Do you live in a subdivision, gated community, or any other place with a homeowners association? If you do, you could be paying HOA fees. Homeowners Associations have earned a reputation for stifling freedom with their strict rules. Some have even resulted in legal battles, especially if the original homeowners have under-the-radar tenants or failed to follow exterior aesthetic themes.
However, you must remember that HOAs have your best interests at heart. They intend to maintain shared spaces beautifully within a community. They also establish stringent rules to protect everyone residing within their community. For example, the board may bar you from making radical changes to your property since this can lower your neighbors’ property values.
Why Do People Choose to Be Part of an HOA and Pay Fees?
For some people, living in an HOA and paying for HOA fees are worthwhile investments because someone does the tough job of enforcing the rules with minimal toe-stepping. Typically, you will be required to join the HOA and pay HOA fees if you move into a condo or townhome. However, other neighborhoods with detached single-family homes fall under HOA governance, too. The benefits of living in this kind of community are:
- Having roads plowed in winter
- Keeping neat flower beds
- Raking falling leaves
- Someone maintaining the sidewalks
- Neighbors abiding by aesthetic standards
- Maintain amenities like pool or gym
However, all these privileges do not come for free. If you choose to live in an HOA-governed property, you must factor the HOA fees into your monthly housing payment. At times, the one heading the HOA board can even slap you with special assessment fees or fines if you end up violating any codes.
Are you considering moving into this kind of neighborhood with an HOA? Before you sign your closing contract, you must do your due diligence. Find out the exact HOA fees and figure out what privileges your payments cover. An informed choice is indeed always the best one.
What are HOA Fees For?
Your HOA fees or homeowners association fees are expenses you pay for residing in a specific property. Typically, you pay this monthly to your HOA to maintain all the properties, common areas, and amenities within the association. However, some HOAs allow you to make an annual payment at a discounted rate.
HOA fees have varying services, so ascertain what these are and ask how they disburse your fees. Usually, different HOAs levy different HOA fees because they also tailor-fit their services based on the needs of their community.
Therefore, if you want to live in an HOA community because you prefer these services, you must compare what each HOA offers along with their rules before deciding which fits your needs and preferences.
What Your Payment Usually Covers?
Since every HOA community is unique, the HOA fees cover different things. So, when you hunt for your dream home, request a copy of the HOA rules from the seller. You want to know these regulations, also known as the CCR or Covenants, Conditions, and Restrictions.
Prioritize knowing the rules because you want to know what you can and cannot do. It would be a disaster to belong in an association that is too restrictive. For example, others do not permit pets within their compounds. This detail is something you want to know upfront. On top of that, it would be prudent to know what services they include in your monthly dues.
Though HOA fees vary depending on where you live, the following are the typical costs that HOA fee payment cover:
Basic City Services
This includes civic services like garbage removal, water maintenance, and sewage repairs. As a bonus, you have lesser monthly bills to pour over and track.
Your monthly HOA fees may include insurance for damages to areas within the scope of influence of the HOA. To illustrate, this may cover common areas, shared amenities, or the exterior of the building for condos. However, you still need homeowners insurance to cover personal items inside your home or those outside a detached house.
Lawn care, landscaping, and gardening may vary based on where you live. In a single-detached house, you may be responsible for your lawn care. Also, your HOA could still have standards you must abide by, like how tall you can let the grass grow. Common areas are usually taken care of by the HOA.
One of the basic perks of living in an HOA is shared roads and parking lots are covered. Snow removal on the sidewalk, including salting to avoid slipping, is also a part of your fees.
If you live in a condo, your fees usually include the cost of pest control and prevention. This can be handy, especially if you do not want to deal with rodents, termites, and other issues. However, detached homes are less likely to have this inclusion. As for townhomes, rules vary, especially for those who share a common wall. So read the CCR to verify the provisions.
Maintenance and Repairs
Part of your monthly HOA fees is allotted for maintenance and repairs of shared structures and common areas. These may include the following:
- Outside walls
- Roofing of condos
- Parking lots
- Neighborhood roads
Some HOA communities offer different amenities for the residents. The most common are pools, gyms, and play areas (for children). With these amenities, the HOA usually provides additional security services. This may include a gate and a guard that controls the entry of visitors and patrolling security to protect the residents. Some HOAs add ample lighting and security cameras, as well.
For luxury or high-end HOAs, you can expect upgrade services like a concierge, valet services, gyms with trainers, or even a roof-deck bar. But, as you can expect, these luxurious HOA communities have equally high HOA fees to offset the many perks and services.
