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What Is A HOA Reserve Study And Does Your HOA Need It?

Why do you need a homeowners association reserve study? A reserve study is a budget planning tool that can prepare HOAs for large capital expenditures. With an HOA reserve study, you can ensure the long-term financial health of your community.


Importance of an HOA Reserve Study

What is a reserve study and why does your HOA need it? Here’s what you need to know.


HOA Reserve Study Definition

An HOA reserve study analyzes the major components of an association. It will look at the current condition of HOA assets and determine how much life it has left. The reserve study also estimates how much it will cost to replace an HOA asset once it reaches the end of its useful life.

For each HOA asset, the estimated replacement cost is divided by the number of years left in service. Then, the numerical quotient for each asset is added. Thus, the result of the reserve study determines how much you need in your association reserves.

The total reserve amount is equally divided among the homeowners. Depending on your HOA, the amount can be covered by annual fees or it could be collected as a separate reserves contribution.


Benefits of an HOA Reserve Study

An HOA reserve study helps associations prepare for capital improvement projects. Unlike regular maintenance projects, capital improvements have larger scales and larger costs. For example, a roof replacement can cost anywhere from $5,000 to $50,000, depending on the size. The reserve study will determine how much time is left before the roof needs to be replaced. Thus, it provides HOAs with a timeline for saving money.

Given the results of the HOA reserve study, the board can come up with an accurate annual budget — which includes HOA reserve fund requirements. If the estimated revenue is not enough to cover operating expenses and reserve contributions, the board can determine early on if there is a need to increase HOA dues or levy a special assessment.

However, the main purpose of an HOA reserve study is to ensure that these two scenarios do not happen.  With proper planning and an up-to-date reserve study, HOAs can protect the financial wellbeing of the community. The earlier you plan for capital improvements, the smaller the financial burden on homeowners.


Essential Components of a Reserve Study  

An HOA reserve study has two main components: the physical analysis and the financial analysis.


Physical Analysis

This section of the reserve study contains information about the physical condition of HOA assets. You’ll find a detailed inventory of components with the following:

  • Quantity of Components: The reserve study should have an accurate count of HOA components. Some components may require additional details such as type, exact measurements, square footage, description of materials, and so on.
  • Average Useful Life: Each component has an average useful life, or how many years it is expected to serve its exact purpose — given that the component is regularly and properly maintained.
  • Remaining Life: The reserve study will consider a component’s age, physical condition, and maintenance history to determine how many years are left until it must be replaced.
  • Estimated Cost of Replacement: A reserve specialist will draw on his/her experience, as well as a detailed survey of current market prices, to determine how much it will cost to replace each component. Estimated costs are relatively stable but it’s still important to account for your local market trends and inflation rates.
  • Maintenance Assumptions: The reserve study also makes certain assumptions based on the maintenance history of each component. Was the asset properly maintained? Improper maintenance can have an effect on replacement schedules and cost estimates.


Financial Analysis

Financial Analysis | homeowners association reserve studyThe second portion of the reserve study analyzes the current financial status of an HOA Your reserve specialist will look at income, expenses, and current reserves.

Based on these figures, the reserve study will recommend a funding plan for your reserve contributions.

There are three potential funding models: fully funded, threshold funded, and baseline funded.

  • Fully Funded: The reserve study will recommend a funding plan that will have your reserves at or near 100%.
  • Threshold Funded: With this funding plan, the goal is to have your reserve cash balance meet a certain threshold — typically at 70%.
  • Baseline Funded: The goal is to have the reserves at or above $0. This is not recommended for most HOAs. However, if your reserves are severely underfunded, this funding plan can serve as a temporary strategy that will guide the HOA to a more stable position.

Each funding plan has its own pros and cons. It will depend on financial goals and the types of components that an association has. For instance, if your major components are “life-critical,” such as elevators, fire alarms, and security systems, a fully-funded reserve is a must.

For many HOAs, threshold funding provides adequate financial security. In case a component fails ahead of time, you won’t have to raise as much money as compared to if you had minimally funded reserves.


Additional Reserve Study Guidelines

An HOA’s governing documents contain guidelines and requirements for the reserve study. There are also different reserve requirements by state. For instance, reserve studies are required in places like California, Virginia, and Utah. Most other states have legal requirements for reserves but not reserve studies while certain states have no requirements at all.  Nevertheless, here are some general HOA reserve study guidelines to consider.


How Often Should an HOA Do a Reserve Study?

Regardless if they are legally mandated by your state or not, HOAs must conduct reserve studies. A good rule of thumb would be to have a formal reserve study every 3 to 5 years.

A professional reserve study specialist will come in to assess your major assets. HOAs must also update their current reserve study every year to ensure that the annual budget and reserves are likewise up-to-date.

However, a reserve study should be conducted after a major construction project or if there was a recent natural disaster as these two scenarios could have an effect on the current condition of HOA assets, as well as the financial capabilities of the association.


How Much Does an HOA Reserve Study Cost?

There’s no specific amount for an HOA reserve study. A formal reserve study with an on-site visit may cost around $1,500 while annual updates may cost around $300 to $600.

The cost will also depend on the size of your association and the number of shared assets. The cost of a reserve study for an HOA with basic amenities (swimming pool, park, basketball court) will be much lower than an HOA with private roads and golf courses.

Even though HOAs want to keep expenses low, don’t skimp on your reserve study. A CAI-certified reserve specialist will have the experience and expertise needed to conduct a reserve study. They also have software and resources to properly calculate the useful life of each HOA asset. The more comprehensive the report, the better you can budget for your reserves.


An HOA Reserve Study Is a Must for Your Financial Security

Without knowing the importance of an HOA reserve study, board members might think that it is just an unnecessary expense. However, a reserve study is essential for the financial health of your association.

Board members will have a better picture of the HOA’s assets, which will guide them as they create the annual budget, collect assessment dues, and contribute to the reserves. A reserve study ensures that your community can handle major expenditures — without putting most of the burden on the homeowners.

 Want to get the best out of your HOA reserve study? Reach out to the Condo Manager team today! Call us at (800) 626-1267, email us at sales@condomanagerusa.com, or contact us online to learn more about our HOA financial management software.



HOA Manager And Property Manager: What Do They Do?

HOA management and property management are very similar industries — so much so that most people interchange an HOA manager and a property manager. However, these are two distinct professions with different roles and responsibilities. Though there are some overlaps, it’s important to understand the distinction between the two.


What Does an HOA Manager Do?

An HOA manager, also known as a community association manager, is responsible for managing different types of residential communities such as homeowners associations, condominium associations, townhome communities, golf and country club communities, and seniors communities.


HOA managers perform a wide range of duties and responsibilities including:

HOA managers also handle the day-to-day operations to ensure that the association runs smoothly and efficiently. An HOA manager and condominium association managers collaborate directly with the board of directors but they work for the entire community of homeowners.

When it comes to maintenance issues, though, HOA managers are only responsible for shared assets such as the HOA swimming pool, basketball court, park, and gym. Homeowners are responsible for maintaining their individual properties.


