For many prospective homeowners, purchasing a property within a community governed by a Homeowners Association (HOA) offers a comforting degree of order and certainty. From maintained shared spaces to structured neighborhood aesthetics, HOAs play a pivotal role in managing community affairs. However, the notoriety some HOAs gain comes from their ability to increase fees, often leaving residents feeling strangled by financial demands. But can HOA fees really just "go up"? If so, by how much and who decides? Let's dig into these questions to demystify the process and empower homeowners.
The Nature of HOA Fees
HOA fees are essentially the lifeline for an association's operations. These fees cover the costs of community maintenance—think landscaping, security, amenities upkeep, and sometimes even utilities. But they don't end there. Fees can also encompass costs for unexpected repairs or upgrades to communal amenities like pools or clubhouses.
There are generally two types of financial obligations in an HOA: regular dues and special assessments.
Regular Dues
Regular dues are the periodic payments that each homeowner in the community agrees to pay. These dues are calculated based on the community's operating budget, which factors in predicted annual costs for maintenance, management, and routine repairs. In California, as per the Civil Code Section 5605, these dues can be increased annually, but not more than 20% over the current year's dues without homeowner approval through voting.
Special Assessments
Apart from regular dues, HOAs may levy special assessments—extra charges for unforeseen expenses like storm damage repairs or major infrastructure renovations. In California, such assessments cannot exceed 5% of the current year’s gross expenses without a majority homeowner approval. These funds help shield the community from financial shortfalls that regular dues cannot cover.
Why Do HOA Fees Increase?
The increase in HOA dues often correlates with external economic factors. Key drivers include:
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Inflation: As costs for goods and services rise, so do the operational costs for maintaining a community. HOA fees often reflect these increased costs in areas like landscaping and maintenance contracts.
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Reserve Funding: Communities must maintain a reserve fund for long-term repairs and major component replacements (roofing, exterior siding, etc.). HOAs may increase fees to ensure these reserves are adequately stocked.
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Cost of Living Increases: Higher costs for basic services—such as waste management or utilities—mandate higher HOA fees to maintain service levels without impacting future repairs or reserve contributions.
Homeowners' Rights and Responsibilities
Despite the frustrations they can cause, increases in HOA fees are governed by rules designed to protect homeowners. Each community's governing documents—particularly the Covenants, Conditions, and Restrictions (CC&Rs)—offer crucial guidelines on fee structures.
Some states have legal caps or conditions on fee increases. For example, Arizona requires a community vote for increases over 20%. These protective measures ensure that homeowners maintain a voice concerning their fiscal obligations.
HOMEOWNERS can actively participate in HOA meetings, request financial records, and, if necessary, advocate for legal intervention when increases feel unjustified.
Addressing Unfair Increases
Should residents feel overburdened by fee increases, they can take several steps:
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Engage with the Board: Attend regular HOA meetings and express concerns. The financials should be transparent and available for homeowner review.
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Request Detailed Financials: This documentation will provide insight into whether increases are justified based on current expenditures versus income.
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Mobilize the Community: If dissatisfaction is widespread, residents can advocate for board member retention or changes in governing documents to better describe fee setting.
Understanding your HOA agreement is vital. Whether it’s acknowledging the realities of fee changes or taking steps to curb unreasonable increases, knowledge is your greatest ally.
In conclusion, while HOA fee increases are often unavoidable, they also serve critical roles in preserving the integrity and value of the community. Homeowners' best course of action is to stay informed, participate actively in HOA proceedings, and use their rights to ensure fair and reasonable governance. When fees align with realistic budget needs and transparent governance, both communities and homeowners stand to benefit.