What Is a Homeowners Association (HOA) Fee?
The term homeowners association (HOA) fee refers to an amount of money that must be paid by certain types of residential property owners every month to their homeowners associations (HOAs). These fees are collected to assist the association with maintaining and improving properties.
HOA fees are almost always levied on condominium owners, but they may also apply in some neighborhoods of single-family homes. HOA fees may also go by the term "common charges" or "maintenance charges."
- Homeowners association fees are monthly dues collected by homeowners associations from property owners.
- HOA fees are standard for most purchased condominiums, apartments, and planned communities.
- Some neighborhoods that consist of single-family homes also have HOA fees.
- HOA fees are used to pay for amenities, property maintenance, and repairs.
- Fees depend on the type of property and services provided, and they generally range between $200 and $300.
Understanding Homeowners Association (HOA) Fees
Homeowners associations are organizations that are designed to set up and enforce rules for certain properties and the residents that live in them. These groups are typically created in planned communities, subdivisions, or condo buildings. People who purchase these properties automatically become members of the association. As such, they are required to pay their dues through monthly fees, which are called homeowners association fees.
HOA fees paid by condo owners usually cover the costs of maintaining the building's common areas, such as:
- Swimming pools
Fees may also cover some common utilities, such as water/sewer fees and garbage disposal. The association may also levy special assessments from time to time if its reserve funds (funds set aside for major and/or emergency repairs) are not sufficient to cover a major repair, such as a new elevator or roof.
These fees can also apply to single-family houses—especially townhouses—in certain neighborhoods, particularly if there are common amenities like tennis courts, a community clubhouse, or neighborhood parks to maintain.
HOA fees tend to vary drastically, depending on the property or community. The fees range anywhere between $100 and $1,000 per month. The average, though, tends to be between $200 and $300 per month. The general rule that applies is that the more services and amenities, the higher the fees.
Some homeowners associations can be very restrictive about what members can do with their properties. These rules are written in the homeowner's agreement.
If a member fails to remit payment to the HOA, it affects the other members of the community. Common areas may suffer due to lack of funds, or other members may be assessed special fees to cover maintenance costs or other expenses.
The HOA has the authority to take action against delinquent homeowners. The actions depend on the contract between the HOA and the homeowner. Some contracts dictate that the HOA can charge late fees to the homeowner while others allow the HOA to initiate a lawsuit, place a lien on the property, or foreclose on the owner's property to collect the delinquent payments.
Some associations may assess both condo fees and HOA fees, so it's a good idea to find out how much you'll be responsible to pay before you purchase a property.
Criticism of HOA Fees
The main problem people have with HOA fees is the cost. As mentioned above, they can range from a few hundred to a few thousand dollars each month. This is, of course, based on the type of property and the amenities involved. Paying monthly fees on top of mortgage payments and other costs, such as utilities, can put financial pressure on property owners.
Owners may even face higher fees if the reserve fund isn't properly managed. Remember, these are funds that are set aside for unexpected and/or major repairs to the property. And the HOA's board and/or management have a fiduciary duty to make sure that their reserve funds are maintained and managed properly.
HOAs also create rules related to parking or the use of common areas. In neighborhoods with single-family homes, the HOA may create rules on how often members can paint their houses, which types of fences they may have, how they must maintain their landscaping, as well as any other related issues. This can often ruffle feathers and create legal hurdles for both the associations and homeowners.
What Do HOA Fees Normally Cover?
HOA fees typically cover the costs of maintaining common areas, such as lobbies, patios, landscaping, swimming pools, tennis courts, a community clubhouse, and elevators. In many cases, the fees cover some common utilities, such as water/sewer fees and garbage disposal. The association may also levy special assessments from time to time if its reserve funds are not sufficient to cover a major repair, such as a new elevator or new roof.
What Is the Average Range for HOA Fees?
HOA fees vary drastically, but some estimates claim these fees are between $100 and $1,000 per month, with the average ranging between $200 and $300. The amount of an HOA fee varies based on the type of property and the amenities it provides—the more services and amenities, the higher the fees. In some cases, owners face higher fees when an association's reserve fund isn't managed correctly.
What Happens if Someone Doesn't Pay Their HOA Fees?
Property owners who don't pay their monthly or annual fees, as well as any special assessments, may face action by the HOA. These actions depend on the contract between the HOA and the homeowner. Some allow the HOA to charge late fees, while others allow them to initiate a lawsuit, place a lien on the property, or foreclose on the owner's property to collect the delinquent payments.
Why Are HOA Fees Higher In Some Areas?
Since HOA fees pay for the amenities and maintenance in a community, those prices will vary from place to place. In high-cost-of-living cities like New York City, even basic maintenance will be more expensive than in low-cost-of-living cities because of higher minimum wages, power costs, and/or taxes. HOA fees may also be higher in condominiums than they are in single-family houses since the fees will pay for electricity, heating, cooling, etc. in common areas. In a recent survey, New York City was listed as the second highest median HOA cost in the nation behind Honolulu, with monthly fees of $410. On the other end of the spectrum, Harrisburg-Carlisle, Penn., had a median of $120.
The Bottom Line
HOA fees are charge levied on owners of many condominiums, co-ops, and certain neighborhoods. These fees cover the maintenance and upkeep of common areas such as shared hallways, elevators, lobbies, and parking lots. It will also usually cover snowplowing, gardening, and damage to common areas. Owners of condos should be aware of HOA fees when computing their monthly expenses.