What are HOA fees?

You've just purchased your new home, and it's perfect for your family – it's in excellent condition and just the right size. It's in the ideal location and community to meet your needs. Your new home is also part of a homeowner's association (HOA) and offers great amenities, like a clubhouse and fitness center, so you can set goals to get back in shape after the harsh Minnesota winter. The landscaping and common areas always look beautiful and are well-maintained. Nothing seems out of place; it's perfect. But, what are HOA fees for?

What do HOA fees pay for?

When you purchased that home in a community association, you automatically became a member of that association. The overall operation and curb appeal of your community association go a long way towards enhancing property values. These are services included in and covered by your homeowner's association fees. Depending on the community, payments may be monthly, annually, semi-annually or quarterly. 

HOA fees are commonly also referred to as assessments, dues, or maintenance fees. The Board of Directors determines the amount based on projected annual expenses. An increase in dues might be necessary occasionally to ensure the association's income is enough to cover its expenses. Common reasons an increase in dues might occur includes the cost of living, deferred maintenance, uninsured losses and a necessary increase in reserve funding. Board members do not profit from HOA dues; they are also homeowners and obligated to pay fees just like everyone else in the community.

Regular Maintenance and Repairs

Most homeowners living in an HOA know there are fees, but not everyone knows what the money is used for. Homeowners have the right to review the association's financial documents and ask how they spend the money. Every association has its own distinct set of rules and policies, so it's essential to read your community's covenants, conditions and restrictions (CC&Rs) and bylaws to find out the specifics. With the overlying goal of protecting property values, we've outlined standard services provided by an association in Minnesota:

HOA Fees can pay for regular maintenance and repairs to shared amenities, green spaces, equipment, and systems. Examples might include:

• Lawn maintenance and landscape services

• Snow removal

• Pest control

• A/C and heating systems

• Electric system and lighting

• Cable T.V. and Internet

• Trash and recycling removal services

• Elevators

• Cleaning, painting and upkeep of exteriors and common areas (hallways walls, carpeting, clubhouse, and more)

• Maintenance and repairs on exterior building surfaces

• Maintenance of shared amenities (pool, fitness equipment, clubhouse, etc.) 

• Security system 

• Front desk and concierge services

Utility payments

Homeowners associations cover the costs of electricity, lighting, water, heating, air conditioning; some pay for Wi-Fi or cable T.V.; for all of the community's common areas. Some Twin Cities' HOAs, condominiums, and townhome associations might also include some or all of these utilities for individual units. Be sure to check your HOA documents and bylaws to determine what is your responsibility as a homeowner and what your dues cover.

Reserve funds

An HOA must be fiscally responsible, including allocating a portion of HOA dues to a special long-term reserve account to pay for planned, budgeted repairs or renovations that do not occur regularly. These expenses could include repaving private roads or replacing elevator mechanicals. Suppose a repair such as this happens, and the reserve fund is not large enough to cover the costs. In that case, your association could levy a special assessment to make up the difference – this is in addition to your regular association dues – or the association could also need to take out a loan, which could result in a significant (but temporary) increase in dues. You can learn more about this here.  However, Minnesota made it illegal for a homeowners association to use reserve funds to pay regular operating expenses. 

Insurance policies

All associations in Minnesota are required to purchase a master insurance policy to protect their community's building structures and community property against damage. This coverage benefits all owners in the community; however, remember that this Insurance does not replace the need to carry your own homeowner's policy. Want to learn more about HOA insurance? Check out more resources here.

Contingency funds

Some associations automatically set aside money each month to cover unforeseen community expenses and emergencies that cannot be paid for by the reserve funds.

 Personnel

Many HOAs use a portion of their fees to cover the salaries and benefits of a community's management, janitorial, and maintenance staff if your community chooses to employ any of these. These team members play an essential role in the success of your community and maintaining a consistent image. It is important to have the right team in place for these key roles, as they make your community's common areas clean, sanitary, and kept in working order. Keeping your community well maintained is especially important if you have a clubhouse or pool area with restrooms or common areas such as a lobby or patio where there tends to be much traffic.

Common interest amenities

Another benefit of living in a common interest community and paying HOA dues is the ability to enjoy community amenities you may not be able to afford or maintain on your own, such as a swimming pool, clubhouses, tennis courts or walking trails. In addition, depending on your community, you may no longer have to pay separately for lawn maintenance, trash, snow removal, cable T.V., electricity, Wi-Fi and other services, which can certainly add up.

Professional property management

To ensure a community's ongoing operations and financial stability, many homeowners associations enlist the services of a professional community association management company. A professional property management company will effectively operate under the board's direction, authority, and control and ensure the long-term success of the association. Additionally, a great management company will provide full-scope management services that add value and enhance the lifestyles of its residents.

HOA fees are a necessary expense to keep a community clean, safe, beautiful and financially stable – and that's what helps enhance property values. For more information on HOA fees and community association living, contact FirstService Residential, Minnesota's property management leader.

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