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Why Are HOA Fees Important?

By:Brian M Stephens, Peter M Dunbar - January 25, 2017

 

FAQs on HOA Fees


In Part 3 of this series, we discussed the HOA rules – where they come from and what happens when homeowners don’t obey the rules. If polled, more likely than not, few homeowners could recite a majority of their HOA’s rules. One rule, however, would likely be recognized by all. That is, you have to pay your HOA fees.


Many homeowners don’t really understand the ins and outs of HOA fees – for example, why the fees are paid, how the fee amounts are set, and who an association may hold liable for past due assessments. This Part 4 attempts to cover certain subjects which form the basis of frequently asked questions about HOA fees.


How Are My HOA Fees Determined?


The timely payment of HOA dues and assessment installments from each member is essential to the smooth functioning of the homeowners association and the proper maintenance of the community’s property. The HOA board establishes the assessment/fee amount based on the association’s operating budget for the association’s fiscal year. The operating budget will vary from community to community. Once determined, the board then apportions the fees amongst the property owners as is described in the community’s governing documents – namely, the HOA’s declaration of covenants and restrictions. Typically, the declaration will base the apportionment on the amount of property owned – that is, the more you own the more you will pay.[1] A parcel owner must pay his or her portion of the fees on time.


A parcel owner is liable for all assessments that come due while he or she is the owner of the parcel, and the obligation for the assessments may not be avoided by waiver or suspension of the use of the common property.[2] A parcel owner is jointly and severally liable with the previous owner for all unpaid assessments or assessment installments that came due prior to the time of transfer of title to the parcel.[3]


How Do HOA Board of Directors Establish Late Payments?



When exercising its authority to set the assessment levels, the board of directors must appropriately establish specific due dates for the assessment or the assessment installments. In addition to a due date, the board should also identify the point in time when the payment becomes delinquent.[4] The payment procedures should be contained in a resolution or in the minutes of the board of directors meeting. They should also be included in the assessment notices which are provided to each member of the association. The clarity of the board of directors’ actions and the responsibility of each member of the association is an essential ingredient to ensure timely payment by responsible members and to ensure effective enforcement against delinquent members.


What Happens When Your HOA Fees Are Not Paid When Due?


HOA fees and installments on an assessment that are not paid when due bear interest from the due date until paid at the rate provided in the governing documents, and if the documents permit, an administrative late fee may also be charged in an amount that does not exceed the greater of $25.00 or five (5) percent of the past-due sums. Delinquency by an owner may also result in the loss of privileges to use the common areas in the community. Any payment received by the association from a delinquent owner is applied first to any interest accrued, then to any costs incurred in collection, and then to the delinquent assessment.[5]


It is important that owners pay their HOA fees in full and on time. And, conversely, owners would be wise to ensure that the HOA fees paid are being used appropriately – that is, in accordance with the budget. In the next part of this series, we’ll more closely examine the expenses for which a board can and should collect HOA fees.

 

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