Homeowners in areas with HOAs must pay Homeowners Association (HOA) fees to cover the cost of neighborhood maintenance, renovations, and repairs. HOA membership fees may also be used for structural repairs and enhancements for condo or townhome residents.
When you calculate how much your monthly mortgage payments will be, you may not realize that HOA fees can significantly increase your housing expenses.
Read on to find where your money goes and what to predict with your HOA fees before you decide to buy a house that is a part of Housing Associations.
Homeowners Association (HOA) Fees: Overview
Homeowners associations (HOAs) are organizations established within planned communities, subdivisions, or apartment complexes to create and enforce rules for the properties and their residents. When someone purchases a property in one of these areas, they automatically become a member of the HOA and are required to contribute to its operations and maintenance.
The term "homeowners association fee" refers to the regular payments that property owners must make to their HOA. These fees are typically due monthly and are used by the association to cover the costs associated with the upkeep of common areas, property improvements, and the provision of amenities. While HOA fees are most commonly associated with condominiums, they can also be applicable in certain single-family home communities. The goal of these fees is to maintain the quality and value of the properties within the community by ensuring that shared spaces and facilities are well cared for.
How much are HOA Fees, and what do the HOA Fees cover?
HOA fees vary drastically depending upon property or community. Homeowners should expect to pay annual HOA expenditures and costs anywhere from $200 to $2,500 or more. The amount depends upon the condo's location and what amenities HOA offers. More the services and amenities, the higher the HOA fees.
Condo owners usually pay an HOA fee to maintain the building's shared features, including:
- Lobbies
- Patios
- Landscaping
- Swimming pools
- Elevators
At a minimum, homeowners have to cover their share of the association's operating expenses, which may include:
- Maintenance and landscaping (including pest control)
- Garbage disposal
- Parking
- Fire Alarms
- Common utilities (e.g., water and sewer fees)
- Security and safety
The HOA also sets funds aside for future projects and emergency repairs by building a reserve fund. You must pay your HOA dues in addition to your monthly mortgage payment.
HOA Rules and Restrictions:
HOA has the task of setting and enforcing rules in your community and controlling finances and maintenance duties.
To avoid any surprises later, educate yourself on the laws and regulations before you purchase a home. Determine the stringent rules by examining the HOA's CC&Rs, requesting recent meeting minutes, and visiting nearby houses.
Bylaws and CC&Rs may address a variety of subjects, such as;
- Pets
- Smoking
- Maintenance obligations
- Exteriors such as paint
- Responsibilities and restrictions for landscaping
- Parking
- Limitations on noise
- Are owners allowed or not to rent out flats
- Alterations and overt ties to your house
- Using your home for work
You'll be relieved there are restrictions in some situations. They may keep you protected, preserve your house's value, and let you take pleasure in your community. You should be aware of the rules that may not apply to you before buying.
Criticism of Homeowners associations (HOA) fees
The cost of homeowners association (HOA) dues is a significant concern for many individuals. As mentioned earlier, these fees can range from a few hundred to several thousand dollars per month, depending heavily on the type of property and the amenities provided. These fees are in addition to other regular expenses such as mortgages and utilities, which can add substantial financial pressure on homeowners.
Moreover, if the HOA's reserve fund—which is designated for unexpected or major property repairs—is not managed effectively, homeowners might face even higher fees to compensate for the shortfall. The HOA's Board of Directors or its administration has a fiduciary duty to ensure that these funds are diligently maintained and utilized, which is critical for the financial stability of the association.
Additionally, HOAs often set rules governing the use of common areas and aspects of personal property use within the community. In single-family residential neighborhoods, for instance, HOAs may dictate the frequency of house painting, the types of fences allowed, how properties should be landscaped, and other similar regulations. While these rules aim to maintain property values and community standards, they can sometimes lead to legal disputes between homeowners and the association, especially if residents feel the rules are too restrictive or arbitrarily enforced.
Are Homeowners association (HOA) fees included in the mortgage?
The payment you give to your mortgage servicer does not include condo fees or homeowners' association fees, as HOA collects these fees directly. You might need to join the neighborhood homeowners' association and pay dues if you live in a condominium, co-op, or specific community (HOA fees).
Are HOA fees tax-deductible?
According to IRS laws, HOA dues are usually not deductible if the property you own in the community is your primary residence. But, if you rent the property, your HOA dues are deductible as a rental expense. Special HOA dues are not tax deductible.
Do you have to pay HOA fees?
You have to pay HOA fees if you purchase a home in the neighborhood where being part of HOA is required upon buying the home. If your HOA is voluntary, you can avoid HOA fees. For instance, you may have neighborhood facilities such as a swimming pool and fitness center that are optional for homeowners.
If you're not able to pay HOA fees due to financial hardships, you can negotiate with the association. But if you don't pay, HOA has strict enforcement mechanisms from late fees putting a lien on your house that will force payment before you can sell your home. Skipping HOA fees permanently results in potential foreclosure.
Bottom line
If you've never lived in an HOA neighborhood but are thinking about purchasing a property there, be sure to spend enough time reviewing the HOA's rules, financial statements, and meeting minutes to determine if any matters, particularly you. HOAs can be crucial in preserving a neighborhood's property value. Still, they can also be a miserable place to live if you don't like the restrictions and added homeowner’s association (HOA) fees.
