According to a report from the US Census Bureau, around 74.1 million Americans live in communities governed by homeowners’ associations (HOAs). An HOA is an organization that enforces a set of rules for residents living in a specific neighborhood or planned development.
When you move to a home in an HOA-governed community, you automatically become a member and agree to abide by the organization’s covenants, conditions, and restrictions (CC&Rs). These typically include paying monthly or annual fees to cover the cost of community maintenance and improvements.
In addition to its role in setting and enforcing community rules, an HOA also has legal authority to impose penalties for noncompliance. This can include issuing fines, placing a lien on your property, and taking legal action to ensure compliance with its regulations.
If you’re in the market for a new home, chances are you’ll be looking at properties within communities governed by an HOA. So, you may be wondering—how does an HOA function? Keep reading to learn more about HOA management.
What Is HOA Management?
HOA management refers to the duties the HOA board performs daily. These include financial management, vendor payment, coordination, insurance, collection, community maintenance, etc.
Since most HOA boards are managed by volunteers, they may not have enough time to perform the operations involved in facilitating an HOA. If that’s the case, they might need to get in touch with an HOA management company to help them with their everyday responsibilities.
What Is An HOA Management Company?
An HOA management company offers services to HOAs. Its primary function is to oversee all the tasks involved in HOAs as well as the maintenance of all facilities and common areas. To be more specific, here are the tasks HOA companies may execute:
- Organize and attend HOA board meetings
- Create meeting agendas
- Offer legal advice
- Create monthly statements and reports (e.g., financial statements)
- Manage insurance policies
- Create and send invoices
- Manage account payables
- Collect dues and assessments
- Take minutes of the meeting
- Conduct regular community inspection
- Offer advice to the HOA board
HOA management companies have a diverse set of professionals at their disposal. This enables them to handle multiple tasks related to the association, whether it’s to collect dues or plan an annual budget.
What Are HOA Fees And What Do They Cover?
An HOA fee is a mandatory payment that homeowners must make to cover the costs of maintaining amenities, properties, and common areas within their community. These fees are typically paid monthly and can vary in cost depending on the specific needs of the community.
- Special Assessment Fees
Special assessment fees are a type of HOA fee that the board can authorize to cover the cost of unforeseen or significant projects, such as repairing common areas or refinishing the façade of a building.
These fees can also be used to establish a reserve fund for unexpected emergencies or maintenance issues that may arise in the future. By setting aside money in a reserve fund, the HOA can mitigate the need for major assessments in the event of a significant project or emergency.
You may check out this post from Kuester Management Group to better understand how special assessment fees work and how they can benefit the entire community.
- Repair And Maintenance
A portion of your monthly dues will be allocated to repairing and maintaining shared structures and common areas. This includes the building exterior (for those living in a condo), parking spaces, neighborhood roads, and pest control.
An HOA also takes care of areas that require landscaping and lawn care such as community parks, playgrounds, etc. Snow removal may also be included as a part of your HOA fees.
- Municipal Services
HOAs require municipal services to maintain the cleanliness and security of the community. These include trash collection and removal, wastewater treatment, water management, and protection.
- Association Insurance
Most HOAs are required to apply for insurance to cover the costs of damage and injuries sustained within the association’s purview. These include common spaces, sidewalks, and other exterior areas like parks. However, most policies will only cover the damage caused by the association’s negligence or failure to provide its members with a safe community.
The exact coverage and cost of the insurance policy can vary depending on factors like the size and nature of the common areas, the number of homes, and the extent of the coverage.
- Amenities And Services
Most HOA-governed communities provide access to different amenities, such as a clubhouse, a fitness center, a playground, or a pool for all homeowners. The HOA board must allocate funds from the fees collected to maintain these facilities or build new ones.
Some high-end communities include luxurious features like valet services, lavish fitness hubs with professional coaches, or even a rooftop lounge. These communities often have high HOA fees, which often exceed thousands of dollars per month.
