What Is an HOA Assessment Fee?

HOAs collect money for communal services

HOAs, or Homeowners Associations, are community organizations made up of elected representatives from within a residential area. HOAs can yield a certain amount of power over the community, such as rules on what sort of signs or lawn decorations a resident can display. But they are also responsible for taking care of certain services that benefit the whole neighborhood, and they pay for these services with dues or fees collected from each resident.

HOA dues cover:

            -Routine maintenance

            -Communal services

            -Emergency cash reserves

            -Insurance

For example, HOA dues will likely cover lawn care for all of the front yards or shared green space in the community. It will also maintain cleaning services for the hallways and other shared spaces if you are living in an apartment complex or condominium. Some HOA fees will cover the building’s water supply and heating or air conditioning units. All of the routine HOA dues should be clearly listed in the HOA rules that you consult before signing a rental or leasing agreement.

Assessment fee

There's a huge difference between HOA dues and HOA assessments, and you can click this link for more information. HOA assessment fees cover the less routine and unexpected items that may be required for the whole community. Ideally, your HOA maintains a steady reserve of money that can be used to repair a front gate that gets toppled from a car crash, or a large tree that is struck by lightning and blocks the road. These reserves are included as part of the routine monthly dues from each resident, and some states even require HOAs to maintain a reserve.

However, unforeseen events, accidents, storms, and yes, even changing state and local insurance policies, can leave residential communities hit with some steep and unexpected price hikes. This could include the need for a major building renovation, or the discovery of mold or asbestos. If these costs deplete the association’s reserve fund, then the HOA will need to determine an assessment fee for each resident to pay in addition to the usual monthly dues.

How can I avoid steep assessment fees?

As a potential buyer or renter in an HOA-controlled residential area, it is your responsibility as a consumer to try and predict what sort of assessment fees might be levied in the future. This sounds difficult, but there are a few steps you can take and questions you can ask to gain a better idea of what you can expect from your future HOA:

●      Ask current residents what assessment fees they have had to pay in their stay (speak to as many longer term residents as you can)

●      Inquire with the HOA how big their reserve fund is, but bear in mind that in some states HOAs are not required to disclose that information

●      Find out what the monthly HOA dues cover

●      Ask if your HOA conducts special assessments from outside authorities to determine unexpected major fees or renovations (again, some states already require this)

●      Try to obtain a copy of the HOA’s assessment fees over the last few years (as far back as possible) to get a better sense of what you can expect to pay on top of your

●      How old is the building? (this can have a huge impact on the costs of upkeep)

Final considerations

It’s critical that you develop a good understanding of how your HOA operates and exactly what the renter/owner restrictions are. Do your research on the types of assessment fees you might face, not just with the particular HOA, but the region or city in general.

Keep in mind that structural permits or fines will also be factored in assessment fees, so avoid older properties or a building with any history of structural flaws. Those kinds of issues will likely add up the future HOA assessment fees, so be on the lookout for red flags and gather as much information as you can before making a decision.