HOA Manager vs Property Manager: What’s the Difference?

A community association manager and property manager may perform very similar duties. However, one key difference is that the latter is hired by a property owner to handle rental properties such as apartment complexes, townhomes, vacation homes, and single-family homes.

The key responsibilities of a property manager include:

  • Managing the Entire Property
  • Setting and Collecting Rent
  • Managing Budgets
  • Handling Accounting and Finances
  • Screening Tenants
  • Advertising and Showing Vacant Units
  • Handling Maintenance and Tenant Requests
  • Evicting Delinquent Tenants
  • Enforcing Rules and Regulations
  • Performing Specific Tasks Assigned by the Property Owner

Though property managers frequently deal with tenants in a rental property, they are hired by property owners and answerable to them. One of their main goals is to ensure that the properties or units are rented and profitable.


Can a Property Manager Operate Within an HOA?

hoa manager vs property managerThere are some cases where a property manager is assigned to handle several homes in an association. In this case, property managers may act as a proxy for the actual property owners.

They are required to comply with HOA rules and regulations, as well as work with the HOA manager to address concerns that they may have. However, if the tenants have issues with the property they are renting, they have to consult the property manager — not the HOA manager.


Importance of Knowing the Difference Between HOA Manager and Property Manager

HOA managers and property managers have become interchangeable to the general public. This is understandable since the two professions have some overlaps. However, the issue is that even in the state legislature, we see that community association management and property management are being treated as one and the same. But why is it important to differentiate them?

HOA managers and property managers have unique responsibilities. As such, they will also require specific training or education. For example, for HOA managers to be effective, they need to be knowledgeable about the different aspects of community association management.

Certified community managers have expertise when it comes to financial controls, reserve planning, risk management, legal management, and human resource. These qualifications provide them with the necessary skills to fulfill their HOA responsibilities.

The same goes for property managers. Since property managers perform renting and leasing duties, some states require these professionals to obtain a real estate broker license as well. This includes states like Arizona, California, Florida, Georgia, Minnesota, North Carolina, and Ohio. Alaska is the only state that requires community managers to also have a real estate license.

By establishing the difference between HOA managers and property managers, individuals who want to pursue these professions have a clear understanding of the requirements and certifications they need. Likewise, homeowners and landlords will know which professional to call on to assist their community.


Do You Need an HOA Manager or a Property Manager?

With a clear understanding of what HOA managers and property managers do, it’ll be easier to decide which is better suited for you. Take time to think about the specific needs of your community. Do you need the services of an HOA manager or a property manager? Whichever professional you choose, make sure that they have the qualifications and experience to serve your community properly and efficiently.

Need help with your HOA management or property management? Condo Manager USA has the tools and resources you need! Call us at (800) 626-1267, email us at sales@condomanagerusa.com, or contact us online to learn more about our management software solutions.



10 Best HOA Accounting Software

Gone are the days of manual bookkeeping for homeowners associations nationwide. With HOA accounting software, you can automate accounting processes and generate financial reports with ease!


What Is HOA Accounting Software?

HOA accounting software helps HOA boards and managers perform day-to-day financial tasks such as payments, invoices, and wages payments. These actions automatically create accounting entries in the general ledger, which the system then uses to generate financial statements such as Balance Sheets, Income Statements, and Cash Flow Statements.

It differs from HOA management software, which is more comprehensive in its features and capabilities. HOA management software usually includes accounting and financial reporting services in addition to other features such as event management, service request automation, communication, resident portals, and the like. HOA accounting software typically does not offer these other services.

What about property management software? This type of software differs from the other two HOA software in terms of purpose. Property management software is used to aid the management of rental properties, whether they are of a residential or commercial kind. It shares some functional similarities with HOA management software, such as tenant portals, communication, work order management, and online rent payment.


What Are the Benefits of HOA Accounting Software?

hoa management softwareHere are the top advantages of getting HOA accounting software:

  • Accuracy. The error margin is much smaller than if you were using a manual system since the software only requires one accounting entry per transaction.
  • Speed. The software makes it much faster when adding data to the computer from its built-in databases and details for each property owner.
  • Faster Documents. You can easily get your invoices printed quickly and efficiently.
  • Automatic Updates. Your program will automatically update everything so that you’ll always see the most recent account balance.
  • Financial Reports. With HOA accounting software, you can generate financial statements in real-time with the click of a button. Accurate reports allow you to make smart and informed decisions for your community.
  • Savings. Although you will initially pay an amount for the software, the cost more than pays off as you cut down on time spent manually performing tasks.
  • Cross-usability. Information can be easily shared and worked on from any location and with more than one user at a time, making it easy for managers to share information with the HOA board and vice versa.
  • Legibility. Having numbers on screen makes them more easily readable than handwritten figures, which improves accuracy.


Best HOA Accounting Software


1. AppFolio

AppFolio Property Manager comes with all the accounting features you need in HOA software, including bill entry and automated accounts payable. It also integrates debt collection with online payments and even automates late fees. You also get real-time flexible reporting as well as performance insights, allowing you to make adjustments as you go.

Although AppFolio is primarily a property management software, HOAs can still benefit from this system thanks to its powerful accounting features. Pricing starts at $0.80 per unit per month, with a minimum monthly fee of $250. You can even sign up for a free customized demo.


2. FreshBooks

FreshBooks promises to make bookkeeping easy, allowing you to spend time on more important matters. This software focuses purely on HOA accounting. You can send invoices, track your expenses, and record payments. After the initial setup, you can basically step back and just let it run by itself. FreshBooks is even available as a mobile app for on-the-go use.

You can try FreshBooks for free for 60 days. After that, subscriptions start at $4.50 a month with five billable clients. If you have over 500 billable clients, you will need to contact FreshBooks for custom pricing.


3. Condo Manager

Condo Manager is specifically designed to cater to HOAs and COAs, though it also has property management capabilities. This software boasts full-service accounting — from budget planning to bank reconciliation to generating monthly reports. You can stay on top of your accounts receivables and accounts payables as well as automate invoicing and receive payments online. With Condo Manager, you can say goodbye to manual entries for good.

This HOA and condo management software does not stop with accounting, though. It is an all-in-one self-managed HOA software that also offers website services, online resident portals, communication tools, and service request management. It even has modules for CC&R violations, collections, and architectural requests. Both HOA management companies and independent communities can benefit from this self-managed condo association software.

You can contact Condo Manager online for a free demo.


4. Buildium

Buildium is a property management software that HOA communities can also use. It offers maintenance request tracking, online payments, and comprehensive accounting features. Buildium also generates financial reports, has a portal for residents and property owners, and even offers a professional website to top it all off. Some of its features, such as tenant screening and property inspections, come with additional fees, though.

It is hard to find software that comes free of charge, but Buildium comes very close. With a 15-day trial at your disposal, Buildium is definitely one of the best free HOA management software you can try. After that, pricing starts at $50 per month.


