What are HOA fees, and what do they cover?

Homeowners association (HOA) fees, sometimes called assessment dues or maintenance fees, are an essential part of living in a planned community governed by an HOA. These fees are contributions made by homeowners to fund the upkeep, functionality, and improvements of the shared spaces and resources in their neighborhood. Not only do they help maintain property values, but they also enhance the quality of life for residents by providing access to amenities and services.

This article details everything you need to know about HOA fees, including what they are, how they are used, how much they cost, and what happens if you don’t pay them.
 

What are HOA fees?

HOA fees are regular payments made by homeowners calculated based on the association’s annual budget, which is determined by a board of directors. These fees are used to cover operational costs, fund reserve accounts and meet the needs of the community. Board members, often homeowners themselves, do not profit from these fees but, like all residents, are also obligated to pay them.

The frequency of payments can vary by community. For example, some HOAs require monthly payments, while others collect quarterly, semiannual or annual contributions. The funds collected are critical for maintaining the neighborhood’s appearance and functionality.

When you pay HOA fees, you’re contributing to shared community resources. Whether it’s keeping the pool operational or maintaining landscaping and roads, these contributions benefit all residents.

To understand fully what is expected as a homeowner, carefully review your HOA’s governing documents, such as the covenants, conditions and restrictions (CC&Rs). These documents outline the fee structure, payment schedule and uses for the collected funds.
 

What do HOA fees cover?

The expenses funded by HOA fees depend on the specific needs and offerings of the community. However, six common categories are typically covered:

1. Maintenance and repairs

   One of the primary uses for HOA fees is repairing and maintaining shared spaces. This includes:
    
   • Building Exteriors: Repairs to roofs, siding and shared walls.
      
   • Groundskeeping: Seasonal landscaping, snow removal, irrigation systems and pest control.
      
   • Preventative Work: Maintenance of heating, cooling, plumbing, elevators and lighting systems in common areas.
      
   • Interior Maintenance: Cleaning and repairs for hallways, lobbies and community rooms.
   
   For instance, if a community parking lot has potholes, HOA fees cover the costs of resurfacing. Similarly, landscaping work enhances the neighborhood’s appearance, which helps maintain property values.
    

2. Shared Amenities

   Many communities feature shared amenities designed to improve residents’ quality of life. Typical examples include gyms with fitness equipment, swimming pools and their upkeep, and clubhouses or recreation rooms.
   
   Luxury communities may offer additional amenities, such as golf courses or theaters. HOA fees cover cleaning, repairs and upgrades for these facilities.
    

3. Utilities

   Some HOA fees include communal utility expenses, such as lighting for shared spaces and streets, water for irrigation and landscaping, and energy expenses for clubhouses or meeting areas. Although homeowners are responsible for utilities in their private residences, shared utilities funded by HOA fees support functional and welcoming common areas.
    

4. Insurance

   HOA associations must maintain insurance policies that protect shared spaces. The insurance often covers:
    
   • Liability for injuries in community areas
      
   • Repairs to damage in common-use buildings, such as clubhouses
      
   • Optional policies, such as flood or theft insurance, depending on location
   
   For example, if a storm damages the roof of a community structure, the HOA insurance policy will cover the expense. It is important for homeowners to maintain personal property insurance, as HOA coverage does not extend to private residences. Remember that you still should have your own homeowner’s policy, even if you live in a high-rise or other type of condo association.
    

5. Reserve Funds

   A portion of HOA fees is dedicated to reserve funds for large, infrequent expenses. These can include paving private roads, replacing communal roofs or HVAC systems, and resurfacing tennis courts. Strong reserve funds shield communities from unexpected costs and help reduce the risk of special assessments, which are additional charges levied to cover large, unforeseen expenses.

   "If you aren’t budgeting for the future, you’ll end up with a loan or special assessment."
   
   David Jandak, vice president of accounting for FirstService Residential’s Illinois market

   That translates into an additional fee each homeowner will have to pay.
    

6. Property management staffing

   HOA fees pay for the salaries and benefits of hired staff such as maintenance workers, security guards and administrative teams. Many communities also hire professional property management companies to manage vendor contracts, finances and enforcement of HOA rules. Outsourcing these tasks reduces the workload on board members, allowing them to focus on decision-making.

How much do HOA fees cost?

The amount of HOA fees varies widely based on factors such as location, community size, property types and amenities. And depending on your community characteristics you need to consider that luxury communities with premium amenities like pools or concierge services tend to have higher fees. Also, that smaller neighborhoods may charge more per household since fewer residents share costs. Larger communities, on the other hand, often benefit from lower fees due to economies of scale.

For example, a coastal neighborhood with private beachfront access might charge significantly higher fees than a modest suburban community with fewer shared features. Before purchasing a property governed by an HOA, consider the fee structure, its history of increases and any upcoming changes.
 

Are HOA fees tax deductible?

Generally, HOA fees are not tax deductible for personal residences. However, there are exceptions:

• Home Offices: If part of the home is dedicated exclusively for business purposes, HOA fees proportional to that space could qualify as a deductible expense.
   
• Rental Properties: HOA fees for rental properties are often deductible as a business expense.

Consult a certified public accountant or tax professional for advice specific to your financial situation.
 

What happens if you don’t pay HOA fees?

Failing to pay HOA fees has serious consequences, including:

• Late fees or interest charged on overdue amounts
   
• Suspension of access to amenities
   
• Legal action initiated by the HOA to pursue collection
   
• Liens placed on your property, which can complicate refinancing or resale

Continued nonpayment could even result in foreclosure. If you encounter financial difficulties, reach out to your HOA to explore options such as payment plans.
 

Why HOA fees matter

HOA fees are an investment in the maintenance of your neighborhood and the amenities provided within it. Not only do these funds contribute to maintaining home values, but they also help residents enjoy well-kept areas and shared resources. Acting together, homeowners pool resources to create vibrant, well-functioning communities.

When looking to purchase a home managed by an HOA, ask about the details of the fee structure, exactly what services are covered and the financial health of the association. Doing so will help you make an informed decision and better understand how these contributions benefit the community.

If you need more guidance around HOA fees and your property management company isn’t offering the resources you need, partner with FirstService Residential. Our group of property management experts can help with all of your community matters, including financial and HOA fees.

Contact us to learn more about how FirstService Residential can support your community’s well-being.