During our decades overseeing property management in Irvine, the Inland Empire and throughout Orange County, the most common questions we receive pertain to HOA dues.
Are dues really that important? What are they used for?
The first answer is: yes, they’re extremely important. The second answer is more in-depth. In this article, we’ll break down all of the applications of your monthly HOA dues and why they actually represent a tremendous value for homeowners.
Why are HOA dues important?
Your homeowners association is a non-profit mutual benefit corporation, of which you are a member. The common areas in your community are the assets that this corporation (your HOA) is responsible for managing. Therefore, your HOA membership dues directly support the programs and services that preserve the property values of the homes in your community. As a non-profit mutual benefit corporation with a volunteer board of directors, none of the members on your community’s board receive compensation for their service–all of the membership dues are funneled back into amenities and services that protect your home’s equity.
Where do HOA dues go?
There are two parts to your HOA’s annual budget: operations and reserves. Both play a critical role in preserving your home’s value.
The operating side of your budget funds the daily operating expenses of your association, including:
- Landscaping contract (lawn mowing, tree trimming, planting, general maintenance)
- Landscaping materials (mulch, rocks, pavers, new plants, new trees)
- Pool maintenance contract
- Minor repairs to common areas (gates, fences, outdoor furniture, playground equipment, pool, roof leaks)
- Security patrol fees
- Insurance fees
- Legal fees (legal retainer, document filing fees)
- Administrative costs (office supplies, postage, office equipment)
- Management company services
Within the scope of utility fees, even more detail emerges. Utility fees can include:
- Electricity (clubhouse/office lighting, landscaping lighting, A/C and heating, street lights, sprinklers, gates, water features)
- Gas (heating, outdoor grills)
- Water (landscaping water, pool, spa, fountains, common area bathrooms, showers, and sinks)
- Phone bill
- Internet bill
In most associations, the landscape and water costs are usually the largest part of the operating budget.
When your association is running smoothly, many of these operations features go unnoticed by you– which is a good thing. This means that your community is a clean, safe, well-maintained, welcoming environment.
Reserve funding is typically a very large part of what comprises your monthly dues. Reserves represent the long-term savings plan that your HOA uses to proactively accumulate funds that cover major repairs and replacements of common area components. Because your board has a fiduciary responsibility to manage your funds and property, setting aside adequate financial reserves is an important part of responsible planning and maintenance.
Reserve funding usually covers most of your HOA’s major maintenance components, including:
- Major pool repairs & replacements to heaters, decking, and restrooms
- New fencing and gates
- Major painting projects
- Repaving common area roads and driveways
- Replacement of entryway monuments
- Major landscaping renovations
- Individual unit repairs for condo associations
A portion of every member’s monthly dues is directed to the association’s reserve fund. As components of your HOA that are covered by reserve funding become due, these proactive savings ensure that there are sufficient funds, ready to use.
What about management company fees?
Contrary to popular belief, management company fees usually comprise a very small portion of an association’s monthly operating costs. The management company’s fee is part of the operational budget and covers the array of administrative support and education that your management company provides. Management company fees are based on the requested service level by your association’s board, so they vary by association.
Your HOA dues cover a wide variety of services that your management company provides in order to facilitate the smooth operation of your community. These services include:
- Dedicated community manager or management team
- Customer service
- Billing resources
- Accounting services
- Organizational support
- Board member training & advice
- Vendor RFPs
- Project management
- Work order completion
- Board meeting facilitation & materials preparation
- Event planning
Property management in Irvine and the rest of Southern California requires a deep understanding of the state guidelines that apply to HOAs. Your management company is a valuable resource for helping your association determine the appropriate amount of funds to keep in your operations and reserve accounts. Utilize their expertise when evaluating your annual budget.
Accessing your community’s budget
As a member of your homeowners association, you have a right to review your community’s budget at any time. California State law requires that homeowners associations issue an annual pro forma budget, which you receive via mail each year. If you would like a more detailed itemization, ask your community manager to send you the full budget and explain any unclear line items. Additionally, if you’re curious about what your per-door-per-month breakdown is for operational and reserve costs, your property manager can present this to you, or share it with your board and membership at a board meeting.
HOA dues are vital to maintain property values and facilitate a successful community. Your management company can help you gain a better understanding of where every dollar of your dues goes. We have found that once homeowners see the extensive amount of services and supplies received in exchange for monthly dues, it’s easier to recognize their tremendous value.