Homeowner Associations (HOAs) serve several purposes – to maintain shared communal spaces, and to create rules preventing individual homeowners from making any property changes that could affect everyone’s property valuations.
Typically, joining an HOA will be a requirement if you move into a townhouse or condo, although many neighborhoods comprising single-family detached homes are also governed by an HOA.
Whilst there are sizable benefits to living within a community that includes having your roads plowed and preventing your neighbors from painting their house in shocking pink, living in a community governed by an HOA comes at a price.

HOA fees explained

Simply put, an HOA fee is money usually paid monthly by all homeowners living within the community, to assist with the cost of maintaining all amenities, properties, and common areas.
There are a variety of costs and services that can make up your particular HOA fees, and the services available through your HOA will differ depending on the community’s specific needs. So, if you are searching for a home amongst a variety of HOA communities, it pays to compare their different offerings to ascertain which HOAs rules and services may best suit your needs.

What do they cover?

Every HOA community runs uniquely, so it’s vital to ask for a copy of an HOA’s rules and regulations when shopping around. These are known as the Covenants, Conditions and Restrictions (CC&R). Joining an association that is more restrictive than you would want can be a miserable experience, so you need to do your due diligence.
Some of the potential costs involved in a monthly HOA payment can include:

1. Insurance

This only relates to insurance coverage for damage to areas within a predetermined scope as outlined by the HOA, such as common areas or the outside of the building. You will still need your own insurance policy to cover the inside of your condo, or both the inside and outside of your detached home or townhouse.

2. City services

Civic amenities, for example, water, sewage and trash removal are often included in your HOA fees. This can result in fewer individual monthly bills to keep track of, which is a plus.

3. Pest control

If a building regularly experiences pest issues, your fees may include pest control and prevention service costs. Townhouses and detached homes are less likely to include these, as individual homeowners tend to be responsible for their own pest control (although townhouses may include some provisions, since residents are likely to share pest problems when they share walls).

4. Amenities and services

Within some HOA communities, access to amenities such as fitness centers or pools is included for all residents. The association may also provide some security services, such as access restrictions via a doorman or gate, an on-site security guard or simply installed security cameras and ample lighting. Higher-end communities may feature valet services, a concierge, rooftop lounges, luxury staffed fitness centers and more. Not surprisingly, such communities command the highest HOA fees, sometimes exceeding several thousand dollars each month.

5. Maintenance and repairs

A portion of your monthly fees will be allocated towards repairing and maintaining shared structures and common areas. This can include the roof and outside walls of a building, parking lots, and adjacent neighborhood roads.

6. Reserve funds

Part of every HOA fee paid is set aside into a reserve fund which acts as a savings account for any irregular or unexpected expenses. Ideally, this means that if a pipe bursts in the common laundry room, or a clubhouse roof needs replacing, the association will have the funds to cover such expenses. In the case of insufficient funds (such as an unusually large cost, or as a result of poor planning), the board may vote to request additional funds from all homeowners. This is called a special assessment payment. Before committing to an HOA community, be sure to review the rules and restrictions regarding how often or for how much the HOA can impose special assessment fees.

How much are HOA fees?

Of course, they can vary widely depending upon the community and its offerings, ranging from $100 to $1,000 or more per month. Typically, they are in the region of $200 – $300 monthly. HOA fees also vary widely across states; Northern Virginia HOA fees, for example, cost anywhere from $600 to $1,500 per year. In New York however, the average fees are around $1,500 a month.
It’s essential to factor in the HOA fees when house-hunting to ensure that your budget will stretch not only across the mortgage repayments but the HOA fees as well.

Are they tax deductible?

If the property in question is your primary residence, then no, the HOA fees are not tax deductible. However, if you purchased the property to rent it out, you can deduct the HOA fees as a rental expense, but only for the period that you rent it out.

Are there any other fees?

Other than the aforementioned special assessment fees, there are fines that could be applicable in the event that you fail to comply with the association’s rules. These should be detailed in the CC&Rs, so read the fine print.

What happens if I don’t pay the HOA fees?

If you miss a payment, you’ll be issued with a notice of failure to pay, and in most cases, a late fee will be added to your account. Failure to pay within 30 days can increase that fine, and you may have your HOA privileges temporarily revoked. For example, you may be barred from using the facilities until you bring your payments up to date.
If you repeatedly refuse to pay your HOA fees, the consequences can be severe. The association could file a lien against your property, instigate a lawsuit, or even attempt to foreclose on your home.

The bottom line

It depends upon your individual preferences and needs as to whether living in a community governed by an HOA will suit you. Anyone wanting total control over their property may feel stifled under the order of an HOA, while others enjoy the conveniences of less responsibility.
Either way, ensure that you thoroughly review an individual HOA’s rules and regulations so you know exactly what you are signing up for.