Other HOA expenses covered by fees include utilities for common areas (e.g., lamp posts, bird baths, fountains, etc.), fire alarm systems, security (e.g., guards, surveillance cameras, etc.), and ground maintenance.
What Are The Benefits Of Working With An HOA Management Company?
Some benefits of hiring an HOA management company are as follows:
- Clarity: HOA management companies see that the association’s policies are easy to understand.
- Consistency: Consistent rule enforcement is the key to a peaceful community and successful association. With an HOA management company, HOAs can ensure that neither favoritism nor bias will take place.
- Legal Knowledge: Managing HOA’s affairs requires plenty of legal know-how. HOA management companies are equipped with legal knowledge regarding HOA policies and laws, including the Fair Housing Act and the like.
- A Diverse Range Of Expertise: HOA management companies are often staffed with professionals from various fields, such as law, marketing, property management, etc., making them more suitable to handle the association’s affairs.
- Operational Efficiencies: Professional HOA management companies can help avoid operational inefficiencies that arise when volunteer board members lack knowledge and experience in dealing with the HOA tasks and services.
If you think your community’s HOA is in need of these benefits, consider contacting an HOA management company immediately.
How Much Are HOA Fees On Average?
HOA fees may vary depending on your location, type of home, and the services your HOA offers. On average, monthly HOA fees range from USD$200 to USD$300 but could be less than USD$100 or more than USD$1,000.
It’s crucial to include HOA fees when you’re calculating potential monthly expenses before deciding to purchase a home. By doing so, you can ensure that you’re fully prepared to meet all financial obligations and maintain a good relationship with your HOA.
Related Reading: Why are my HOA fees so high?
What Will Happen If You Fail To Pay Your HOA Dues?
As you know, the budget of the HOA primarily depends on the fees it collects. Without monthly fees, the association won’t be able to execute its primary duties and responsibilities.
So, what will happen if you fail to pay your dues on time? Here are the possible consequences:
- Suspension Of Privileges: If you miss a payment, the board will send you a notice and add late fees to the amount due. If you don’t settle everything within 30 days, the fees may increase, and your privileges, such as access to the pool or clubhouse, may be suspended.
- Lawsuits: Filing a lawsuit can be expensive for everyone, but that doesn’t mean it’s unlikely to happen. Some wealthy HOA communities often take legal action against homeowners who fail to meet their monthly obligations. This can be a costly and time-consuming process for everyone involved. It may also impact other homeowners in the community as the board’s legal fees may lead to increased HOA dues for the rest of the community.
- Liens: The HOA board may put a lien on your property. It means it’ll be difficult for you to sell your property because a lien will appear in the title search. If you want to sell your house, you must first get rid of that lien from your title.
If you’re having trouble making payments, communicate with your HOA and try to work out a payment plan or explore other options to avoid the consequences above. By staying on top of your monthly dues, you can help maintain a healthy and positive relationship with your HOA and com munity.
Further Reading: How to deal with your HOA when they are being unreasonable?
Are HOA Fees Tax-Deductible?
Generally, HOA fees (including special assessments) aren’t tax-deductible if your property is your main residence. However, there are some exceptions. If you own rental property, the fees may be tax-deductible as a rental expense. If you work from home, you may also be able to deduct a portion of your HOA fees. It’s important to consult with a tax professional to determine if you’re eligible for any deductions.
HOAs perform a series of tasks to keep the community they govern safe and peaceful. Such duties include maintaining common areas, imposing fines, collecting dues, etc. However, as most HOA board members are volunteers, working with a professional HOA management company can help ensure that the community’s needs are met in a timely and efficient manner.
By partnering with an HOA management company, the board can focus more on strategic planning and decision-making, while leaving the day-to-day management tasks to the professionals. If you’re a part of the board, it’s worth considering hiring an HOA management company to help keep the entire neighborhood in good condition.