5. MoneyMinder

MoneyMinder is one of the few providers that solely focuses on HOA accounting. This particular software has been in the business for 17 years, making it a true veteran when it comes to accounting for HOAs. With MoneyMinder, you can track resident dues as well as other income, generate reports, send invoices to homeowners, receive payments online, and compare your budget with your actual expenses. You can even integrate it with your bank account, allowing for easy bank reconciliation.

Although MoneyMinder is chiefly an HOA accounting system, it also offers a few other management features. This includes document management and sharing as well as member communication.

Perhaps the best part about MoneyMinder is that it has a completely free version, though it understandably comes with limited functions. You can try the paid version for 30 days before subscribing to it for $159 a year.


6. ATG Online

ATG Online understands the difficulties self-managed communities face. With C3 (Complete Control for Communities), it aims to make financial management easy for HOAs everywhere. C3 comes with A/R and A/P management capabilities, budgeting, reporting, and delinquency processing. It also boasts association management features, such as work order management, maintenance, architectural, and covenant tracking.

Pricing available upon request.


7. ForwardPass

ForwardPass offers full-service accounting features, from accounts receivable and accounts payable right down to the general ledger. It can manage and track assessments, automate processing fees, send invoices and statements, create purchase orders, reconcile bank accounts, and generate real-time financial reports.

This HOA software is not limited to accounting, too. It comes with work order management, amenity reservations, community calendars, communication tools, and complaint processing. Pricing begins at $49 a month per user plus $49 a month per community with a minimum of $147 a month.


8. CINC Systems

CINC Systems is an all-in-one association management software that comes with robust accounting features. This software boasts modules for accounts payable, collections, homeowner billing and payments, lockbox services, and monthly reports. It also offers other features typical in HOA management software, such as communication, CCR management, and ACC management. CINC Systems even provides a customized website for easy access.

Pricing starts at $39 a month.


9. FrontSteps

FrontSteps allows you to build your own custom HOA website with features like violation tracking, dues management, and online payments. You can even make it easy for residents to file work orders and maintenance requests. On the management side, you can keep track of these requests and stay on top of your community’s financials with seamless accounting services.

You can sign up for a free trial with FrontSteps, though you need at least 750 homes/units to be eligible. After that, pricing begins at $79.95 per month.


10. QuickBooks

For most people, QuickBooks is the first thing that comes to mind when it comes to accounting software. And while there is no QuickBooks product that specifically caters to community associations, you can still use QuickBooks for HOA purposes. With this software, you can automate dues payments, wages, and bills. You can also track your income and expenses, allowing you to compare your budget with actual figures. Many HOA management systems even integrate with QuickBooks for streamlined use.

Pricing starts at $12.50 per month.


Making a Decision

hoa softwareHOA accounting software definitely makes financial management easier for many communities, self-managed or otherwise.

With so many options available, choosing one can come as a challenge. Not all software providers offer the same features, though. When looking for the best HOA software for your community, make sure to evaluate your needs, compare it with the features your prospects offer, and consider your budget.

Condo Manager offers extensive HOA management solutions to companies and communities alike. Call us today at (800) 626-1267 or contact us online for more information.



Are HOA Fees Tax Deductible?

Tax season is always a stressful time of the year. One of the questions HOA residents commonly ask is, “Are HOA fees tax deductible?” The answer, though, is not as simple.


Are HOA Fees Tax Deductible?

A homeowners association runs a community by imposing certain rules, preserving its aesthetics, and maintaining various aspects of the neighborhood. It does this with the help of HOA dues — fees that the association collects from members. These fees are used to fund the association’s maintenance and operations.

Those who live within an HOA community, though, often wonder, “Are HOA dues tax deductible?” The short answer is no. If you use the property as your primary residence, then your HOA fees are not deductible. There are certain exceptions, though, such as if you use the property as a rental property or a place of work.


Are Condo Fees Tax Deductible?

Condo fees essentially serve the same purpose as HOA fees, except condo fees are charged to unit owners by a condo owner’s association (COA). When you join a COA, you agree to abide by its covenants, one of which is to pay condo fees.

Are condo fees considered rent? No, condo fees are not the same as rent. These fees go into the maintenance and upkeep of common areas, which condo owners share joint ownership of. In a COA, the common areas belong to the owners, as opposed to an HOA, where the common areas belong to the association itself.

When it comes to taxes, a similar rule applies to condo fees as with homeowners association dues tax deduction. You cannot deduct condo fees from your taxes because the IRS deems this as a personal expense. Condo fees, just like HOA fees, cover the day-to-day maintenance expenses of a condo building, such as cleaning services and snow removal. Since personal expenses are not tax deductible, there is no reason to make condo fees deductible because they pay for virtually the same things.


Can You Write Off HOA Fees If You Work from Home?

Tax Cuts and Jobs Act | is hoa tax deductibleYes, you can write off HOA fees if you use your home as an office. This is an exception to the rule.

You can deduct certain expenses, including HOA fees, related to your home office. Though, it is important to keep in mind that even this exception has requirements.

For one thing, according to the Tax Cuts and Jobs Act, you must be self-employed to enjoy this benefit. If you are employed and just working remotely from your home, this does not apply to you.

Your home office must also serve as your primary place of business. That means it should be where you perform administrative work or meet with customers.

Additionally, it should be a designated area in your home. It can be anywhere from a corner desk to an entire room. But, it cannot be something as small as just using your laptop on your bed or sofa. You may also need to supply photographic evidence supporting your claim of a home office, especially in the event of an audit.

You can deduct expenses equivalent to the percentage of your home office. For example, if you claim to use 10 percent of your home as an office, you can write off 10 percent of your expenses. That includes your property taxes, mortgage interest, utilities, repairs, and HOA fees.


Are HOA Fees Tax Deductible for Rental Property?

Yes, you can deduct your HOA fees from your taxes if you use your home as a rental property. The IRS considers HOA fees as a rental expense, which means you can write them off from your taxes. Therefore, if you use the home exclusively as a rental property, you can deduct 100 percent of your HOA fees.

Rental property tax deductions also apply if you rent out only a portion of your house, such as a basement apartment or garage. In that case, you can deduct a portion of your HOA fees equal to the percentage of your house that you use as a rental space.

The concept persists if you use the property as a rental part-time. For example, if you reside in the property 50 percent of the time and use it as a rental for the other 50 percent, you can deduct 50 percent of expenses, including HOA fees.

What about condo fees? Is condo fees tax deductible on a rental property? Yes, if you rent out the condo unit, you can also deduct condo fees from your taxes. It works in a similar fashion as HOA fees.


What Expenses Can You Write Off on a Rental Property?

Apart from HOA or condo fees, you may deduct other expenses from your taxes if you use the property as a rental. This includes your property tax, mortgage interest, depreciation, operating expenses, and repairs.

You may write off ordinary and necessary expenses for the maintenance and management of your rental property. Ordinary expenses are common expenses, i.e. generally accepted expenses in the business. On the other hand, necessary expenses are expenses like interest, taxes, insurance, utilities, maintenance, and advertising.

Although you can deduct the cost of materials required for the maintenance and repair of your rental property, you cannot deduct expenses for improvements.


Can You Write Off Special Assessments on Taxes?

