Homeowners association (HOA) fees are the lifeblood of the organization. Also known as dues and assessments, HOA fees are paid by all members of the association. HOA fees cover basic operating costs and maintain the HOA’s special reserve fund, an account reserved for emergencies and unexpected expenses. As an HOA manager, you’ll likely hear a lot of questions about HOA fees. One of the most common questions is, are HOA fees negotiable?
The short answer is no. When a property owner joins an HOA, they are required to pay the fees as outlined in the association’s governing documents or Covenants, Conditions & Restrictions (CC&Rs). Most members are happy to pay these fees because of the benefits they enjoy as part of the HOA. However, as with anything related to HOA management, there may be unique circumstances where HOA fees can be changed or submitted under an alternative payment plan.
As the HOA manager, it’s unlikely that you’ll be directly involved with financial negotiations between your clients and their members. These affairs are typically handled by the HOA board directly. However, your clients may defer to your expert advice and experience as an association manager to assist with issues pertaining to HOA fees. It’s also common for residents to approach managers when they have questions.
By understanding the answer to the question of whether HOA fees are negotiable, you can offer better service as an association manager and help your clients improve their community.
Understanding HOA Fees
First, it helps to understand HOA fees. In general, there are two types of HOA fees. The first type of fee is called a due. HOA dues are fixed, regular fees paid by each member of the association. HOA dues can be paid monthly, quarterly, or hourly depending on the association’s bylaws.
HOA dues cover the association’s daily operations. This includes paying for maintenance and repairs on shared-use areas, as well as costs associated with upkeep. For example, HOA dues can pay for landscaping and waste disposal services. 25% to 40% of HOA dues also goes into the association’s reserve fund. The money set aside in the reserve fund is then used to pay for special projects or cover emergency spending.
HOA assessments are special fees paid on a one-time or short-term basis. Assessments are levied in addition to regular membership dues. They are mandatory, however, the payment schedule for assessments may differ from normal dues as outlined in the CC&R or bylaws. HOA assessments may be levied once a year or as needed.
HOA assessments pay for costs not covered by regular dues. For example, assessments may fund new construction in common areas, or upgrades to equipment in a communal gym facility. HOAs can also charge assessments when the normal monthly dues fail to cover their anticipated expenses.
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When Are HOA Fees Negotiable?
As an HOA manager, it’s helpful to understand the context for negotiating HOA fees, even if it’s unlikely that you’ll be directly involved.
As previously mentioned, HOA fees are usually mandatory and non-negotiable. Although HOA fees may change over time, the decision to increase or lower fees is made by the association’s board, not individual members.
Changes to fees are usually issued at the beginning of the year, following an audit of the HOA’s budget and finances. However, changing HOA fees can be a different process for each unique HOA. Be sure to consult your clients’ HOA bylaws and CC&Rs to understand the rules regarding changes to HOA fees.
For residents, one of the few opportunities to negotiate HOA fees occurs during the home buying process. When a potential buyer is considering purchasing a home that belongs to an HOA, he or she can negotiate with the home’s seller to lower the price based on HOA fees.
Additionally, if the home has any title liens because of unpaid HOA fees, the potential buyer can negotiate with the seller to pay these back fees rather than accepting the debt after the sale. This tactic is often employed during real estate negotiation for HOA properties.
How to Change HOA Fees
When residents approach you with questions about how to negotiate for lower HOA fees, let them know their options. In general, the best way to change HOA fees is to join the association board. You can help members by informing them about the board’s election process and sharing a copy of the HOA bylaws. However, it’s important to remain impartial.
HOA members can also try these steps to lower their association fees:
- Request a copy of the HOA’s current budget and spending records.
- Petition the board to reduce ongoing costs, such as landscaping.
- Ask to see the HOA’s insurance premiums and other bills to find out if the association is overpaying for services.
- Petition the board to perform a financial audit and reassess fees with a CPA.
- Petition the board to defer nonessential projects to lower or eliminate assessments.
Make HOA Fees Easier with Online Payments
While HOA fees may not be negotiable, you can still make the payment process easier for your clients’ residents by implementing a payment web portal. With association accounting software like CINC Systems, you have the tools to receive, process, and deposit HOA fees completely online.
HOA residents love this option because it’s easier than mailing checks. It also helps you manage your HOA client finances more effectively because it saves time. By collecting HOA fees in an online payment portal, you won’t have to waste your valuable time going to the bank.
Plus, an online payment portal makes it easy to see which residents have paid their fees, and which still owe. This helps streamline the collection process.
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For collecting HOA fees for your clients, you need powerful software that delivers great accounting tools. Using CINC Systems, you’ll be able to assist your clients and their residents with all aspects of fee collection as well as other financial duties. To see how CINC Systems can help you grow your HOA management business, click here for a free software demo.