Buying a home in a community with a homeowners association comes with many perks—such as a maintenance crew to take care of the lawn, gym, swimming pool, or other shared areas enjoyed by HOA members.
But the COVID-19 pandemic has forced many HOA-run facilities to close. In a recent survey by the Community Associations Institute, or CAI, 79% of HOA communities said they had closed common areas and amenities.
Which begs the question: Do you still need to pay HOA fees?
HOA fees to maintain these facilities, after all, typically run between $200 and $300 a month, but can be as much as $1,000. So if they’re closed, it stands to reason you don’t have to pay for them, right?
As much sense as that might make, the answer is typically no.
“There are very few associations, if any, that are waiving fees” because of the pandemic, says Dawn Bauman, senior vice president of government and public affairs at CAI.
Granted, some HOAs have waived late fees or are working with homeowners unable to pay during this pandemic, she explains. But no, they’re not granting full-fee reprieves—and could even raise fees during this time. Here’s why, and what to do if you can’t pay your HOA fees. (And since much of the same is true for many condo associations, condo owners should take note, too.)
Why you still have to pay HOA fees during COVID-19
More than 25% of the U.S. population lives within an HOA, according to CAI. Living in these communities comes with rules, referred to as covenants, conditions, and restrictions, or CC&Rs.
“When an owner purchases a home in an association, the deed of that home is restricted,” Bauman says. “It’s restricted because they are part of the homeowners association, so there are restrictions that come with ownership of that home. So, they sign saying, ‘I will pay my assessment and I’m obligated to conform with the rules in the community.’”
In short, homeowners likely have no legal recourse for not paying their fees—even when amenities are closed. However, this doesn’t mean that HOAs are just raking in your money and getting rich off the profits.
How HOA budgets work
Community associations aren’t set up to rake in cash; the fees collected pay the association’s bills, says Jim Slaughter, real estate broker and partner in the law firm Black, Slaughter & Black in North Carolina.
“Monies collected by an HOA or condo typically aren’t retained, but are forwarded to others, such as the power company, plumber, and insurance carrier,” he says.
Bauman says HOAs operate on a “zero-based budget.” HOA fees may also be put in reserves for current or future maintenance or capital improvements for the community. Lowering these fees, however, is typically not possible. This is because most HOA expenses are fixed, and will continue through the pandemic.
“For instance, association pools must be treated even if closed, and some associations have increased costs due to increased cleaning of common areas such as lobbies and elevators,” Slaughter says.
Plus, associations are usually under contract with vendors for repairs and maintenance. As such, expenses can’t be temporarily canceled or reduced unless the vendor allows it, which is unlikely.
Another possible expense HOAs may need to compensate for are any homeowners within the community who may not be able to pay dues right now, due to layoffs or otherwise.
“With the extended health and economic crisis, many HOA and condo association boards are concerned about association finances and how to possibly assist owners financially,” Slaughter says.
In fact, the CAI’s survey found that 50% of HOAs are expecting fee delinquencies to grow in 2020.
Why HOA fees might rise due to COVID-19
In some cases, if certain homeowners can’t pay their HOA fees for an extended period of time, the HOA could raise the rates for those who can pay, Bauman says, “because there’s nowhere else for this money to come from.”
Furthermore, the pandemic is prompting many HOA communities to buy more supplies, such as masks and hand sanitizer, and conduct extra cleanings of common areas. As such, they might even raise fees to cover these expenses as well.
Another potential fee hike down the road may involve their reopening amenities that were closed, only with added safety measures that cost more money to maintain.
“Most associations are trying their best to determine how to open these amenities in a way that is manageable for the residents in their communities,” says Bauman. “And that will then lead to potentially additional expenses on the community.”
What to do if you can’t pay your HOA fees
If you can’t pay your HOA dues, don’t panic—Bauman says many communities will work with you through payment plans or delayed payments.
More than 90% of homeowners were still paying their HOA fees at the beginning of May, according to CAI’s survey. However, about 20% of communities have said they’ve seen more homeowners ask for payment plans or other kinds of reprieve, and many communities are waiving late fees.
Homeowners struggling to pay their HOA fees should reach out to the community’s board of directors or management to discuss their situation and find out what their options are, Bauman suggests.
Many associations have dealt with this situation before, during the Great Recession of 2008, she says, and likely have policies for payment plans and other ways to help residents.
High rates of delinquency could have long-term effects on the community as a whole, however. Lenders, including Freddie Mac, Fannie May, and Federal Housing Administration, will not back mortgages in communities with a delinquency rate of 10% or higher, Bauman explains. This could influence home buyers’ decisions to purchase in the area.
“Most HOAs are not pursuing aggressive collection tactics,” Bauman says. Instead, “they are trying their best to make it more manageable for the residents who are unable to pay while balancing the interests and the financial need of those residents that are paying.”
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