HOA fees are a certainty when you live in a governed community. Every member has to pay them. But the way that boards and managers collect fees doesn’t have to stay the same. Automation makes the collection process easier, and often reduces the number of late payments too.
What are HOA fees
HOA fees (otherwise known as dues or regular assessments) are precalculated payments that each member must make. The money is used for a variety of services and costs, including:
- Trash removal
- Snow removal
- Security systems and gates
- Staff payroll
- Management services
- Water, plumbing and sewage systems
- Landscaping and lawn care
- A/C and heating systems
- Pest control
- Roof repairs
- Elevator maintenance
- Pipe replacements
- Maintenance of gym equipment, swimming pool, and clubhouse
Some of the money also goes to the reserve fund. A reserve fund is maintained to cover significant unexpected repairs. HOAs that have an adequately funded reserve fund don’t have to ask owners for large amounts of money if the clubhouse or pipes suddenly need to be repaired.
The association needs every member to cover their fair share so that it can maintain the value and appeal of the property. The only way to avoid paying HOA fees is to buy a home that is not part of a HOA-managed community.
How are fees determined?
HOA fees can vary widely depending on the location of the association, and how luxurious the community is. A monthly HOA fee could be less than $100 or more than $1,000. Typically, owners pay between $200-$400 each month.
It is ultimately up to the board to set annual HOA fees, but a property manager can help with budgeting. The board will calculate the total operating expenses for the upcoming calendar year, as well as factor in reserve fund contributions. Once the board has a total cost, it is divided equally among all owners – that includes the board members.
Fees will likely increase each year due to an increase in costs for services. But, HOAs generally have rules about how much fees can increase each calendar year. For example, an HOA’s CC&Rs might limit increases in annual dues to 5%. Limits must be reasonable, but not so small that the association has trouble keeping up with inflation. A shortage of funds can mean that the development won’t be properly cared for, or a special assessment will be charged to owners.
Some states have laws about HOA fee increases. Arizona is one such state. An HOA cannot increase dues by more than 20% per year without a vote from the members.
How often do fees need to be collected?
Fees are usually collected monthly because it’s easier for owners to pay a few hundred dollars each month than $3,600 all at once. But they may be collected quarterly depending on the association.
HOA fee automation for management
HOAs have traditionally collected cash or checks (via mail) or physically from each owner. Not only is this time consuming, but it costs money to process checks. It’s not really convenient for anyone, and management still has to manually document the payments.
Conversely, online payments are very convenient, and they can help save HOA managers hours each month.
Online payment systems
It is possible to automate HOA fees with online payments – but keep in mind that no owner can be forced to sign up for preauthorized payments. Similarly, they cannot be forced to make online payments. Associations can give owners the option to pay online, but must also accept another form of payment.
The main thing your association will need to do to get online payments up and running is select a payment processing company. Payment processing companies handle the transactions on the HOA’s behalf. It relays information to the association’s bank and the owner’s bank, and verifies whether the transaction is valid.
There are several different companies to choose from, and some specialize in certain types of payments. For example, one company may only handle ACH and debit payments, whereas another will take credit cards.
Condo Control integrates with Stripe, Rotessa and Zego to provide additional convenience to HOAs. When used together, owners can make online payments for fees, fines, amenity booking costs, and more. They can even make mobile payments using Condo Control’s app.
All transactions made through Condo Control will automatically be recorded for you. With this information, it’s easy to verify when payments were made, and which owners are delinquent. Owners are also able to view records of payments through their accounts.
When deciding what type of system to adopt, boards and managers should think about these factors:
Transaction fees – be clear about how much the system will cost, how much each transaction costs, and whether those costs are absorbed by the owner or the association. Some payment systems may have monthly charges while others will charge a nominal fee per transaction.
Integration capabilities – it’s strongly recommended that you choose an online payment system that is compatible with your HOA software. This prevents you and your team from having to log onto two different systems and enter data twice.
Owner accounts – owners should be able to see their own transaction history. They should receive confirmation that they have successfully paid their monthly fees. Transparency is important as it helps owners feel more comfortable making online payments.
Customer support – even the best systems have issues once and a while. When something goes wrong, you’ll want to ensure there is a real person available to help you or your owners resolve the problem. Poor customer support reviews should be a big red flag.
Option for multiple accounts: HOA management companies should choose a solution that is able to handle multiple accounts. This way, you can manage each HOA from the same program without having to worry about payments being sent to the correct bank accounts.
HOA fee automation for owners
Most online payment systems give owners the option to make one-time payments, or schedule recurring payments. Select the recurring option to automate HOA fee payments. When you do this, money is automatically transferred from your bank account or credit card, and deposited in the association’s bank account.
You will also receive a record of payment, either through email or your owner portal.
The nice thing about automating HOA fee payments is that you almost always know how much will be coming out of your account. That’s because fees are the same each month for the entire year. When fees are increased, you’ll have notice from the board about how much more you will be paying.
What is the benefit of automating payments?
There are several benefits to automating HOA fees and other payments. They include, but are not limited to:
- More on-time payments made since owners don’t have to remember to issue payment
- Less time spent collecting checks or cash
- Less time spent collecting delinquent payments
- Money flows more quickly from owners to the HOA bank account
- Better financial records for the association and owners
- Less manual work for management
- Owners are happier since they have more convenient payment options
Automating HOA fee payments requires the association to invest in a payment processing platform. There are several solutions to choose from, so make sure to do your research before making a final decision.
HOAs cannot force owners to automate payments, however many owners would be happy to have this option available to them.