HOA Fees: Pesky Expenses or Value Add?
Every penny matters, right? It’s easy to get frustrated with paying HOA Assessments, especially if you are unclear on what purpose they serve. Whether you have been living in an HOA for a while now, or are considering it, knowing where your fees go can make your experience better!
So, right to the nagging question, “where does my money go? First, it does NOT go to your homeowner’s association management company! Your manager is NOT your HOA.
Let’s look at the difference in the roles of your Homeowners Association and your management company:
HOA Management Company
A professional HOA management company can save your association – and ultimately YOU – money! Hiring a management company is cost-effective and brings many benefits to your community.
Your elected HOA Board defines your management company’s role in your community. The manager doesn’t set HOA policies or create rules and regulations for the HOA. Your manager simply acts in accordance with the HOA Board and administers the policies and rules that the HOA adopts. So when you receive a fine for leaving your trashcan out, that fine is sent to you by your Association. It is the Association, not the manager that enforces the rules that your neighborhood has established. Your management company works in an administrative capacity at the direction of your Board and your Governing Documents.
Homeowner’s Associations (HOAs)
Also known as Property Owners Associations, Landowners Associations etc., your HOA is a business entity created for many purposes including maintenance of your common areas and grounds, enforcement of rules and standards and to perpetuate the standard of living to which you and all owners purchased at the time of your closing.
Your homeowners association sets a budget for your neighborhood that lays out the costs to operate your neighborhood. The process starts with listing all of the operating expenses while considering the needs of the association.
These can be broken down into categories such as repairs and maintenance: items such as pressure washing landscape supplies general maintenance, irrigation, elevator service, common area air-conditioning, permits, courts, tree maintenance, docks, janitorial, gates, fire systems, pools, ponds, parks, playgrounds, parking lots, poops and roofs! (Yes, you read poops!)
There are general and administrative costs from postage and printing to websites and legal and professional work, CPA and administration, insurance, social activities and pest control and termite bond.
There are utilities such as electricity and water for the common areas and grounds as well as for many communities, street lighting. There may be a telephone and internet access at the amenity center. There can be other expenses such as state federal and county property taxes.
As the board considers all of these, they also consider bad debt and reserve fund contributions.
Simply put, the association takes the cost to operate the association and divides them by the ownership interest in all members. That becomes your Assessment. This funds the association operation for the year.
As a final note…..
There are a number of potential income sources for your homeowners association but most are nominal or not relied upon to offset expenses. These can include interest and covenants violation fines. There’s an infrequent but troubling misconception that Assessments (dues, fees, fines, etc) are paid to the management company. They are not. They are paid to your HOA.
Additionally, all funds are accounted for separately in the association’s own bank accounts and should never become commingled with the management company’s or other communities’ funds. Your homeowners association management company is a completely separate financial and business entity from your Association. It must be managed separately on a separate computer with separate accounting software and separate bank accounts. Community Management Group uses completely separate banks and accounting systems.