Hoa fees.. Something that haunts those of us who live in a community development. What are they? and what do they cover? lets take a look.
What are HOA fees and what do they cover?
Date Published: June 20, 2019
When most people think about buying a home in a condominium or community, they only consider the capital cost of buying the property. Things like HOA fees comes as a surprise to them because there isn’t much information available on how they work and what they cover.
To help you understand HOA fees, we’ve put together a helpful guide with all the information you need on the subject. Read on for more.
What is an HOA?
Before we delve into HOA fees and what they cover, it’s important to explain what the ‘HOA’ stands for. The Homeowner’s Association is usually set up by the property developer to ensure that the condo building or living complex maintains the same standard of living over the years.
Once the developer has sold most of the units, he transfers ownership of the HOA to the buyers who have now become the homeowners. Thus, the HOA becomes a non-profit organization that comprises community members who volunteer to be a part of it.
Some responsibilities of the HOA include maintaining common areas and making sure that the community has enough in its reserves for a rainy day. The HOA is also in charge of enforcing community rules and regulations to make certain that things run smoothly.
In a nutshell, a well-functioning HOA is the foundation of a healthy planned community. It’s also the key to ensuring that the value of the asset continues to appreciate over the years.
What are HOA Fees?
If your community is managed by a homeowner’s association, you will be required to pay monthly dues that contributes towards the cost of maintaining the property. It is also very common for fees to increase in correlation with the economy’s cost of living. HOA fees are usually mandatory, and failure to pay them could result in you getting evicted or your home being foreclosed.
There is no real way to avoid paying these fees if you live in a community. The only feasible way to avoid paying HOA fees is to avoid living in an HOA managed community altogether. The only exception is if the property isn’t being taken care of or the funds are being mishandled. In situations like those, it might be in your best interest to find a lawyer that specializes in HOA cases.
What do HOA Fees Cover?
The expenses covered by your HOA fees will depend on the type of condo building or complex you’re buying into. With most condos, HOA fees cover things like maintenance of the outdoor property and common areas. This includes landscaping, swimming pool, gym, and snow removal. HOA dues might also pay for building insurance and add to the community’s reserve fund.
Higher HOA fees typically mean that you’ll save money on “extras” like electricity, water, and heating, as the HOA will cover those expenses for you. Here’s an in-depth look at what HOA fees cover in different communities:
Repairs and maintenance
The reason your condo building or estate looks so beautiful is because of the well-maintained common areas. This ongoing maintenance costs money which is why you’re paying monthly HOA fees. Here are some of the amenities, systems, and equipment that need maintenance in a typical community:
- Trash removal
- Electric system and lighting
- Snow removal
- Security system and gates
- Concierge and front desk services
- Water, plumbing and sewage systems
- Landscaping and lawn care
- A/C and heating systems
- Sanitation system
- Pest control
- Elevator system
- Maintenance of exteriors such as the hallway wall paint, carpeting, etc.
- Roof repairs
- Elevator maintenance
- Pipe replacements
- Maintenance of gym equipment, swimming pool, and clubhouse
- Internet and cable systems
Your community may have all or some of these amenities and services. Either way, you’re partially responsible for their upkeep through your monthly HOA fees. But, this is a small price to pay considering how much time and effort it’ll save you.
While a typical homeowner might spend their weekends mowing the lawn or trimming the bushes, you’re free to relax and enjoy other fun activities. This is one of many perks that come with living in a planned development community.
The reserve fund is an amount that’s allocated from the HOA budget to cover future repairs and maintenance of common areas. Most condo communities will start building a reserve fund right from the beginning. That way, emergency maintenance costs don’t have to come out of homeowner’s pockets when they happen.
If you’re buying into an older condo building or planned community, be sure to check if the reserve fund is healthy. You don’t want to move into a community with a weak reserve fund. That means the HOA will have to charge extra fees known as “special assessments” to cover costs that should have been taken care of by the reserve fund.
Some of the costs covered by the reserve fund include:
- Fixing damage from natural disasters
- Planned maintenance of interior roads and other common areas
- Major repairs
- Replacement of machinery in recreational areas
Your HOA should have a master insurance policy to cover the costs of regular wear and tear or unforeseen damage. This is separate from the reserve fund and can really come in handy when disasters or emergencies happen. With that said, it’s advisable to take out your own individual homeowner’s insurance policy just to be on the safe side.
Your HOA fees also cover utilities like air conditioning, heating, water, lighting and electricity for common areas. Depending on how your community is set up, your fees may also cover utility expenses for individual units.
Most HOA boards hire maintenance and janitorial staff permanently so they’re always available for maintenance tasks. As a result, part of the HOA fees you pay will go towards salaries and other personnel costs.
It’s not uncommon for an HOA to streamline the process using an HOA software or hire a professional community association manager to enhance the standard of living in the community. The management company does this by applying the policies set out by the HOA.
The great thing about property management companies is that they comprise experienced professionals who’re trained to increase the value of each property they manage. Most of these companies have several departments that can handle pretty much anything that’s thrown at them.
However, all of this comes at a cost that is covered by the HOA fees.
As you can see, HOA fees afford you the luxury of enjoying a maintenance-free lifestyle. That’s because they cover all the maintenance and insurance costs of the building and recreational areas so you don’t need to worry about it.
It’s important to note here that there’s no cap on HOA fees. It depends on what the fees are for and what they contribute towards. Also, your HOA fees may increase over time because of a corresponding increase in landscaping costs, maintenance fees, and repairs. Either way, you’ll have peace of mind knowing that all you need to do is pay a nominal amount along with your mortgage at the end of each month, and the HOA takes care of everything else.
Do you live in an HOA community? How much are your HOA Fees? Let us know in the comments below.