This is another common question many homeowners ask. Are assessments tax deductible? Homeowners associations typically charge special assessments to cover unexpected expenses. As a rule of thumb, you cannot write off special assessments on taxes. If you rent out the property, you might be able to deduct it if the assessment is used for maintenance and repairs. But, if it is used for improvements, it is not tax-deductible.


How Do I Deduct HOA Fees?

Schedule E Form 1040 | are hoa dues tax deductibleAssuming you qualify for the deduction, you must report the HOA fees on your Schedule E (form 1040). This is the form you use to report your income or loss from different classes, such as partnerships, royalties, estates, S corporations, and trusts.

It also applies to rental real estate. You should do this when you submit your HOA tax return.

According to the IRS, you can deduct up to $25,000 if you are actively engaged in managing your rental property. Should you suffer a loss for the year, though, you can carry over the excess to the following year. For example, if you recorded a loss of $35,000, you can deduct $25,000 the current year and deduct the remaining $10,000 the next year.


Is HOA Tax Deductible? Answered!

Are HOA fees tax deductible? It depends. Generally, you cannot deduct HOA fees from your taxes, though this comes with a few exceptions, as discussed above. It is always best to seek help from a tax professional when preparing your taxes, though. This way, you can avoid issues with the IRS.

Self-managed communities and HOA management companies can benefit from the HOA management solutions Condo Manager provides, including accounting and financial management. Our software makes it easy to stay on top of your financials, which, in turn, makes tax season a breeze. Call us today at (800) 626-1267 or contact us online for a free demo.




How To Choose The Right HOA Management Software For Your Association

HOA management software can help companies and self-managed communities alike. But, choosing the right one for your community can come as a challenge without proper preparation.


The Do’s and Don’ts of Picking HOA Management Software

Anyone who has ever managed a community association knows how important it is to have the right software to help perform day-to-day tasks. But, HOA management software comes in many different kinds, and there are many different vendors who supply it. With so many options, it can be difficult to know exactly which one best suits your association.

As a guide, here are the do’s and don’ts of choosing an HOA or condo management software:


Do: Consider Your Needs

Before you decide which one you want, you need to reflect on your association and its needs. Take a hard look at your business processes and how each one affects the other. Evaluate which aspects of HOA management you often encounter problems in.

Perhaps your HOA finds it difficult to disseminate information in a timely manner. In that case, you need HOA software that offers communication tools. You might even benefit from a system that comes with an HOA website. If your HOA needs help tracking and managing service requests, then find a management program that comes with a work order module.

It is a good idea to sit down with your fellow board members and assess what you think the association lacks. Consider which features are non-negotiable and which ones you can do without. This will help you narrow down your choices.


Do: Research

types of homeowners association management app | hoa softwareResearch is of paramount importance when it comes to any type of decision. You must do your due diligence and look at a number of possible options before choosing a provider.

Now that you have a list of features you want, you can cross-reference it with the ones software providers offer.

Your research should not stop there, though. It is also worth finding out what other users and clients have to say about the HOA software. Testimonials and reviews often give you a better look at what you can expect from a provider. Consider both positive and negative comments. If you cannot find reviews online, reach out to the software provider to ask for references.


Don’t: Skip Out on Accounting

Accounting is one of the most challenging parts of HOA management, so it is no wonder many HOAs deem this as a must-have feature. Financial management is not exactly the easiest aspect of running a community, and self-managed HOA software can help lighten the load.

Make sure to look for specific accounting features, such as real-time budget management, A/R and A/P modules, invoicing and billing, and even online dues payments. Having bank reconciliation, general ledger, and financial reporting capabilities is also a plus. Though setting up your chart of accounts and master lists will take some work at first, a comprehensive accounting feature will significantly ease the burden on your HOA board.


Do: Consider Mobile Applications

With the world rapidly embracing the transition to mobile, it almost seems foolish to go with HOA management software that refuses to get with the times. Whether it is in the form of a mobile app or a mobile-friendly website, you should look for a provider that places weight on mobile practices.

Mobile-friendly software will benefit both your HOA board and community members alike. Residents can access their accounts through a mobile online portal and pay their dues straight from their phone. Similarly, board members can retrieve documents, review and approve requests, and send notices while on-the-go.


Don’t: Be Afraid to Contact the Developer

There is only so much you can find out about community association management software through its website. If a provider leaves you wanting more information, you can always reach out to them directly. Most software providers post a number you can call or an online form you can fill out.

Make sure to ask vital questions — questions that product pages usually skip over. This includes questions such as:

  • How will their software make your operations smoother?
  • How long have they been providing HOA management solutions to communities?
  • Can they customize the software based on your specific needs?
  • Do they offer updates or software upgrades for free?

HOA management is a special brand of management, and it takes a developer with sufficient knowledge of the industry to provide you with expert solutions.


Do: Ask About Support

customer support | community association management software

The best-case scenario is that your HOA software will run continuously and smoothly without any hitches or problems. Unfortunately, software, no matter the type, usually comes with some bugs and errors.

You may even experience downtime or get locked out for some reason. If and when this happens, you need to be able to rely on your provider to fix the issue.

Therefore, it is imperative to learn how your prospective software provider handles customer support. Can you reach them 24/7? What communication avenues can you reach them through? How quickly will they respond to your concerns? How do they deal with various software problems?

It is also worth asking about the entire installation process. Who will set up the software? Do they offer data migration assistance? Clearing this up right from the get-go will eliminate any misapprehensions.


Don’t: Forget Security

It is impossible to discuss data management without mentioning security. Homeowners associations deal with all kinds of information, and a lot of them are personal or financial in nature. Therefore, it only makes sense to have concerns about security and privacy.

First of all, you should ask about data storage. Where does the provider keep your data? Do they have their own servers or will they store it in a cloud? Do you need your own on-site server?

You should also learn about the different ways they ensure security. How do they make sure your data stays safe and secure? Do they use SSL encryption?

Dealing with data also raises the possibility of corruption due to viruses or breaches in security. If one or the other occurs, what steps will they take to handle the situation? Do they back up your data? If so, how often?


Do: Take Advantage of Free Demos

Although you can get a somewhat fragmented understanding of how their product works, it is infinitely better to experience it firsthand. Many software providers offer free demos of their products for a limited amount of time.

Through demos, you can get a feel of what the software has to offer and how each module relates to the others. You can pinpoint gaps in processes and maybe even discover some features you previously failed to consider.


Making a Choice

Choosing HOA management software is a big decision for any size association. Before diving head-first into a decision that could very well waste your time and money, consider all your options, do your research, and find out everything you can about each prospect. In doing so, you can make the most out of your investment and use the software without any regrets.

If you need full-service HOA software with all the necessary features at an affordable price, Condo Manager is the one to beat. Give us a call today at (800) 626-1267 to learn more about our product. You can also get a Condo Manager HOA management software free demo by contacting us online.




How To Plan For The Yearly HOA Budget?

HOA budget planning is an integral part of running a homeowners association. Whether you are new to the HOA board or simply a concerned member of the community, it is essential to familiarize yourself with the planning process.


Why Is an HOA Budget Necessary?

