And the expenses covered under HOA fees similarly range massively. Depending on many variables — including your own personality — you might find an HOA and its associated dues either a convenience or a hassle or some measure of both. And an HOA does come with a fee. But you might not be clear on what those mandatory dues are actually doing for you. Let our guide, with expert input, serve as your primer on what to expect from HOAs.
Condo HOAs manage the buildings where the condo units are located, as well as common areas surrounding them — think lobbies, patios, hallways, swimming pools, elevators, and recreational areas. The HOA also covers insurance for these areas, as well as staffing and property management.
Typically, condo HOA fees would also cover utilities, such as lighting. You could also expect your condo HOA to cover major repairs that might be needed, such as a new roof or elevator. Your HOA may have a large cash reserve for such issues — and it may also call upon residents for a special assessment if a major need pops up whose cost exceeds the reserve funds.
Common areas may suffer due to lack of funds, or other members may be assessed special fees to cover maintenance costs or other expenses. The HOA has the authority to take action against delinquent homeowners. The actions depend on the contract between the HOA and the homeowner. Some contracts dictate that the HOA can charge late fees to the homeowner while others allow the HOA to initiate a lawsuit, place a lien on the property, or foreclose on the owner's property to collect the delinquent payments.
Some associations may assess both condo fees and HOA fees, so it's a good idea to find out how much you'll be responsible to pay before you purchase a property. The main problem people have with HOA fees is the cost.
As mentioned above, they can range from a few hundred to a few thousand dollars each month. This is, of course, based on the type of property and the amenities involved. Paying monthly fees on top of mortgage payments and other costs, such as utilities, can put financial pressure on property owners. Owners may even face higher fees if the reserve fund isn't properly managed. HOAs also create rules related to parking or the use of common areas. In neighborhoods with single-family homes, the HOA may create rules on how often members can paint their houses, which types of fences they may have, how they must maintain their landscaping, as well as any other related issues.
This can often ruffle feathers and create legal hurdles for both the associations and homeowners. HOA fees typically cover the costs of maintaining common areas, such as lobbies, patios, landscaping, swimming pools, tennis courts, a community clubhouse, and elevators. The association may also levy special assessments from time to time if its reserve funds are not sufficient to cover a major repair, such as a new elevator or new roof.
The amount of an HOA fee varies based on the type of property and the amenities provides—the more services and amenities, the higher the fees. In some cases, owners face higher fees when an association's reserve fund isn't managed correctly. Property owners who don't pay their monthly or annual fees, as well as any special assessments, may face action by the HOA.
These actions depend on the contract between the HOA and the homeowner. Some allow the HOA to charge late fees while others allow them to initiate a lawsuit, place a lien on the property, or foreclose on the owner's property to collect the delinquent payments. Real Estate Investing. Your Privacy Rights. To change or withdraw your consent choices for Investopedia. At any time, you can update your settings through the "EU Privacy" link at the bottom of any page.
These choices will be signaled globally to our partners and will not affect browsing data. With the overlying goal of protecting property values, we've outlined standard services provided by an association in Minnesota:. HOA Fees can pay for regular maintenance and repairs to shared amenities, green spaces, equipment, and systems. Examples might include:. Homeowners associations cover the costs of electricity, lighting, water, heating, air conditioning; some pay for Wi-Fi or cable T.
Some Twin Cities' HOAs, condominiums, and townhome associations might also include some or all of these utilities for individual units. Be sure to check your HOA documents and bylaws to determine what is your responsibility as a homeowner and what your dues cover.
An HOA must be fiscally responsible, including allocating a portion of HOA dues to a special long-term reserve account to pay for planned, budgeted repairs or renovations that do not occur regularly. These expenses could include repaving private roads or replacing elevator mechanicals.
Suppose a repair such as this happens, and the reserve fund is not large enough to cover the costs. In that case, your association could levy a special assessment to make up the difference — this is in addition to your regular association dues — or the association could also need to take out a loan, which could result in a significant but temporary increase in dues.
You can learn more about this here. However, Minnesota made it illegal for a homeowners association to use reserve funds to pay regular operating expenses. All associations in Minnesota are required to purchase a master insurance policy to protect their community's building structures and community property against damage. This coverage benefits all owners in the community; however, remember that this Insurance does not replace the need to carry your own homeowner's policy.
Want to learn more about HOA insurance? Check out more resources here. Some associations automatically set aside money each month to cover unforeseen community expenses and emergencies that cannot be paid for by the reserve funds. Many HOAs use a portion of their fees to cover the salaries and benefits of a community's management, janitorial, and maintenance staff if your community chooses to employ any of these.
These team members play an essential role in the success of your community and maintaining a consistent image.
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