Homeowners Association Fee - HOA Fee

What is 'Homeowners Association Fee - HOA Fee'

A homeowners' association fee (HOA fee) is an amount of money that must be paid monthly, or annually in some cases, by owners of certain types of residential properties. Homeowners' associations (HOAs) collect these fees to assist with maintaining and improving properties within the association. HOA fees are almost always levied on condominium owners, but they may also apply in some neighborhoods of single-family homes.

For condominium owners, HOA fees typically cover the costs of maintaining the building's common areas, such as lobbies, patios, landscaping, swimming pools and elevators. 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. HOA fees can also apply to single-family houses in certain neighborhoods, particularly if there are common amenities such as tennis courts, a community clubhouse or neighborhood parks to maintain.

BREAKING DOWN 'Homeowners Association Fee - HOA Fee'

HOA fees vary drastically and are largely based on the amenities and services an association provides. The majority fall between $100 and $700 per month, and some estimates pin the average HOA fee at about $200. Generally, the more services and amenities that a homeowners' association provides and the more upscale the properties in an association are, the higher the fees. HOA fees are typically allocated to two different types of funds used by the HOA to maintain and improve the properties in its association: operating funds and reserve funds. Operating funds are used for day-to-day operations and recurring expenses, including facility maintenance, insurance, taxes and utilities. Meanwhile, reserve funds are tapped into in the event of large-scale projects, such as major renovations or emergency repairs.

In some cases, homeowners face higher fees if the reserve fund is not managed correctly. Because of that, a potential homeowner should investigate the efficacy of a particular HOA before agreeing to buy a home in that community. Additionally, the buyer should add the cost of the fee into her prospective budget when determining whether or not she can afford a property.

What Do HOAs Do?

In addition to taking care of maintenance and repair issues and managing the association's funds, HOAs also create rules related to parking or the use of common areas. In neighborhoods of 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 or related issues.

According to a 2017 report by the Community Associations Institute, an estimated 21.3 percent of the U.S. population lives in community associations, a broader term for HOAs that includes condominium communities and cooperatives. The report also found that HOAs collected about $88 billion in fees and assessments from homeowners in 2016.

What Happens If Someone Doesn't Pay HOA Fees?

If an owner of property governed by a HOA does not pay the required monthly or annual fees as well as any special assessments, the HOA can take action against the delinquent homeowner. 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.

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.