You can count on a percentage of your fees to be placed in the HOA reserve funding. The HOA usually sets up a separate savings account for these funds. They use the money for emergencies, unexpected costs, and irregular expenses. For example, the HOA committee will have enough money to defray the costs if the clubhouse roofing collapses or the pipes in the pool burst.
If an HOA does not have enough emergency funds saved up, the board could either have poor management or spend a lot on their regular expenses. As such, the HOA board may require the homeowners to vote to cover the costs. Thus, before you buy any property in an HOA, read all the stipulations and rules to see the restrictions or if they can impose this kind of special assessment on you to cover unexpected emergencies.
Though no one enjoys paying for extra stuff on their monthly budget, do note that your HOA fees typically cover things or services that you may spend on anyway. So, if you do your computations right, you may even end up saving on some things like your gym membership.
For many people, not worrying about pest control, snow removal, and landscaping make residing in an HOA-governed community a worthwhile expense. In addition, the services proffered and covered by the fees are extremely helpful for those who dislike performing home maintenance like mowing your lawn or gardening.
How Much Should I Pay for My HOA Fees?
When it comes to the costs, HOA fees can vary a lot. This is usually determined by where you live, what type of house you have, and the service or amenities included. It can range from as little as $100 to more than a grand for high-end HOA-governed communities. However, the standard rate is usually a monthly fee of $200 to $300.
If you are hunting for a new home, make it a point to learn the exact monthly HOA fees. Consider also if they offer discounted rates for advanced payments, whether annual, bi-annual, or quarterly. It is not enough to compute mortgage payments in your monthly budget if you want to own an HOA-governed property. HOA fees can eat up your budget, so consider this factor when computing your total costs.
Can HOA Fees Be Deducted on My Taxes?
Unfortunately, the answer is no. Your HOA fees are not tax-deductible if it is your primary residence. However, if you buy the home as a rental property for passive income, you can deduct the fees since they are a business expense. Also, even if it is a rental property that you use for only a certain time of the year, you can still deduct the HOA fees. But keep in mind to only minus the time frame when you rented out the property.
If you find the costs of your HOA to be absurd and burdensome, rethink buying the property. However, if you live there and they escalate the costs, you have no choice but to join the HOA board. While seated in position, you can examine the budget and reassess areas where the HOA may be overpaying.
Should I Expect Other Fees Apart From the HOA?
Well, the board could slap you with a few more fees. Living in a community governed by HOA is not cheap. Here are the two fees to watch out for:
1. Special Assessments
HOAs get a bad rap for imposing special assessments. These are additional charges to homeowners to meet additional expenses. This usually happens when the board does not have access to reserve funds. Hence, they levy these add-ons for both emergencies and necessary renovations. In cases where the HOA funds fall short, such as the clubhouse septic needing repairs, you and the rest of the homeowners must pay added payments to defray the costs.
Failure to comply with the rules of the HOA can result in fines and penalties. They discuss these fines usually in the CCR, so read them thoroughly. For example, picking a different shade for the exterior of your townhome can result in fines. The HOA may also ask you to re-do the painting at your own added expense.
What Will Happen If HOA Fees are NOT Paid?
If you forgot to pay your HOA fees by accident, you would receive an initial notice in the form of a letter communicating that you have missed your payment. Usually, they will add a late payment charge to your total monthly dues.
Should you not settle the amount in 30 days, the fine levied will increase. Consequently, you may have your HOA privileges suspended. For instance, they may bar you from entering the clubhouse, using the pool, or working out in the gym. After that, you can expect the HOA to file a case against you.
Remember, HOA can go after you in court if you abruptly stop paying your HOA fees. After all, you agreed to pay these dues when you joined the community when you purchased your property. The HOA board may file a lien against your home and sue you. This can result in a foreclosed home if you do not pay those fees.
Lawsuits are complex, stressful, and expensive for everyone involved, so this should never be an option. Keep in mind, HOAs have vast financial resources, so they can pursue your case to prove a point. If they take legal action against you, things can get out of hand, and you may end up paying more than you bargained for since lawyer fees are expensive.
Evaluate HOA Fees Thoroughly
Do you think you are cut out for HOA-governed living? Again, the answer will depend on your lifestyle needs and preferences. If you want complete control and freedom over your home, an HOA will not work for you since the rules and regulations can be stifling.
However, if you do not mind following home color schemes and you find it convenient to off-load lawn care or snow removal to others, then living in an HOA is perfect for you. This lets you enjoy home ownership without the headaches of home maintenance.
As you hunt for a home, do not forget to consider the pros and cons of an HOA before signing any contract. Then, if you need help, call our professional agents at the RI Home Store. We can help you find a community that fits your budget, needs, and wants to assure you can live the lifestyle you desire.