Homeowners and board members must fully understand how HOA fees work. Remaining in the dark can not only create confusion and frustration but can also lead to financial mismanagement. Here are the most frequently asked questions about HOA fees.
What are HOA Fees or Dues?
Like any organization, homeowners associations rely on funds to operate continuously and successfully. But, unlike corporations, HOAs don’t sell products or services to earn revenue. Instead, these communities collect regular fees from homeowners to pay for expenses.
This is where HOA fees, also known as HOA dues, come into play. HOA fees cover the amount that homeowners must pay to their association regularly, such as monthly, quarterly, or annual.
Can an HOA Charge Fees?
Section 204.010 and Section 82.102 of the Texas Property Code respectively grant HOAs and COAs the authority to collect regular dues for common expenses. Homeowners and board members should also check their governing documents for additional requirements or provisions.
What are HOA Fees Used For?
Homeowners associations use regular fees to pay for various expenses related to running the community. This includes common area maintenance, the upkeep of amenities and facilities, utilities for common areas, security and safety, insurance, administrative and legal costs, management fees, and community events.
What is Included in HOA Fees?
Typically, HOA fees include both operating and maintenance expenses as well as reserve fund contributions. These fees pay for common expenses, which pertain to the expenses that all homeowners share. For example, the upkeep of amenities such as pools and clubhouses is a shared expense because all homeowners use them.
Homeowner expenses are not included in HOA fees. Homeowners must pay for their own property maintenance, home insurance, and individual utilities (unless the governing documents say otherwise).
Condo fees usually cover general common elements. Limited common elements and exclusive common elements are covered by those who have access to them. For example, a balcony shared by two units must be maintained by the two unit owners who share it. Of course, as with any other association, it is best to consult the governing documents for exact requirements.
What do HOA Fees Cover?
There is a lot that goes into running an association. HOA fees cover a multitude of expenses, including but not limited to:
- Cleaning and maintenance of common areas
- Landscaping for common areas and shared spaces
- Snow removal and street cleaning (for private roads)
- Sidewalk, pathway, and lighting maintenance
- Amenity maintenance and upkeep (including pools, clubhouses, tennis courts, fitness centers, playgrounds, etc.)
- Utilities for common areas (water, electricity, trash and recycling services, etc.)
- Insurance premiums for the association
- Gated entry and access control systems
- Surveillance cameras in common areas
- Fire and disaster preparedness costs
- Reserve fund contributions
- HOA management fees
- Legal fees
- Accounting fees
- Community events and activities (social gatherings, engagement programs, seasonal events and decor, etc.)
For condo communities, there may be additional expenses, such as:
- Maintenance and upkeep for elevators, stairwells, hallways, and lobbies
- Condo insurance
- Exterior wall maintenance
- Balcony, deck, and railing upkeep
- Plumbing and sewer line maintenance
- HVAC systems
- Fire sprinklers and alarm system servicing
- Pest control
- Staff salaries (front desk, doormen, on-site personnel, etc.)
- Maintenance and upkeep for parking garages and storage areas
Because condo associations tend to have more expenses, condo fees are usually higher than HOA fees in single-family detached communities.
Do HOA Fees Include Taxes and Insurance?
HOA fees cover the taxes and insurance of the homeowners association. Homeowners must pay for their own home insurance and taxes. The same goes for condo associations and owners.
How are HOA Fees Calculated?
Typically, homeowners pay the same fees every month or year. The HOA board creates a budget and uses it to determine how much the association will need in funds to cover all expenses.
In some communities, depending on the governing documents, HOA fees are calculated based on square footage. A property or unit with a larger square footage pays a higher fee.
Do I Have to Pay HOA Fees?
Whether homeowners must pay HOA fees depends on the association’s governing documents. If an HOA has the authority to collect fees based on its CC&Rs and bylaws, homeowners must pay these fees.
Additionally, it depends on whether or not membership in the HOA is mandatory. For most HOAs, owners automatically become members once they buy a home in the community. This is outlined in the closing documents they receive upon the home’s sale. For this reason, buyers must carefully review these documents and confirm if there is an HOA.
