homeowners association dues | hoa assessment

Part of residing in a homeowners association community is having to pay regular dues and the occasional HOA assessment. But, what is an assessment fee anyway? And does it really differ from HOA dues and fees?


What Is an HOA Assessment?

Many people use the terms HOA assessments and HOA dues interchangeably either out of habit or ignorance. In fact, it’s a common misunderstanding. These two terms, though, are totally different from one another.

An HOA assessment, otherwise known as a special assessment, is a one-time fee that homeowners associations charge to cover unexpected expenses. At the start of every year, the HOA board prepares a budget from which they will determine how much to charge each homeowner in monthly dues.

Sometimes, the board fails to make accurate projections, resulting in a shortage of funds. To cover the additional costs, the board can choose to levy special assessments. Other times, unforeseen costs or emergencies can also call for the collection of HOA special assessments.

What is an example of a special assessment? If, for instance, flooding occurs in the community clubhouse and the HOA’s insurance can’t cover the entire cost of repairs, the board might turn to the homeowners for an assessment. It can also happen if some homeowners default on their regular dues, leading to insufficient funds.


How Are HOA Assessments Determined?

More often than not, the amount required to foot the bill of the surprise cost will determine how much the HOA board charges in assessments. The division of special assessments among homeowners can differ from one association to another, though.

It is important to check the association’s governing documents to find out how HOA assessments should be calculated. Having said that, most associations divide the costs equally among all the homeowners in the community, board members included.

It is also worth noting that many associations do have a cap on how much they can charge in special assessments. Again, this is where an HOA’s governing documents come in. Several states have also enacted laws imposing an HOA special assessment limit.

For instance, California law requires HOA boards to obtain membership approval for any assessments that go over 5 percent of the current fiscal year’s budgeted gross expenses. For amounts below 5 percent, though, the board can freely impose them.


Can You Write Off Special Assessments?

homeowners special assessment non tax-deductible | hoa duesThe short answer is no. Just like HOA dues, special assessments are generally not tax-deductible.

You may be able to write off special assessments, though, if you use your home or unit as a rental property. But, since taxes can be confusing, it is always best to check with a professional before making any claims. This way, homeowners can steer clear of any tax problems.


How to Fight a Special Assessment

Many homeowners fear the very mention of an HOA assessment since it means they will need to make an additional payment. But, it is important to remember that a majority of HOAs use this option as a last resort.

Most HOA boards first look at other alternatives. Once they have exhausted all other options, only then will they turn to special assessments.

If the board does levy an HOA assessment, there is not much that homeowners can do but pay it. It is, after all, a legal requirement.

Homeowners agree to abide by the association’s governing documents when they first move in. Provided the HOA is acting within its authority to do so and is complying with the law, homeowners must pay the special assessment HOA imposed.

Should homeowners fail to pay the assessment, the HOA can force payment using a few options:

  • Charge a late fee;
  • Suspend owner rights and privileges;
  • Take the owner to small claims court;
  • Place a lien on the owner’s property; and/or
  • Initiate foreclosure.


What Are HOA Dues?

HOA dues are fees charged by a homeowners association to its members for the purpose of maintaining the community. Compared to special assessments, which are one-time payments, HOA dues are paid regularly. Homeowners typically pay these dues, also known as HOA fees, on a monthly or yearly basis.


How Are HOA Dues Calculated?

The HOA board carries the responsibility of calculating the dues for every fiscal year. It begins with budget preparation where board members anticipate the cost of each expense. This includes things like vendors, management fees, utilities, landscaping, and other expenses.

The board will also account for reserve funding. From there, the board will divide the total projected expenses by the number of homeowners in the community to arrive at the dues amount each member must pay for the year.

A lot of factors can influence the cost of HOA dues. Associations in more high-end neighborhoods usually charge a higher fee. The same goes for associations with numerous amenities or larger amenities.

Every HOA board must check their CC&Rs to learn the proper budget preparation and dues calculation procedure. Not all associations have the same guidelines.


What Do HOA Dues Cover?

The HOA dues or fees cover the operating expenses of the community. A portion also goes to the reserve fund. Examples of operating expenses include landscaping, insurance, seasonal services, security services, management fees, utilities, pool maintenance, and the like.

The reserve fund, on the other hand, is a fund allocated for long-term replacements and major repairs such as the cost of repaving a private road or retiling the pool. This fund essentially pays for the cost of deterioration, similar to a usage fee.


How to Get Out of Paying HOA Dues

The payment of HOA dues is mandatory and something that homeowners consent to when first purchasing their properties. Thus, there is no way to get out of paying them.

When homeowners default on their HOA fees, the board can impose a late fee, revoke owner privileges, and even pursue legal action. Many HOA boards are also not afraid to file a lien on the owner’s property and, subsequently, foreclose on that lien.

Homeowners who are facing financial difficulties can always approach the board about their situation. Most of the time, the board will accommodate the homeowner with a payment plan.

If homeowners feel that their dues are too high, they can examine the budget carefully, which the board must present to them. Take note of any expenses that can be trimmed and bring them to the board’s attention. The board can also adopt other ways to reduce the HOA budget.


What Is an HOA Fine?

HOA fine or penalty | hoa feesAn HOA fine is a fee that an association charges to members of the community who have violated the rules or covenants. Every HOA has rules and regulations that homeowners must follow.

These rules exist to keep the community in order and in good condition. The board uses fines to enforce these rules and discourage violations.

Fines can vary from association to association. Some HOAs have different fines for different violations, with more serious violations incurring heftier fines. Others increase the amount with each passing offense.

Typically, fines range from $25 to $50 for the first occurrence. Fines must be reasonable, though. For instance, imposing a $500 fine for a minor parking violation would be outrageous.


HOA Assessment vs HOA Dues Explained

Homeowners and HOA board members alike should know how to differentiate an HOA assessment and HOA dues. Knowing the distinction between these two terms will minimize the number of misunderstandings, which can snowball into full-blown disputes.

Juggling professional and personal matters with HOA management can come as a challenge to many HOA boards. Contact Clark Simson Miller today for expert management solutions at an affordable rate. Call us at 865.315.7505 or reach out to us online for more information.