What is an HOA budget anyway? And why is it so important? Simply put, an HOA budget is a projection of expenses required to keep a homeowners association in operation. Without it, an association cannot calculate HOA dues and quickly fall into ruin.

Additionally, a budget can help the board make smarter decisions. For instance, if there is a project coming up, the board can turn to the budget to see how much it can allocate to the project. Having a budget in place also helps maintain transparency within the association. Because the board is required to present the budget to members, it acts as a way to hold board members accountable for their spending.


Annual HOA Budget Guidelines to Follow

Before the start of every fiscal year, the HOA board sits down to discuss and create the annual budget. Here are the considerations you must keep in mind during your HOA budget meeting:


1. Analyze Past Budgets and Financial Statements

A good way to make a plan for the future is to look to the past. Your board should dig up the association’s past financial statements to gain a better understanding of the HOA’s needs as well as your current standing. Using past budgets and financial reports as a guide can help you start on the right foot.

You don’t need to go all the way back and review a decade’s worth of financial statements. The past three years’ budget and financial reports should work just fine. Check each line item and keep an eye out for any trends. Perhaps your association consistently spent more on landscaping than it budgeted for. In that case, you can either increase the budget for landscaping this year or find ways to cut back on this expense.


2. Specify Expenses by Item

Your HOA budget is a blueprint of your projected financial expenses, so it only makes sense to be as specific as possible. Don’t just say you need $1,000 for maintenance. There are so many things that could possibly fall under maintenance expenses, such as plumbing maintenance, electrical maintenance, and the like. Break down each item as much as possible so that you know where money has to go.


3. Plan for Possible Increases

One of the HOA budget best practices you can adopt is to plan for expenses that constantly fluctuate. This typically relates to insurance and utilities. Although you can get a good idea of how much you can expect to spend on these items, they can increase unexpectedly and make you suffer a deficit.

A number of factors can influence utility charges. For instance, a drought can drive up the cost of water. When it comes to insurance, premiums and rates often shift every year, and you may very well end up paying more than you expected. To plan for this, look at historical data and calculate how much insurance rates have increased from year to year. Then, apply the same increase to arrive at your budgeted insurance cost.


4. Allow for Contingencies

contingency fund | homeowners association budgetAlthough proper insurance coverage is paramount to any association, not all expenses can be covered by your policy. HOA boards that encounter unanticipated costs usually either levy a special assessment (which homeowners dislike) or dip into the reserve fund.

Taking from the reserves might result in having to increase dues for the next year, though, since you need to make up for what you spent. To avoid these unpleasant scenarios, it is best to always budget for contingencies.


5. Evaluate Your Reserves

Homeowners associations use money from the operating fund to pay for day-to-day expenses such as maintenance costs, wages, and event management fees. HOAs keep a separate fund, known as a reserve fund, for major repairs and replacements that are usually set aside for the long-term. Common examples include roof replacements, retiling, equipment installations, and the like.

To continuously have money in the reserves, your HOA board must also include it in the budget. The amount varies from association to association. Generally, though, about 25 to 40 percent of HOA dues go into the reserve fund.

It is good practice to conduct a reserve study every few years. This way, you can stay on top of all your major assets and keep your reserves well-funded. Some states have specific requirements concerning reserve studies. For instance, in Virginia, the law mandates that associations must perform a reserve study at least once every five years.

To learn whether your state has reserve study requirements, check here.


What Does the Law Say?

As with reserve studies, there are some laws on HOA budgets, though they can change depending on where you’re located. In California, for instance, Civil Code Section 5300 dictates that associations must distribute an annual budget report to all members 30 to 90 days prior to the end of the fiscal year. The same section even breaks down what the annual budget report must include at a minimum, including a pro forma operating budget and a summary of the HOA’s reserves.

There are also some state laws on dues increases, which your budget will directly affect. If your budget increases significantly from the previous year, then so will the amount you charge in dues. California Civil Code Section 5605, though, might restrict your budget and dues increase. The section states that an HOA board must obtain approval from members if it plans to raise dues by more than 20 percent of the previous fiscal year’s dues.


Additional Tips for HOA Budget Creation

These additional tips, while not compulsory, can help you draft a better HOA budget:

  • Put Together a Committee. Sometimes, board members need extra hands when putting together a budget. Consider assembling a budget committee to help you analyze past reports and make projections.
  • Schedule a Meeting for Budget Planning. It is imperative to approach budget planning with a clear head, so it is wise to dedicate an entire meeting to the task.
  • Call Vendors for Estimates. Even the cost of vendor services can fluctuate. As preparation, contact your vendors to verify whether they will impose price increases. You might also want to ask for special promos or discounts, especially if you have a long-standing relationship with the vendor.


Homeowners Association Budget Sample

Coming up with a budget from scratch can be difficult without a proper example of an HOA annual budget. To help you out, use the one below as your HOA or condo association budget template:

HOA Budget Template

Download Your HOA Budget Template Here


Digitize Your Budget

The HOA budget functions as a roadmap of sorts for your association’s expenses for the coming year. It helps determine how much homeowners should pay in dues and keeps the HOA board on track financially.

Having trouble preparing your annual budget? Condo Manager can help. Our state-of-the-art HOA management software makes budget planning easy. Just input the amounts and let our program do the calculations. Contact us today at (800) 626-1267 to learn more or fill out our online form to schedule a free demo.



What Are HOA Reserve Funds? And What Is It For?

It is important for any homeowners association to have HOA reserve funds and to understand the purpose of this separate account. In doing so, an HOA can avoid financial ruin and minimize the need for special assessments.


What Are HOA Reserve Funds?

Reserve funds, also known as reserve accounts or HOA cash reserves, are money a homeowners association sets aside to cover the future cost of major repairs and replacements related to common areas. It differs from an HOA’s operating fund, which is primarily used to pay for recurring expenses such as accounting fees, insurance premiums, legal fees, day-to-day maintenance, and the like.

A good analogy for operating funds and reserve funds is that the former is like a checking account and the latter is like a savings account. You use your checking account to pay for everyday expenses, such as groceries, utility bills, and rent. In contrast, you rarely tap into your savings account because it is money you have set aside for unexpected or major costs.

What is a reserve expense? A reserve expense is something you use reserve funds to pay for. This typically refers to the cost of repairing or replacing existing components. Replacing the roof of the community clubhouse and repaving roads are examples of reserve expenses.


What Can HOA Reserve Funds Be Used For?

hoa cash reservesBy design, reserve funds are supposed to cover unexpected expenses. These expenses are usually substantial in kind.

The association dedicates a portion of the monthly homeowner dues to the reserves every year. This way, when a major expense comes up, the association does not need to take from the operating fund, levy special assessments against homeowners, or take out an HOA loan. Instead, it simply needs to tap into the HOA reserves account.

It is worth mentioning that not all reserve expenses are unanticipated. Some of these expenses are just deferred or do not come up often.

For instance, it would be downright silly to have the pool retiled every year. You might need 10 to 20 years between each retiling, so that kind of major expense would need to use the association reserves. The board will simply need to set aside money every year so that when the time does come to have the pool retiled, you can pay for the cost without worrying about sourcing the funds.


