What is an HOA fee? And what do HOA fees cover?

Homeowners’ associations are great for upkeeping the neighborhood and providing amenities like fitness centers, game rooms, or clubhouses. But it takes money for your community to remain beautiful and well-maintained. That’s why it’s necessary for every homeowner to pay association fees.
 

What is an HOA Fee?

HOA fees, which are sometimes called “assessment dues” or “maintenance fees,” are established by your board of directors based on a projection of the HOA’s annual budget. Since board members are also residents, they are obligated to pay HOA fees just like everyone else in the community and don’t profit from the money they collect. Depending on your HOA, you may be expected to pay those fees monthly, quarterly, semi-annually, or annually.

Homeowner and condominium association fees are a vitally important part of keeping your neighborhood running smoothly. By sharing the costs, communities benefit from properly maintained amenities that enhance resident lives while also increasing property values. To get an accurate understanding of what's expected from you as a member, be sure to read up on all associations' governing rules and policies.
 

What do HOA fees cover?

Here are 6 of the most common items your HOA fees are likely to cover:

1. Utilities

   “Utilities represent a significant portion of the operational budget,” says Jamina Richards, finance manager at FirstService Residential. Lighting for streets, parking lots, tennis courts, clubhouses, etc., requires electricity. In addition, a community needs water for irrigation, swimming pools, and other facilities. Indoor areas also need to remain well-ventilated and comfortable, whether that means providing heat on cold days or air conditioning on warm days. All these utility costs are covered by your fees.
    

2. Maintenance and Repairs

   Depending on your community, these expenses might include:
    
   • Cleaning and painting of building exteriors and indoor common areas, such as carpets, floors, and walls.
      
   • Preventive maintenance of heating and ventilation systems, lighting, electrical systems, plumbing, elevators, and security systems.
      
   • Lawn care and landscaping
      
   • Snow removal
      
   • Trash removal
      
   • Pest control
      
   • Repairs to walls, roads, plumbing, roofs, and system components.
      
   • Maintenance of amenities, fitness equipment and pools



3. Insurance

   Associations need insurance to protect common areas from damage, which you can obtain under a master policy. Your community may also require other riders and add-ons based on your location, property type and other circumstances. For example, in some areas, associations are required by law to carry flood insurance. Liability insurance, theft insurance and directors and officers (D&O) insurance are other common policies for associations. 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.
    

4. Reserve funds

   Fiscally sound HOAs allocate a portion of their dues to their reserve fund to cover planned and budgeted major renovations or repairs that do not occur on a regular basis, like repaving private roads or replacing elevator machinery. According to David Jandak, vice president of finance at FirstService Residential, “If you aren’t budgeting for the future, you’ll end up with a loan or special assessment.” That translates into an additional fee each homeowner will have to pay.
    

5. Staffing

   If your community employs its own maintenance, security or management staff, part of your HOA fees is used for their salaries and benefits.
    

6. Professional property management

   To eliminate the excessive burden on board members, implement the policies set by the board and ensure the financial stability and operational efficiency of the HOA, many communities choose to partner with a professional property management company. HOA fees pay for these services, too; however, a good management company will work to save your HOA money through its vendor relationships, buying power, and financial knowledge.

Your HOA fees are an investment in your community and the lifestyle it provides for you, your family, and your neighbors. By contributing to this shared cost of ownership, you play a part in sustaining its beauty and vitality now -and into the future.

Read our guide “Succeeding Together: A board member’s guide to association budget planning” to learn the top things to consider for your community’s budget process that will help guide your association to success.