What happens if you are unable to pay your HOA fees?

A homeowners association (HOA) can be a major benefit to a neighborhood. They help keep the community safe and clean by maintaining all of the shared space in the area as well as by enforcing rules in the neighborhood to help protect home values. 

An HOA always comes with a fee and in some cases, those fees can be fairly high. So, what happens if you fall behind or are struggling to pay your HOA fees? We have put together a quick overview of HOA fees and what can happen if you are unable to pay them.

HOA Fees Explained

HOA fees are mandatory in neighborhoods that maintain a HOA and can be billed monthly, quarterly or yearly. These fees help the HOA maintain the common areas and other amenities that might be in the neighborhood such as a pool or playground. The HOA fee will vary by neighborhood and the amenities in the neighborhood. 

HOA fees can be used for a wide variety of expenses in the neighborhood. Here are just a few things that may be covered by your HOA fee:

Insurance: This does not cover your homeowners insurance but a portion of your HOA fees may go to cover general liability insurance for the common areas as well as insurance to cover damage to those amenities. This can be especially true for neighborhoods with a pool or playground. If your HOA is for a condo or apartment, the insurance would cover the building while your homeowners insurance would cover your particular unit. 

Community services: This could be related to a gym or pool in the neighborhood. Other homes may pay for a doorman, automated gates or even a security guard. 

Lawn care: The common areas must be maintained, and this usually includes lawn care. Mowing, maintaining sprinkler systems and replacing shrubs and trees that die can all be paid out of your HOA fee. In most cases, you are responsible for maintaining your own yard and HOA’s often come with standards you must maintain. 

Utilities: This can relate to lighting and other utility expenses in common areas such as pools. It may also be applied to common utilities in the neighborhood such as trash collection, snow removal or even sewage and water costs. 

Pest control: In a condo or townhouse complex, part of your HOA fee may cover the cost of pest prevention. 

Repairs and Maintenance: Pools, play areas and amenities such as club houses and gyms will all need repairs or maintenance over the years. HOA funds may be spent maintaining these parts of your community. 

Reserve funds: All HOA’s keep some funds in reserve to help cover large unexpected expenses. A healthy reserve fund is always a plus when it comes to an HOA, if they don’t have the money to cover unexpected costs, residents could end up paying an additional assessment to cover unexpected costs or repairs. 

Every HOA is different, it is always important to review the Covenants, Conditions and Restrictions associated with an HOA to see what you can expect your fees to be as well as what is (and is not) covered by the HOA.

What happens if you don’t pay your HOA fees?

If you are struggling to pay your HOA fees or miss a payment you will usually be notified of the late or missing payment via letter. The letter should outline the consequences you can expect as well as details about late fees or any interest that will be charged until you bring your account current. The letter should also contain information about what legal consequences you may face if you fail to pay your fees and as well as any other late fees or interest.  

Penalties vary by HOA but here are a few scenarios that could happen if you are late or fail to pay your HOA fees:

HOA privileges could be suspended: You could lose access to amenities such as the pool, gym or clubhouse. Once you bring your HOA account back up to current, your privileges should be reinstated. 

You may be sent to collections: If you fail to pay the back fees and any late fees or interest, your account may be sent to collections. This can result in letters and phone calls from a collection agency. 

You may be sued: Most HOA agreements allow your HOA to sue you if you fail to pay your HOA dues, interest or late fees. If this happens you will be responsible for all of your legal fees and if you lose the lawsuit the HOA can garnish your wages if necessary, to bring your account current. 

You could lose your home: There can be major consequences if you fail to pay your HOA fees over an extended period of time. Laws vary by state but in some states, your HOA may be able to foreclose on your home over even a small number of past due fees. This can be as low as a few hundred dollars. In other states, your past due amount may have to hit a certain threshold before they can take this drastic action. 

If they foreclose on your home it can be nonjudicial which means that the courts will not be involved in the process or judicial which means the HOA must go through the court system to sell your home. 

The exact rules and regulations will vary depending on the state that you live in as well as your HOA Covenants, Conditions and Restrictions (CC&R) If you are considering buying a home in a neighborhood with a HOA it is important to read the CC&R documents and have a full understanding of what will happen if you are late or fail to pay your HOA fees. 

If you are struggling to pay your HOA fees the best bet is to contact your HOA before you miss a payment or incur late fees to see if they can work with you on a payment plan to get your account back on track.