How Do You Account for Reserve Funds?

How much should HOA reserves be? This is a common question that often comes to mind when discussing reserve funds. Unfortunately, when it comes to HOA reserve fund accounting, there is no single correct answer. The exact dollar amount you should have in your reserve fund depends on a number of factors, such as the size of your HOA and what type of common elements you have.

In general, to qualify as a fully-funded reserve, you should have an amount that can cover all of the expenses you can reasonably predict. Typically, your association’s governing documents will have provisions concerning the adequacy of your reserves. Other times, the board sets the HOA reserve funding percent requirement. A good HOA reserves rule of thumb, though, is to have your reserves at least 70 percent funded at any given time.

How much money can an HOA have in reserve? While there is no limit per se, all associations eventually need to use reserve funding to cover major expenditures. Therefore, it is nearly impossible to accumulate so much money in the reserves without tapping into them.


HOA Reserve Fund Laws

Depending on where your association is located, there may be certain laws concerning reserve funds that apply to you. It is vital to check your state laws to ensure you remain compliant. Failure to abide by these laws can result in legal trouble for your HOA.


Funding Requirements

Although it is the board’s responsibility to determine how much money to have in the reserves, the law may also have a say in the issue. A few states have specific requirements when it comes to reserve funding. For instance, Ohio law mandates that associations must allocate at least 10 percent of the budget to the reserves, though members can waive this through a majority vote. Other states simply have statutory guidelines, leaving the details to the association board.

How much should condo reserves be? Condo laws concerning reserve requirements tend to be more specific, such as in the case of Florida. According to Florida law, associations must budget for building painting, roof replacement, pavement resurfacing, and any other expenditure that exceeds $10,000. The board must calculate the cost of each item based on estimates for its remaining useful life and cost.


HOA Reserve Study Requirements

A homeowner association reserve study evaluates the HOA’s major components to roughly calculate the cost of repairing or replacing them when they eventually reach the end of their estimated useful life. Reserve studies help HOAs determine the right reserve level, but hiring a company to conduct such a study does cost money.

How often should an HOA do a reserve study? Some states have specific laws requiring reserve studies and even dictating how frequently an association should have it done. Virginia law, for instance, mandates that HOAs must conduct reserve studies at least once every five years.

You can find reserve study requirements by state here.


Reserve Report Requirements

An HOA board must always remain transparent with its membership, especially when it comes to money. Members need to know where their contributions are going. While it is part of the board’s duty to disclose financial reports, there are states that go so far as to mandate it.

Homeowners associations in California, for one, need to create and distribute a detailed reserve report to all of its owners. According to California law, the board must use the most recent reserve study to produce this report. This report should consist of the estimated remaining life of every major component as well as its estimated useful life and estimated replacement cost. It should also include an estimated reserve amount required to maintain, repair, or replace the components.


Is It Possible to Invest Your HOA Reserves?

hoa reserves accountIn a word, yes. You can invest your reserves, and many HOA boards do this as a way to earn more income for the association. But, you must exercise caution.

Remember that your duty as a board member is to maintain the community — and that includes its assets. Every decision you make should be within the association’s best interests.

Therefore, you must choose your HOA’s investments wisely. Go for an investment that offers growth but will not put the principal amount in jeopardy. It is generally ideal to stay away from riskier investments. Though these offer more growth, there is also a higher chance of loss. In choosing this route, you might incite anger from the community and even invite potential lawsuits.

When using your reserve fund to invest, it is always best to follow the provisions outlined in your governing documents. Not all associations have an investment philosophy written in their CC&Rs, though. In that case, turn to an accountant, an attorney, or an HOA management company for advice.


An HOA Board’s Duty

Just as you would save money for life’s major undertakings, your association should save money for large expenditures down the road. Healthy associations have well-financed HOA reserve funds. It is up to your board to make sure you meet the optimal level of funding for your reserves.

Reserve accounts have a distinct purpose, so you must not use them to cover operating expenses. Easily keep your reserve fund separate from your operating fund with the help of Condo Manager. Call us today at (800) 626-1267 or contact us online to schedule a free demo of our software.



Should You Be Aware Of An HOA Super Lien?

Many homeowners know that homeowners associations can place a lien on your property. But, did you also know that some associations, depending on the state, can place an HOA super lien instead?


What Is an HOA Super Lien?

Simply put, an HOA super lien is a type of lien that takes a higher priority than all other lien types. A lien automatically attaches to a property when the owner has failed to pay the monthly fees or assessments to their homeowners association. A super lien takes a much higher priority and operates similarly to a property tax lien.

To better comprehend the nature of super liens and how they work, though, you must first understand lien priority.


Breaking Down the Priority of Liens

When you buy a house, you take out the first mortgage. This mortgage, recorded first, serves as the first lien on your property. Sometimes, you may need to take out a second mortgage on your home. This mortgage is then recorded second, turning into the second lien. Whether or not a lien is first or second depends on the date the lien was recorded. As such, priority follows the recording date.

The priority of a lien decides which lien holders receive payment first following a foreclosure sale. Most of the time, the first mortgage holder gets all of the sale’s proceeds, leaving little to nothing for second or third lien holders, also known as junior lien holders.

In the context of a homeowners association, liens can be used as a form of covenant enforcement. Homeowners who default on their monthly dues or special assessments will see an HOA lien automatically placed on their property. The lien’s recording date typically follows the date the association’s CC&Rs were recorded or the fees’ due date. The HOA can then later foreclose on this lien.

Unfortunately, HOA liens usually take a lower priority than first and second mortgages, even if the mortgage was recorded after the HOA lien. Many associations have such stipulations written in their governing documents. Some states also deem mortgage liens as superior to HOA liens.

A super lien, though, overrides all of that. In states that allow them, super-priority liens take a higher ranking over all other liens. That includes first and second mortgage holders. Super liens apply to the part of an HOA lien that holds superiority over other lien holders. In such a case, the association’s interest takes priority.


The Case for HOA Super Liens

Some say an HOA super lien is unnecessary and harsh for homeowners. But, in reality, they help protect the value and desirability of a community. When homeowners fail to pay dues, the community can suffer maintenance issues and start to decline.

Super liens make sure homeowners associations receive the right amount of dues to maintain their neighborhood. Any late notice or insufficient funds are important and need to be paid. This helps keep the community’s worth high and acceptable for all other homeowners in the association.


When Does an HOA Lien Become an HOA Super Lien?

Whether or not your association can attach super liens depends on your location. In addition to the District of Columbia, there are currently a total of 21 states in the country that can give HOA liens the status of a super lien. HOA super lien states are as follows:

  • Alabama
  • Alaska
  • Colorado
  • Connecticut
  • Delaware
  • Florida
  • Hawaii
  • Illinois
  • Maryland
  • Massachusetts
  • Minnesota
  • Missouri
  • Nevada
  • New Hampshire
  • New Jersey
  • Oregon
  • Pennsylvania
  • Rhode Island
  • Vermont
  • Washington
  • West Virginia

These states have differing laws, though, when it comes to how an HOA lien becomes a super lien. In some states, a regular lien can attain super lien status after a fixed number of months of delinquent dues and assessments. For instance, in Colorado, it is six months, while in Nevada, it is nine months. You can learn more about super lien states and their individual laws regarding super liens here.