Who Profits from HOA Dues?
Homeowners associations aren’t for-profit organizations. These associations are typically formed as nonprofit corporations in their state, including Texas. Because of this, it is not an HOA’s purpose to earn a profit from HOA dues.
That said, the HOA board must collect an adequate amount of fees from homeowners to cover the cost of all expenses. If there is a budget surplus, the board should check its governing documents for guidance on what to do. Excess funds are more often than not refunded to homeowners, used to offset future dues, or deposited into the HOA’s reserves.
Can You Avoid Paying HOA Dues?
If an HOA’s governing documents impose a financial obligation to pay dues, homeowners must follow through. Outside of selling their home, homeowners typically can’t avoid paying dues to their HOA. It is also not advisable to default on these dues, as many potential consequences exist.
Is it Illegal Not to Pay HOA Fees?
Failing to pay HOA fees generally violates the association’s governing documents. Although it is not a criminal offense, homeowners have a legal obligation to pay dues. This is because homeowners sign a contract with their HOA when they purchase a home within the community.
What Happens When You Don’t Pay HOA Dues?
When homeowners fail to pay their dues, a number of penalties might follow. Depending on the governing documents, an HOA has several collection methods available. These include late fees or interest, suspension of privileges, legal action or collection agencies, liens, and even foreclosure.
Late Fees or Interest
An HOA can impose a late fee or charge interest on unpaid dues, inflating the outstanding amount that homeowners must pay to their association.
Suspend Privileges
An HOA can temporarily revoke an owner’s privileges for failing to pay dues. Associations might suspend access to amenities and facilities until the owner settles their balance. In some communities, the right to vote is even revoked.
Legal Action
An HOA can take legal action against a homeowner or hire a collection agency. In Texas, HOAs must follow proper collection practices and notification procedures (Section 209.0064).
Nonpayment of HOA dues can also negatively affect credit scores. If a collection agency reports the issue to a credit reporting bureau, homeowners might see their scores negatively affected. Some HOAs and lawyers also make such reports.
Liens
An HOA can place a lien on the home until the dues are paid. A lien makes it harder for an owner to sell their home or refinance their mortgage because they must settle the lien first. An HOA must follow proper notification procedures when placing a lien on a home (Section 209.0094).
Foreclosure
Finally, an HOA can initiate foreclosure proceedings. Condo associations can foreclose liens either judicially or nonjudicially, but they can’t foreclose on liens that are only made up of fines (Section 82.113).
On the other hand, HOAs can foreclose on a lien through judicial or nonjudicial foreclosure, provided their governing documents allow it and the HOA first obtains court authorization for an expedited foreclosure (unless the homeowner waives this step). Once the court grants approval, the HOA follows the same nonjudicial foreclosure procedures that condo associations use under Chapter 51 of the Texas Property Code.
That said, an HOA’s declaration may limit foreclosure methods. Additionally, an HOA cannot foreclose on a lien if it only includes fines, attorney’s fees related solely to penalties, or fees for compiling or reproducing HOA records.
Can You Be Evicted for Not Paying HOA Fees?
Although homeowners can’t be evicted in the technical sense of the word, HOAs can foreclose on an owner’s home if they fail to pay their dues. It starts with a lien, which makes refinancing or selling the home impossible without settling the lien first. Then, an HOA or COA can choose to foreclose on the lien, resulting in the owner losing their home or unit.
Eviction is possible for tenants. If the lease agreement states that the tenant is responsible for paying HOA fees and they fail to pay them, that’s considered a violation of the agreement. The landlord/homeowner can then choose to evict the tenant for nonpayment.
The Final Word
Navigating HOA fees can be challenging, especially for newbie owners or board members. This FAQ guide should help you better understand these fees.
Preferred Association Management Company offers exceptional financial management services to communities in Central Texas. Call us today at 512-918-8100 or contact us online to learn more!
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