Homeowners Association (HOA) Fees: What Are They, What Do They Cover And What Happens If You Don't Pay?

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If you’re considering whether to buy a home in a community with common features like a pool, fitness center and a gorgeous clubhouse – amenities that might be prohibitively expensive to own privately – you might want to consider a home within a homeowners association (HOA). 

You might be wondering whether you can afford the HOA fees on top of your monthly mortgage, property taxes and homeowners insurance payment. 

If you’re considering purchasing a house in an HOA, it’s important to understand that you’re both buying a home and joining an HOA, and with HOA membership come HOA fees. In this article, we’ll take a look at what your fees will pay for. 

What Are HOA Fees?

An HOA fee, also known as a homeowners association fee, is a kind of dues that owners within the association must pay. It is similar to condo owners association (COA) dues and the maintenance fee required by co-op associations. 

Simply put, a homeowners association fee is money typically paid monthly by homeowners living within the HOA community to help maintain all properties, amenities and common areas within the association.

There are a variety of different services and costs that can make up your HOA fees, and the services that an HOA offers will vary depending on the community's needs. If you're looking at a variety of homes in different HOA communities, you can compare what each one offers and decide which HOA's offerings (and rules) best fit your needs.

What Is A Homeowners Association?

Homeowners associations (HOAs) are non-profit organizations that manage master-planned communities on behalf of the community’s developer. HOAs generally refer to communities of single family, detached homes. Typically, you’ll be required to join a COA as well if you move into a condo or a co-op.

HOAs have a couple of intended purposes: to keep shared spaces within a community maintained and to create rules that prevent a single homeowner from making a change to their home that lowers everyone's property values.

What Does An HOA Fee Cover?

Every HOA community is different. When house hunting, it's vital that you request a copy of the HOA's rules and regulations, known as the Covenants, Conditions and Restrictions (CC&Rs) so you don't end up joining an association that is more restrictive than you want and so you know what kinds of services to expect your monthly dues to cover.

If you’re attracted to amenities like a swimming pool, fitness center, clubhouse and landscaping, understand that you’ll be contributing financially to maintaining those features.

Some of the costs that can be paid for by members' monthly HOA fee payments include the following. 

Municipal Services

HOAs generally provide civic amenities such as trash removal, water and wastewater management and security. These are often included in HOA fees, meaning you'll have fewer monthly bills to keep track of.

Association Insurance

Your HOA will be required to carry insurance for injuries sustained in or damage to areas within the purview of the HOA, such as common spaces, recreational areas or other exterior locations, like sidewalks, that the HOA is required to maintain.

You'll still need an individual insurance policy to cover everything you're responsible for. Your lender will require homeowners insurance to cover damages to your property. 

Maintenance And Repairs 

A part of your monthly fees will also be allocated to maintaining and repairing common areas and shared structures. This can include upkeep of the outside walls and roof of the building (if you're in a condo), pest control in common areas, and maintaining parking lots and neighborhood roads. The HOA takes care of common areas that require lawn care and landscaping. Snow removal for shared roads and parking lots may also be included as part of your fees. 

If you live in a condo, your COA will be directly responsible for exterior maintenance. Remember, with a condo, you own everything from your interior walls into the unit, and the HOA retains ownership of and responsibility for all exterior maintenance.

Amenities And Services

Some HOA communities include access to amenities such as a pool or fitness center for all the residents. The HOA may also provide certain security services, such as restricting access to the community or condo with a gate or doorperson, a security guard on-site or simply ample lighting and security cameras installed. High-end communities may include features like a concierge, valet services, luxury fitness centers staffed with attendants or trainers, or even a relaxing rooftop lounge. As you could probably guess, these types of communities have the highest HOA fees, often exceeding several thousand dollars per month.

Reserve Funds

A portion of the fees you pay will be set aside into the HOA's reserve funds, which is a savings account that the association can dip into for unexpected or irregular expenses. This means that, ideally, if the clubhouse roof reaches the end of its life or the pipes burst in the laundry room, the HOA will have enough money to pay for these things.

If your HOA doesn't have enough saved up (either due to poor planning or an unusually large cost), the board may vote to require all homeowners in the community to pay what's called a special assessment to cover the costs. Before moving into an HOA community, be sure to read the rules to see if there are any restrictions on how often or for how much the association can impose a special assessment.

How Much Are HOA Fees On Average?

HOA fees can vary widely depending on where you live, what type of home you're in and what your HOA offers. A monthly HOA fee could be less than $100 or more than $1,000. Typically, they'll be $200 – $300 per month.

