Homeowners associations are established to ensure the safety of their member-homeowners, protect property value, and maintain the community they serve. To put it another way, homeowners associations are there to protect the interests of both the homeowners and property owners (if these are separate entities).
An HOA is run and managed by volunteer homeowners that make up the Board of Directors. They ensure that the HOA is fully functional and fulfills its duties and responsibilities. And part of their responsibilities is to ascertain that funds are available for both maintenance purposes and emergencies. Where do the funds come from? They come from the community itself; homeowners, in other words.
What every homeowner should know about HOAs is that they too have a responsibility to the association just as the association has a responsibility towards them. Payment of fees and dues is arguably one of the most important responsibilities of a homeowner. Here are some of the fees and dues that homeowners should expect to pay to their HOA:
1. HOA membership fee
Depending on your city or state and the size of your household and property, your HOA membership fee could range anywhere from $300 to $500 per month (some HOAs have a much higher membership fee). A part of the fees collected will go into maintenance funds/daily operational expenses and another portion of it will go into the reserve fund, which can be used for emergency repairs and other unforeseen expenses.
2. Assessment dues
In a nutshell, assessment dues are fees collected from homeowners to pay for expenses that aren’t covered by the membership fee, homeowner insurance, or reserve fund, whichever is applicable. These additional HOA expenses typically include emergency repairs, natural disaster response, and emergency assistance to homeowners the costs for which have exceeded the amount of money kept in the reserve fund.
Understand that for such assessment dues, it doesn’t matter whether or not you’re using the facility that needs repairs or whether or not you were directly affected by the natural disaster/emergency. You, as a member of the association, have a responsibility to the HOA, and this includes payment of assessment fees.
Homeowners may be required to pay assessment dues for a certain number of months until such time when the reserve fund is in the positive again. This arrangement, however, depends on the HOA.
While both financials may seem very basic, there are specific inclusions and considerations for each one and this is actually where the hard work lies. For the HOA membership fee, for instance, the HOA must be able to determine an accurate monthly budget for daily operations as well as allocate a feasible amount for the reserve fund and have a little wiggle room to cover bad debt and deferred equipment repairs or replacement.
Usually, HOAs hire the services of a professional property management company to assist them with their financial duties and other HOA obligations.