How to Determine HOA Fees

We've talked about the importance of collecting HOA fees from residents in the community, but how can HOA boards determine the appropriate management fee amount? 

Condo association and HOA fees must cover a wide range of services and amenities within the community—without making it too expensive for residents to live there! Whether you're starting a new homeowners association or it's time to review and update your current fees, check out these insights from an expert community association manager.

Start With Homeowners Association Board Meetings

Before you start determining an HOA fee schedule, it's helpful to review current budget needs and the number of homes in your community. This conversation should take place at scheduled homeowners association board meetings that allow discussion about community needs and costs to deliver on those needs. 

Conducting productive meetings can be challenging for a new or seasoned association, and budgets and fees can be an especially sensitive topic. To help facilitate productive meetings, an HOA management company can help set the agenda and encourage appropriate discussion during each meeting. 

Review Services and Budget Items

Next, review the past year's budget and look at it from a big picture perspective. You'll want to determine all expenses, income, and reserves in your community so you can see where the money has been going. If board members are starting a new association, use your initial meetings to identify budget items and how your HOA will serve homeowners.

When reviewing historical budgets, community associations should note what services are provided by fees collected—like landscaping or utilities—and which are covered through tax dollars or developer contributions. It's also essential to consider what services are not yet being delivered but may need attention in the future—like routine inspections, for example.

Reviewing current needs allows HOA board members to consider how much additional revenue is needed to provide these services while holding down monthly dues for their residents. In many communities, common services and vendors include:

• A property management company for community resources
• Landscaping
• Pool maintenance
• Homeowners association insurance or liability insurance
• Trash or snow removal
• Utilities for common areas and buildings
• Maintenance
• Reserve funds
• Salaries for an accountant, lawyer, or professional HOA management services

With a thorough list of current and potential expenses, it's time for board members to review the total budget.

Calculate the Budget vs. Total Number of Residents

Once board members have reviewed the budget, they can determine anticipated community needs for homeowners association fees versus how many residents live there. To do this, divide the total homeowner association operating budget by the number of homes in your community. This gives you a per capita figure to use when determining HOA management fee amounts for regular assessments.

This formula is helpful for older communities that need to update their dues to reflect changes in community needs and longer resale times. It's also important for new associations considering maintenance levels and amenities like pools or common elements that may require additional financial contributions from homeowners. 

Additional Considerations

Every condominium association or community has unique needs. As you work through budget numbers to determine the ongoing management fees per household, it's also important to consider additional factors, including:

• Homeowner delinquencies. While most homeowners will pay their HOA management fees on time, there will always be a few residents who pay late (or not at all). Delinquencies should be part of your budgeting and fee planning process to reduce the potential for budget shortfalls. 
• Surplus numbers. If your association has a budget overage from the prior year or additional funds from an assessment, be careful about including those numbers into an annual budget review and fee planning. Instead, apply a surplus to your reserve funds and determine routine HOA dues according to real costs. 
• Late fees. Your HOA dues and budget planning should also factor in late fees. When residents don't pay their management fees on time, associations can experience shortfalls and additional costs while tracking down late payments. 

After establishing the fee amount, it's important for HOA boards to collect fees consistently. 

Accurate Calculations and Fair Fees Are Important

When joining the HOA as a board member, you probably wanted to help your community to the best of your abilities. However, the budgeting process can be a tedious and frustrating process, even if you enjoy reviewing numbers. 

Whether you're good at analyzing numbers or not, it's important to come with accurate fee calculations. Fees set too low result in a budget shortfall, while high fees can discourage homeowners from joining your community and lead to questions about how fees are spent. 

Set the Right Management Fee With a Community Association Manager

Setting the right HOA management fee amount can be challenging! A community association manager can help your board review numbers and estimate potential costs to deliver a happy and safe community. With the right fees, homeowner association boards experience fewer conflicts with residents about paying dues on time or where the money goes. 

Trestle Community Management helps associations determine the right fee amount for their properties based on what they need to maintain good communication, accountability, transparency, safety, security, cleanliness, and an enjoyable living environment for all residents. If you are looking for more information on how we work with communities like yours, reach out to us today! 

Learn more expert insights into managing a successful homeowners association! Get a free copy of "Best Practices for HOA Operations: A Checklist."