When you purchase a home, condominium, or townhouse that's part of a covenanted community, you will most likely be required to pay monthly fees or dues as well as special assessments to a homeowners' association (HOA). These fees can be hundreds or even thousands of dollars per month; sometimes as high as rent on an apartment might have been.
When you first purchase the property, you will be informed of the current monthly fee amount. However, these fees can be raised over the years, assuming the HOA acts in accordance with its bylaws and other rules and regulations. And special assessments can be unpredictable, often put into place to deal with unforeseen or urgent needs such as uninsured damage.
When the monthly fees reach the point that they burden current homeowners and discourage potential buyers, current homeowners sometimes challenge the HOA fees and assessments in court.
Purpose of HOA Monthly Fees
Monthly HOA fees are intended to pay for the repair, maintenance, and upkeep of all areas of the property that are owned collectively, rather than individually. They might, for example, cover garbage and other utility bills (such as electricity bills for street lights), landscaping or lawn-mowing services, snow removal, and maintenance and repairs to hallways, roofs, and walkways, as well as to community facilities like clubhouses or meeting rooms, pools, and gyms or exercise rooms.
HOA fees also cover insurance and the salaries of HOA employees or independent contractors such as an outside management company.
How high the HOA fees are will naturally depend partly on how new, large, and luxurious the community facilities are. A single, new building containing several condos and no amenities will (hopefully) charge lower fees than a sprawling but aging one with a golf course, lake, winding roads, 24-hour security, and "free" services to owners such as dry cleaning.
Ordinarily, the HOA board of directors (a group comprising homeowner members) will establish a budget and divide the total expenses by the number of homes in the community to set the monthly dues amount. However, if the properties are of different sizes, monthly payments might instead be based on square footage or some similar measure.
Don't expect your fees to be reduced based on services you don't use: Even if you never take a swim in the pool or work out in the gym, you're expected to pitch in to maintain them.
Each homeowner is expected to make monthly or other fixed payments throughout the year, and can face penalties and even foreclosure for nonpayment.
When Owners Must Also Pay HOA Special Assessments
If and when an HOA decides that an emergency or special project is necessary for the community, such as painting the exterior of all buildings in the community or repairing flood damage that wasn't covered by insurance, the HOA may require all owners (perhaps after a community vote) to pay a special assessment to cover the costs.
Sometimes, these assessments raise more money than seems reasonable to fund the project. When this happens, homeowners might want to challenge the HOA assessment, perhaps ultimately taking the matter to court.
Planning Ahead for HOA Fees When Purchasing Your Home
If the home you purchase comes with a required payment of monthly HOA fees and assessments, you may want to find a real estate lawyer with experience in this area; one who can evaluate whether the fees and assessments are reasonable and reflect an HOA that's financially sound.
If, for example, the fees are reasonable on their face, but half the owners aren't paying them and the HOA is therefore facing bankruptcy, you'll want to know about it. Or, if the fees are likely to go up soon because the HOA has failed to set aside any financial reserves and has been putting off much-needed maintenance, you'll want to find that out, as well. A lawyer with experience in this area can help you evaluate such concerns.
Challenging an HOA Fee or Assessment
If you and your fellow homeowners are considering a challenge to the HOA monthly fees or a special assessment, look first to the HOA's bylaws or other governing documents. These likely set forth internal procedures for such a challenge. In any case, you should talk to your HOA board about your concerns.
If these procedures don't work, and you're contemplating a lawsuit, you first should contact a real estate lawyer for advice. Homeowners who sue their HOA and lose can end up having to compensate the HOA for the legal fees it spent to defend itself. Have a clear sense of your chances of success before filing any case in court.
Questions for Your Lawyer
- Is the HOA community I'm considering buying into financially sound and charging reasonable fees?
- Do you see any language in the governing documents of this HOA that should worry me with regard to future changes in fee amounts or my ability to challenge them?
- Has this HOA set aside sufficient financial reserves, and does it carry enough insurance, to deal with an emergency expense without passing it onto owners in the form of a special assessment?
- What can I do about a special assessment that I believe is too high, or for a project that I believe is extravagant, unnecessary, or a pet project of a few dominant HOA board members?