A rough breakdown of how HOA dues are spent.
When you sign an agreement to purchase a home in a community, you also are signing an agreement to fund that community. You may own the space inside your property, but areas outside of this (known as the “common elements”) are owned by the community and everyone part of it. As an owner, you also have a share in these common elements, so to keep their value, everyone makes regular payments through HOA dues.
So what are these fees?
HOA dues, or assessments as they’re commonly called, are a fee paid either monthly or quarterly to the association (or community). The amount you have to pay is assessed according to a formula in HOA declarations, sometimes by square footage. So: What is included in this sum?
The community itemizes assessments to determine many of the spending decisions. These community declarations are part of the governing documents, typically are listed near the beginning of the document, and are listed as a specific article. The heading is titled in various ways, such as “Covenant for Maintenance Assessments,” “Association Assessments,” “Common Expense Assessments,” etc.
The association also spends part of the budget to maintain and insure different portions of the property and community. The Association is obligated to use this money for the maintenance of the community in the same way that unit owners are obligated to pay fees to fulfill these responsibilities. These obligations are therefore called “maintenance responsibilities”.
How is it all spent?
Assessments can vary greatly by association and property type, so really it depends on if you’re living in a single family home or high rises. Generally speaking though, it will commonly include:
- The maintenance and operation of the common areas (called the “general common elements” in your declarations). This includes:
- Gardening and landscaping
- Trash services
- Snow removal
- Road maintenance
- Parking (including paving, painting, sealing and upkeep)
- Underground utilities
- Community lighting
- Recreational Facilities (such as a communal pool)
- Employee wages
- Working capital
- Community, common area insurance
- Management company fees
- State-registration fees
- Financial reporting
- Items affected by service contracts such as:
- Laundry Machines
What does this mean for me?
No Owner is exempt from assessments so the system is fairly paid for by everyone. Each owner, when they signed their contract and exchanged deeds, entered into the association and are personally obligated to pay for its upkeep. These payments include not only the stated assessments, buy special assessments and other charges; fines, interest late charges, attorney’s fees and other amounts established and collected.
This financial/legal instrument is called a lien. Associations membership is based on lien-based enforcement: if the homeowner doesn’t pay, a lien is placed upon the property and the homeowner cannot sell or leave the unit until the lien is paid.
You may be frustrated about having to pay these dues and the benefit you receive from them. Understandably, no one likes writing a hefty dues check, then walking outside to a property in need of repair. People often ask us, “what am I even paying for?”
And that’s often a complex question to answer, because Boards decide how to spend HOA money, NOT the management company. Our job is to follow the directions of the owners, and as such we have little control over where the money gets spent, which is a good thing. It’s your HOA, and it’s your money. The owners, represented by their volunteer board get to decide. So if you don’t know or don’t like how your money is being spent, you can review the HOA monthly financials and attend a board meeting to offer your input.
By Ben Tryon