If you’ve just purchased a home in a community maintained by a homeowners association, you may be wondering what that means. Homeowner’s associations often provide extra amenities, like pools, tennis courts, kids programming, and gym space. When you purchase a home in a homeowners association community, you’ll be responsible for helping pay for the upkeep of the enticing benefits this type of community offers. In order to do this, you’ll be charged an HOA fee.
HOA fees are typically determined by the board of directors for your association. The board is responsible for setting the price, determining what is covered in that price, and how often fees must be paid. Each homeowner’s share is based off of the association’s budget for the year. Homeowner’s 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 these fees are, it’s important to understand what they cover. Here are seven ways your fees are put to use.
1. Maintenance and Repair Costs
The common areas within your community have to be maintained on a regular basis, 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 homeowner’s association will need to purchase insurance 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. 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 yourself.
3. Contingency Funds
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.
Homeowner’s 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, homeowner’s 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 as well.
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 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 figure out where the money to make the repair is coming from.
6. Property Management
Since board members of a homeowner’s 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.
If your homeowner’s association staffs the community with maintenance and janitorial staff, helping pay their salaries will be part of your regular fees. These staff will likely be available to help with maintenance around your home and will keep all common areas looking neat and clean
Managing HOA Fees
HOA fees can be a dreaded expense, but it’s important to remember that these fees cover many things that help improve the overall experience you have in the community you’re living in. Your homeowner’s 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. As stated above, many homeowners associations choose to hire a management company to handle the more complicated aspects of running a community. Often, this includes managing the money both coming into and going out of the community’s bank accounts. A good management company like Cedar Management Group will work with the board to make sure you are getting the most out of your HOA fees. We help the board conduct reserve studies, determine necessary expenses, and keep fees as low as possible. If you need a hand managing your community’s fees, request a proposal online or by phone at (877) 252-3327.