Foreclosing on HOA Super Liens

property foreclosure | hoa lienWhen a property has a super lien, an association can initiate HOA lien foreclosure. Once the lien enters into foreclosure brought on by the HOA, it could remove the first mortgage.

Because of this, most lenders will usually settle the super lien to put a stop to the foreclosure and, thus, retain their place as the first lien holder.

Lenders will not just let the super lien amount go, though. Typically, they will add the amount to the homeowner’s (i.e. borrower) total mortgage debt. They will ask the borrower to reimburse them for the amount paid. If the borrower refuses or fails to do so, the lender may then initiate foreclosure.


What If the First Mortgage Holder Forecloses?

In some cases, the lender or first mortgage holder will foreclose on a property if the owner or borrower stops delivering mortgage payments. When that happens, what will become of the homeowners association lien?


For Regular HOA Liens

As mentioned above, first mortgage liens generally take priority over HOA liens. Therefore, when a mortgage holder forecloses on the property with an HOA lien attached, the HOA will not get anything.

It is important to check your own CC&Rs and state laws regulating the priority and nature of liens in your homeowners association. This way, you have a clear understanding of how your liens work and can set the proper expectations. When in doubt, it is always a good idea to consult with a foreclosure attorney with experience handling HOA cases.


For HOA Super Liens

As you may know by now, HOA super liens have more pull. Therefore, if the first mortgage holder forecloses in a state that allows HOA super liens, the association gets paid first. The amount the HOA receives depends on state laws, but it is usually a specific number of months’ worth of delinquent dues or assessments.


Moral of the Story

Homeowners have an obligation to pay their dues on time and in full. Liens and foreclosures are only two of the possible consequences you might face when you default on your payments. To avoid suffering these repercussions, it is best to stay up-to-date on all your dues payments and leave no room for error.

Collecting and paying dues and assessments can become a headache when done manually. Allow for easy dues collection and payment online with the help of Condo Manager’s software. Call us today at (800) 626-1267 or reach out to us online for a free demo.




HOA Candidate Nomination: What’s The Process?

Behind every homeowners association is a set of board members, collectively known as the HOA board, running it. These board members are elected into position by the association’s members. With every board election, though, comes HOA candidate nomination.


Determining the HOA Candidate Nomination Procedure

It is important to know that every homeowners association may have different guidelines when it comes to the nomination process. State laws and an association’s governing documents usually dictate how candidate nominations should go. Thus, it is best to refer to your HOA bylaws to learn the exact details of your association’s election rules.

Typically, the nomination procedure will lay down how members can nominate candidates, what qualifications are needed in a candidate, and the general steps that the association must follow. The HOA board will normally start with a call for candidates. This is to invite members to send in their nominations through an HOA board nomination form. The board will also need to send a general notice to all members containing the nomination procedure as well as the deadline for nomination submissions.

Some associations might require candidates to write a letter of intent to run for the HOA board, while others may not. This letter simply confirms a candidate’s interest in running for the position. In most cases, candidates will also need to submit an HOA board of directors candidate statement. This statement consists of the HOA board candidate bio and how the candidate believes they can contribute to the community.

If you need board candidate statement examples, here is one:

HOA Candidate Nomination_HOA Board Candidate Statement

Download Your Sample HOA Board Candidate Statement Here


Candidate Qualifications

Who is qualified to run for the HOA board? It depends on the association. Your HOA bylaws should have explicit qualifications for candidacy. Generally, though, for candidates to qualify, they must first be a member of the association. This means the candidate must own a separate interest within the HOA at the time they are nominated. This is a mandatory qualification.

Another common qualification is that the candidate must be current on all payments, including dues, assessments, and applicable fines. If an association places such a qualification on a nominee, though, it should also expect as much from current board members. That means no existing board members should be behind on payments.

Some states, such as California, go into further detail about what kind of qualifications are allowed. For instance, a nominee may be behind on payments but has enrolled in a payment plan with the association. In this case, the board may not disqualify the candidate from running.

Apart from qualifications, associations may also have grounds to disqualify candidates. California law, for instance, allows associations to disqualify a member from running if, when elected, that member would be serving with another board member who owns the same separate interest. The same law allows disqualifications if the candidate has only been a member for less than one year or if the candidate has a past criminal conviction. You may also disqualify a member if they miss the deadline for nomination submissions.

If your association intends to disqualify a member for whatever reason, though, you must allow the member to engage in an Internal Dispute Resolution with the HOA. Associations may not disqualify members without conducting this first.


Methods for HOA Nomination of Candidates

Floor Nomination | hoa board nomination formThere are a handful of ways members can nominate candidates for the HOA board election, namely self-nomination, floor nomination, and write-in candidates.

Again, the specific methods for HOA candidate nomination should be written in your governing documents. This includes whether or not your association allows certain nomination procedures, such as write-ins and floor nominations.



Many associations allow members to nominate themselves to run for a position on the board. Although an HOA may disqualify a member from running with justifiable cause, it may not take away a member’s right to self-nominate.

If you intend to nominate yourself, you must answer the board’s call for candidates. Usually, this means submitting an application form or a letter of interest to the board prior to the deadline. Your HOA may have a specific format for such a form or letter, so it is best to check with your board first. Some boards will include a copy of the application form or letter with the general notice, while others have it up on their HOA website for easy access.

Here is a sample letter of interest for an HOA board position:

HOA Candidate Nomination_Sample Letter of Interest for HOA Board Position

Download Your Sample Letter of Interest for HOA Board Position Here


Floor Nomination

Floor nominations are typically not required of homeowners associations unless its governing documents say so. The procedure for floor nominations is simple. After the association meets a quorum, the board president will open the floor for HOA candidate nominations.

Members may then nominate individuals who meet the candidate qualifications. The validity of the nomination persists even if the board president fails to recognize it. Additionally, members need not second the nomination.

During floor nominations, members can nominate other members or even themselves, though there is a limit on how many nominations each member can make. Moreover, the nominated members also do not need to be present at the meeting. It is worth noting that those who have already sent their ballots through the mail may not vote for floor nominees.


Write-In Candidates

If your association’s governing documents permit write-in candidates, then you must allow members to do so. But, if your governing documents say no such thing, then you can eliminate write-ins altogether. In that case, if members do write candidates in on their ballots, the association or election inspector can disregard the write-in votes. Any other votes that were not written in remain valid.

You may wonder about the verification process for write-in candidates. If your association permits write-ins, then you must consider these write-ins even if no previous nomination took place. Should the write-in candidate accumulate the votes necessary to secure a position on the board, you must then contact the candidate and confirm if they want to accept the nomination.

It is essential to make it clear in your governing documents whether or not to allow write-ins (and even floor nominations). Consider amending your governing documents if ambiguity remains.


