What is an HOA fee for, and why do you have to pay it on top of your home expenses? If you’ve just purchased a home in a community maintained by a homeowners association, you may be wondering what do HOA fees cover in the first place. Homeowners associations often provide extra amenities, such as swimming pools, tennis courts, gym amenities, and security staff. Your HOA fees, for the most part, goes into making sure that everyone gets to enjoy these features for years to come.
When you own a home in a homeowners association community, your responsibilities include helping to pay for the upkeep of all the enticing amenities this type of neighborhood offers. As your contribution, you’ll be required to pay HOA fees at a regular schedule, usually every month. HOA fees usually make up the largest part of association fees you have to pay as a homeowner. Of course, you’d just love to know – what do HOA fees cover in the first place?
What Is an HOA Fee?
A homeowners association fee or an HOA fee is the amount of money collected by the HOA from owners of properties in certain types of communities. Neighborhoods that maintain exclusive amenities for homeowners may also apply HOA fees.
What is the HOA fee used for, once your share is in the hands of the HOA management? You can expect them to use it to cover the costs of keeping up the common-use amenities in your community. For condominium owners, their HOA fees will typically go into maintaining the building lobbies, elevators, swimming pools, and parking spaces. If you live in a neighborhood made up of single-family homes, you can expect your HOA fees to pay for landscaping, road maintenance, snow removal, and similar services.
HOA fees are typically determined by the board of directors for your association. The board is responsible for setting the price, determining what the HOA fees include, and how often HOA fees must be paid. Each homeowner’s share of the HOA fees is based on the association’s budget for the year.
Homeowners associations are typically formed as non-profit associations, which means extra money at the end of the year goes to covering operational expenses. An association’s board of directors are purely volunteers and homeowners who are expected to pay the HOA fees, as well.
Now that you know what is HOA fee needed for, it’s important to understand what they cover. Here are seven ways your HOA fees are put to use:
1. Maintenance and Repair Costs
The common amenities within your community have to be maintained regularly, which costs money. Some of these maintenance costs can include lawn care, landscaping, snow removal, plumbing system maintenance and upkeep, lighting and electrical costs, repairs, pool maintenance, air conditioning and heating costs, pest control, and general repairs.
For any shared buildings or structures, a homeowners association will need to purchase insurance. These policies serve to protect themselves against costly damage or any other incidents that may occur in these shared spaces. Depending on location, your association may also need to get flood insurance to protect it from environmental hazards.
What do HOA fees cover, in this case, is the insurance for the community properties only. It’s important to remember that this insurance does not protect your own home, and you should get a separate homeowner’s insurance policy to protect your family.
3. Contingency Funds
What is an HOA fee used for, in terms of preparing your community for emergencies? A good HOA management will set aside some of the HOA fees for unforeseen incidents. Contingency funds include any money set aside every month to help with unexpected costs. These costs could include expenses for the community, emergency expenses, or insurance expenses after a major natural disaster.
Homeowners associations will also have to pay utilities for any shared buildings like pools, wellness centers, meeting rooms, and clubhouses. If you’re living in an apartment building, this may also cover your own apartment’s electricity, air conditioning, and heating. Occasionally, homeowners associations can get a bundled deal on Internet and cable services for an entire complex or development. This is a cost that would be part of your association fees, too.
What is an HOA fee used for after paying for the community necessities? The remaining part of it is used to keep the finances of your community safe. Any association that is looking to secure their financial future should be establishing reserve funds. These accounts house funds that are separate from accounts used to pay for everyday expenses.
Reserve funds should be used for major repairs or other unexpected costs. Your HOA fees may be used to build up your association’s reserve fund. This way, when major equipment in shared areas breaks, they will be able to repair it easily without having to spend time having to figure out how to raise more funds.
6. Property Management
Since board members of a homeowners association are typically volunteers, they often will bring in property management experts to help run daily operations. The property managers will oversee maintenance requests, insurance policies, and other operational tasks. This all ensures that the property values within your community are high, but it’ll come at a cost through your association fees.
How are the HOA fees used in terms of keeping your community well-kept and livable? If your homeowners’ association hires maintenance staff and security personnel, paying their salaries will be part of your regular fees.
Managing HOA Fees
HOA fees can be a dreaded expense, but it’s important to remember that these association fees cover many things that help improve the quality of life in the community you’re part of. Your homeowners association works hard to improve the community so that those who live there have a positive experience and high home values. As with anything that provides a specific benefit, these things come at a cost. That’s where your contribution comes in, in the form of association fees. As stated above, many homeowners associations choose to hire a management company to handle the more complicated aspects of running a community.