When you're house hunting, be sure to learn what the monthly fees are for any HOA communities you're considering. It's not enough to be able to afford the mortgage payment on a given house – and make sure you’re preapproved for that amount – you have to pay your HOA fees to keep your title on the home clear, so it's vital to factor that into what your actual monthly costs will be. 

Are HOA Fees Tax Deductible?

No, HOA fees are not tax deductible if the property is your primary residence. However, if you purchased the home as a rental property, you can deduct HOA fees because they're considered a rental expense. If it's a rental property that you inhabit for a portion of the year, you can still deduct the fees, but only for the time frame that the property was rented out.

If you find the cost of your HOA fees to be burdensome, your best option may be to join the HOA board yourself and start looking for areas of the budget where the HOA may be overpaying for certain services.

Are There Other Fees I'll Have To Pay?

There could be. HOA membership isn’t cheap.

Special Assessments

HOAs impose special assessments, or charges, to homeowners to pay for major, non-routine maintenance and other unexpected expenses. A part of your monthly HOA fees should be kept in a reserve account to save up for planned renovations, although the amount often falls short of what's needed for major, non-routine maintenance.

Let’s look at some examples. When the clubhouse roof needs to be replaced but the reserve fund is short of the necessary funds, homeowners will have to make additional payments to cover the expense. If major systems like air conditioning are old and due to be replaced, the funds will come out of reserves first, then through special assessments.

Of course, the repairs can be far more substantial than a roof replacement, particularly if you’re considering a unit within a high-rise building in areas where earthquakes or storm surges are common. In that case, a special assessment could be costly.

Fines

If you fail to comply with HOA rules, you could be fined. The range of possible fines should be discussed in the CC&R. Thought no one would notice if you picked a shade just a little different from the colors approved by the HOA? Think again.

What Happens If I Don't Pay My HOA Fees Or Fines?

Even the most unobtrusive HOA will spring into action if you fail to pay your monthly HOA fees or fines. The HOA depends entirely on homeowners fees for its budget.

Immediate Consequences Of Failure To Pay

If you miss an HOA payment, you'll receive a notice that you failed to pay. In most cases, a late fee will be added to your amount due. If you don't pay within 30 days, the amount of that fine may be increased and you may have your HOA privileges suspended. In other words, you may not be able to use the pool or clubhouse. After that, you can expect the HOA to take legal action against you.

Legal Consequences Of A Failure To Pay

HOAs have a few different legal options if you decide to stop paying the fees you agreed to pay when you joined the community. The association may file a lien against your property, pursue a lawsuit against you or even foreclose on your home.

Lawsuits

Lawsuits are expensive for everyone. In 2012, a Tampa, Florida judge awarded homeowners damages plus costs in a lawsuit they'd brought against their HOA. The lawsuit arose out of a special assessment of $2,212 the couple was charged for lawn care. The lawsuit went on for 12 years and finally settled in the homeowners' favor. The homeowners spent $222,000 on litigation – most of which the HOA was forced to reimburse – costing other homeowners within the complex an extra payment of $600 per month over 5 years.

While this is an extreme example of an HOA run amok and homeowners with the financial resources to prove a point, it also teaches a lesson about how expensive legal action is and how it can get out of hand.

Liens

Failure to pay your HOA fees will result in a lien on your property. In other words, if you don’t pay, you won’t be able to sell your property easily because the lien will pop up in the title search. In order to complete the sale, you’ll have to remove the lien from your title.

Some states have restrictions on when an HOA can initiate a foreclosure on a resident's property, but in states with no restrictions, an HOA can foreclose on a home over just a few hundred dollars in missed HOA fee payments. More often, the lien stays on your deed, causing a cloud on your title that will delay or disrupt your closing when you’re trying to sell the home.

Some HOAs may be more forgiving, offering payment plans to homeowners who are late on their payments, but you shouldn't assume this will always be the case. It's important to read up on all the association's rules on late payments and foreclosure before you join, so you don't get surprised with a foreclosure over a $200 HOA bill.

The Bottom Line: Paying HOA Fees Is Just As Important As Paying Your Mortgage

If you’re seriously considering joining an HOA community, make sure you factor HOA fees into your monthly budget. If you can afford it and love the lifestyle, make sure your offer is strong and stands out by attaching a Verified Approval letter from Rocket Mortgage^®. 

Ready to buy a home within a homeowners association? Take the first step by applying for preapproval online today.