Closing Nominations

Either your association’s governing documents or your HOA board will set a deadline for nominations. In the case of floor nominations, the HOA board may close nominations for the duration of ballot preparation and mailing. Once the annual meeting takes place, the board can then reopen floor nominations.


The Final Review

Write-In Candidates | hoa board of directorPrior to distributing the ballots, the association must finalize its list of candidates and disseminate it to the candidates. The timing can vary depending on the location or the HOA’s governing documents.

For instance, in California, the association must make this list available at least 30 days before distributing the ballots.

The association must allow its candidates to review this HOA candidate information sheet. For any errors spotted, the inspector of elections must make the necessary changes to correct the inaccurate information. The inspector must make this correction within two business days of any reported errors.


Make Election Season a Breeze

It is imperative for every association to know and practice its HOA candidate nomination procedure properly. This will ensure a smooth nomination and election process, thus, avoiding wasting time and money. Always check your governing documents and state laws for any provisions relating to candidate nominations. When in doubt, consult with an HOA attorney.

Condo Manager can make the election season easier for homeowners associations everywhere. Our software can track homeowner information, print customized ballots, and send notices with the click of a button. Contact us today at (800) 626-1267 to learn more or fill out an online form for a free demo.




What’s The Difference Between HOA Assessments And HOA Fees?

What is an assessment fee? Contrary to popular belief, HOA assessments are not exactly the same as HOA dues. It is essential to learn the difference between the two, especially if you are considering moving into an HOA community.


Separating HOA Assessments from HOA Fees

Before moving into any community governed by a homeowners association, it is imperative to evaluate any related fees that you might need to shoulder. No two associations are the same, so one HOA might charge a higher fee than another.

What is the difference between dues and assessments? To understand the distinction between these two terms, you must first understand how a homeowners association works. Homeowners associations exist to maintain the community, hence, keeping property values high. To carry out this type of work, HOAs naturally need to source their funds from somewhere. Enter you, the homeowner.


What Are HOA Fees?

hoa fee | hoa special assessmentsHOA dues, which are sometimes referred to as HOA fees, are recurring fees homeowners pay to the homeowners association. The association uses these fees to cover the cost of maintenance and repairs required to keep the community’s common areas in good shape.

This includes landscaping expenses, insurance premiums, legal fees, utilities, and the like. Additionally, homeowners receive access to community amenities, such as clubhouses, pools, and tennis courts, in return.


What Are Special Assessments?

What is a special assessment? An HOA special assessment, also known as simply assessments, is a one-time fee imposed by a homeowners association to its members. Typically, HOAs only charge special assessments when unanticipated expenses arise.

For example, if a disaster occurs that affects the community, the HOA would usually turn to its insurance provider. But, if the HOA’s insurance is not enough to cover the cost of the associated expenses, it might need to levy special assessments. Another instance where an association may need to charge homeowner assessments is if the HOA board made inaccurate budget projections.

It is worth noting that homeowners associations should have a reserve fund with sufficient money to cover unexpected costs as well as major repairs and replacements. This is why it is important to perform a reserve study every few years to keep a healthy reserve level. Special assessments are usually the last resort for HOAs.


Calculating HOA Assessments vs HOA Dues

How are HOA dues calculated? The association calculates how much homeowners should pay based on the annual budget. Typically, the HOA board drafts a budget for the upcoming fiscal year consisting of projected expenses.

From this total amount, the board will divide it either equally or according to certain terms across all homeowners. You can find specific provisions for calculating HOA dues within the association’s governing documents. State laws may also play a role in determining your HOA dues.

How are HOA assessments determined? Most of the time, the amount the association needs to cover the cost of the unanticipated expenses will dictate how much it levies against homeowners.

For example, if the HOA requires $10,000 to pay for uninsured damages, it will split that amount among all the members of the association. The formula used to split the charge, though, will depend on the association’s HOA special assessment rules. To learn how your association divides up assessments, refer to your governing documents.


Assessments and Dues: Are There Limits?

Many factors can influence the cost of HOA dues. For instance, if you live in an affluent neighborhood, your HOA dues are likely higher than the average association. The nature and extent of an association’s amenities and common areas can also affect dues amounts because there are more expenses involved.

Can an HOA raise the fees? Yes, though there is usually a limit as to how high an HOA can increase its dues. You will normally find such stipulations within the HOA’s governing documents or state laws. Associations in Arizona, for instance, cannot raise dues by more than 20 percent without securing a majority vote from members.

Many CC&Rs also have regulations limiting the amount of the special assessment HOAs can charge. Some associations have a fixed amount, while others work on a percentage basis. It is necessary for homeowners and board members alike to familiarize themselves with the HOA’s governing documents. This way, you know what to expect and when an HOA board is in breach of its authority.

There are also some states that have laws that impose an HOA special assessment limit. In California, Civil Code Section 5605 mandates that associations cannot charge assessments that exceed 5 percent of the preceding year’s budgeted gross expenses without obtaining approval from members. Check your state laws to see if any regulations apply to your HOA assessments.


Can HOA Special Assessments Be Written Off?

Are special assessments tax deductible? In a word, no. You usually cannot deduct special assessments from your taxes. But, if you use the home as a rental property, you may be able to write it off. It is always best to check with your tax adviser first, though, to avoid any problems with your taxes.


Can I Get Out of Paying HOA Assessments?

hoa dues | hoa special assessmentMany homeowners wonder how to fight a special assessment or their monthly dues. Unfortunately, there is generally no way around these.

Homeowners agree to follow the covenants and rules within their association, including paying fees and assessments. So long as the HOA is exercising its power to levy assessments correctly, then you really have no choice but to pay it. Keep in mind that board members are not exempt from paying HOA assessments.

There will always be delinquent homeowners, though, in any given HOA. In case you fail to pay your dues and assessments, the association can force compensation through a number of means.

  • Impose a Late Fee. Can an HOA assess fines? Yes, many associations do have the ability to charge penalties or fines if a homeowner has violated a covenant or rule. This includes defaulting on dues and assessments.
  • Revoke Privileges. In some cases, an HOA may suspend your rights and privileges as a consequence of nonpayment. This can include anything from your right to vote on association matters to suspending access to community amenities.
  • Take Legal Action. An HOA can file a lawsuit against delinquent homeowners to force payment.
  • Attach a Lien. When you fail to pay your dues and assessments, a lien will automatically attach to your property. If you live in a super-lien state, the HOA’s lien has superiority over all other lien holders.
  • Foreclose. An association has initiate foreclosure on a lien, causing you to lose your home.


The Importance of HOA Assessments

As a homeowner, you might feel that HOA assessments are unnecessary when there are already monthly dues to cover the association’s expenses. But, as in life, many things can go wrong in an HOA community. The board can make budgeting mistakes or unexpected costs might arise. And special assessments allow HOAs to source funds when the going gets tough.

Stay on top of your association’s dues and assessments with the help of Condo Manager’s state-of-the-art management software. We make dues and assessment payments a breeze for any size HOA. Give us a call at (800) 626-1267 or reach out to us online for a free demo.