HOA fees cover a variety of needs for the community and home each year. There are many aspects to consider when setting your HOA dues.
When setting your monthly HOA dues each year, it may be challenging to think of everything you need to consider. There is so much that goes into taking care of a property that it may be easy to let something slip through the cracks. The general aspects to consider when calculating your HOA dues are the following:
- Employee salaries
- Reserve Funds
- Vendor Services
- HOA Management Fees
In this article, we will discuss how you should calculate HOA fees, the consequences of raising them, and the consequences of keeping them too low.
How to Calculate HOA Fees
Once you’ve considered all of the aspects mentioned above, you can determine the overall income you will need from your homeowners. This will help you calculate your HOA assessments. To do so, you’ll add up total budgeted expenses, total contribution to the reserve, and all miscellaneous income.
To determine how much each owner will pay each month, you will take the total you calculated and divide it by the number of homes in your association. Then, you will divide that number by how many assessments there will be (if you are charging a monthly fee, you will divide by 12).
Sometimes, you can use an HOA fees calculator that considers the size of each property. In this instance, a resident with a larger property will pay more than a resident with a smaller property. In other cases, HOAs divide the assessments equally. You should always check your bylaws to determine how to divide your dues.
Can HOA Dues Be Raised?
Yes, the HOA can raise dues if the need arises in your community. That said, there are limits to how much you can increase HOA dues. These limits may be defined within the HOA governing documents or state laws. For example, an HOA can raise dues by up to 20% annually in California. If an HOA wants to raise dues by more than 20%, they have to seek approval from their members. This is another case where it is critical to check the laws for your state and community before making any decisions.
What Happens if Your HOA Dues are Too Low?
Some of the consequences of too low HOA dues are obvious. You won’t be able to maintain your property without additional money. While the short-term results may be positive with your residents being pleased, they will not be pleased when they begin to lose amenities. Your community will begin to lose its curb appeal, and property values will decline. In the end, homeowners will be more unhappy than they were initially.
There are also other dangers in lowering your HOA dues. For example, you might open your association up to liability. Federal and state laws require you to keep your infrastructures up to code, and if you reduce fees so low that you cannot keep up with these standards, you may run into trouble. As a result, homeowners can file a lawsuit against you, and the state may assess fines.
Another negative situation is if you wind up asking for more money partway through the year. If your HOA board has to levy special assessments, this will be wildly unpopular. It’s best to simply ensure that your monthly HOA assessments are enough to cover the fees that you need to handle throughout the year.
Track Your Financials and Get Advice from TOPS [ONE]
It never hurts to have a partner in the HOA business. That’s where TOPS [ONE] comes in. Our experts have been in the HOA business for over 30 years. As such, we know how to navigate the financial needs of any HOA. We offer financial consulting that helps you easily make business decisions. Furthermore, our software has features that allow you to track your community’s financials throughout the year, so you don’t run into any surprises after you’ve calculated your HOA dues. You can view a demo of our software online and see for yourself what TOPS [ONE] can do for your HOA.