOA uses these fees to cover various expenses, such as standard area maintenance, insurance premiums, and landscaping.
Board members are responsible for setting the amount of this fee. It is essential to recognize that HOA fees are not fixed, meaning they can fluctuate in response to economic factors and the association’s specific needs.
Can an HOA Charge Fees?
Generally, homeowners’ associations can charge regular fees. This authority should come from state laws or the association’s governing documents.
Homeowners are responsible for paying these fees. They agree to fulfill this financial obligation when they first purchase a home within the community.
What are Condo Fees?
Condominium fees function similarly to HOA fees, but in a different property setting. Condo fees are allocated to the condo association, which covers expenses such as building maintenance, common area upkeep, and other related costs.
It is worth noting that condo fees are typically more expensive than HOA fees. This is because shared expenses tend to be higher than in a condo association compared to a single-family HOA.
What do HOA Fees Cover?
The specific expenses that an HOA fee covers can vary from one association to another. Homeowners should check their association’s governing documents to clarify these expenses further.
That said, HOA fees usually cover the following:
- Maintenance of Common Areas. This includes cleaning, repairs, landscaping, irrigation, signage, sidewalks, and lighting.
- Amenity Upkeep. This covers pools, gyms, clubhouses, tennis courts, and playgrounds.
- Utilities for Shared Spaces. This includes electricity, water, and gas for common-use facilities.
- Repairs and Capital Improvements. This covers roofs, pavement, and major systems in shared structures.
- Insurance. This includes liability insurance, D&O insurance, and coverage for common areas or buildings.
- Professional Fees. This covers management fees, legal fees, and accounting fees.
- Reserve Fund Contributions. The reserve account comprises savings for future repairs, replacements, or unforeseen emergencies.
- Administrative Costs. This includes office supplies, audits, and other back-office costs.
What HOA Fees Don’t Cover
One of the perks of living in an HOA community is that fees cover shared expenses. That said, homeowners are responsible for maintaining their own properties.
Homeowner dues won’t cover the maintenance costs of private property or the interior repairs of units. Residents must also pay for their utility bills.
While fees cover the association’s master insurance policy, homeowners are responsible for their own individual policies. These include individual homeowners’ insurance, separate liability policies, and landlord insurance (if the owner rents out their property).
Property taxes and mortgage payments also don’t fall under the HOA fee umbrella. Homeowners must shoulder these expenses on their own.
Some associations cover the cost of personal landscaping, but most do not. Homeowners should check with their HOA board to understand what their fees don’t cover.
How are HOA Dues Calculated?
It is the board’s job to determine HOA fees. This typically occurs at the beginning of the year, when the board plans the budget. During the budget preparation phase, the board anticipates upcoming expenses and sets an amount for the HOA fee.
Some associations get help from an HOA management company. Self-managed boards, on the other hand, must perform this process alone, typically led by the treasurer.
When calculating the fees, the board must consider the following factors:
- The size of the community
- The extent of the amenities
- Reserve studies
- Long-term planning
- Vendor changes
- Unexpected repairs
- Economic factors such as inflation, rising cost of goods, and wages
How Much is the Average HOA Fee?
Homeowners should not expect to pay the same fee year after year. Additionally, fees can change depending on the type of property, the location, and other factors.
On average, HOA fees generally range from $200 to $300 per month. In Virginia, these fees average about $392 a month. Meanwhile, in Maryland, these fees average about $401 a month.
How Much are Average Condo Association Fees?
In the United States, condo fees typically range from $300 to $400 per month on average. Virginia and Maryland condo unit owners can expect the same average monthly condo fees.
As with HOA fees, condo fees can also be influenced by external factors. These include the condo association’s size, location, amenities, and needs.
What is an HOA Special Assessment?
A special assessment is a one-time fee that homeowners pay in addition to the regular HOA dues. Special assessments are rare, only occurring when the association needs an extra cash injection.
This can occur when an association incurs unanticipated expenses, leading to a budget shortfall. It can also happen in the event of an emergency, such as a natural disaster, that causes significant property damage.
Some communities charge a special assessment to get their reserve funds up to standard. An underfunded reserve account can cause several financial risks to an association. Without sufficient reserves, an HOA would have no means to pay for the costs of replacing and repairing major assets.
Not all associations have the authority to levy special assessments. This power stems from either state laws or the governing documents.
What Happens When You Don’t Pay HOA Fees?
When homeowners default on their fees, they may face several potential consequences. They can even lose their homes.
Late Fees and Interest
Most associations charge a late fee or interest for unpaid dues. Whether or not an HOA can do this depends on state laws and the governing documents.
In Virginia, Section 55.1-1824 permits association boards to impose a late fee for fees that are 60 days past due. In Maryland, Section 11B-112.1 allows an HOA’s governing documents to provide for a $15 late fee or one-tenth of the total unpaid amount, whichever is greater.
Suspension of Privileges
Depending on the governing documents, an HOA may temporarily suspend a member’s privileges until they settle their unpaid dues. Privileges include access to amenities and the right to vote.
Collection Agency
Some associations refer the delinquent account to a collection agency. This agency will then be responsible for collecting the unpaid fees, charging a flat rate, or taking a percentage of the amount collected as payment.
Collection agencies may also file the delinquency with a credit reporting bureau. This will negatively affect the homeowner’s credit score.
Legal Action
An association may file a lawsuit against a delinquent homeowner. A court may grant an order of wage garnishment or other means to collect the unpaid amount.
Liens
If a homeowner still refuses to pay their dues, the association can record a lien against the owner’s property. The owner will then need to satisfy the lien before they can refinance their mortgage or sell the home.
Foreclosure
In extreme cases, an HOA may foreclose on the lien. The association can then recoup its losses using proceeds from the foreclosure sale.
What is an HOA Fee? Answered!
HOA fees cover essential services and amenities, making them a significant part of living in an association. Homeowners should consistently pay their fees, while board members should do their best to plan the budget and collect dues properly.
Keymont Community Management offers expert management services to associations in Virginia, Maryland, and Washington, DC. Call us today at 703.752.8300 or contact us online to get started!
RELATED ARTICLES:
- HOA Reserve Funds: Does It Protect Your Community’s Future?
- The Essential Guide To HOA Documents: From CC&Rs To Bylaws
- How To Choose The Right HOA Management Company
