The Home of HOA Banking
The Home of HOA Banking

4 things HOAs should consider before increasing fees

/ 4 min read

Homeowners Associations (HOAs) regularly collect dues from homeowners which go towards keeping the community well-maintained, in good repair, and providing amenities for their residents. These fees are what keep the HOA in operation, but unfortunately, sometimes they may not be enough to cover unexpected expenses. 

If your HOA is struggling financially, you may think that you have to increase dues, but that is usually a pretty unpopular decision with your homeowners. Before you start raising dues, consider the following:

1. Is it legal?  

Usually, HOAs have discretion to raise their dues whenever or by however much they want, but this is not true in all states. Some states require the approval of some or all of the homeowners before raising rates above a set percentage, which could thwart your plans. Be sure to learn the laws that apply to HOAs in your state before you think about increasing dues.

2. Is there an HOA fee increase limit?

Some HOAs have an increase limit specified within their governing documents – most likely in their Declaration of Covenants, Conditions, Restrictions and Easements (CC&Rs). Your CC&R may set a limit on the percentage increase allowed, or even set a maximum dollar amount. Review your CC&R closely to ensure that you are following your own guidelines regarding rate increases and the types of fees you’re allowed to charge.

3. Have you reviewed your budget thoroughly?

Before you raise monthly assessments for your homeowners, be sure to go through your budget line by line. Are there expenses you can cut? Projects that are just nice-to-have instead of must-have? Have you explored different bids from vendors that could get you a lower price? Meet with a financial advisor or consultant who specializes in HOAs to look for areas where you might be able to save.

4. Are there other options for raising needed funds?

There are a number of other options for raising HOA funds without raising dues. Some HOAs decide to start charging homeowners a fee for using certain amenities, such as the pool or clubhouse, but this decision may be met with anger, since dues typically include use of the community’s features. A better idea is to charge people outside of your community to use your amenities – such as renting out your clubhouse for weddings or parties.

An HOA may also use a special assessment, which will increase dues for a set period of time to fund a specific project. However, this is usually significantly more than a regular increase which could be a hardship for some of your homeowners. Ideally, the special assessment would be funded quickly and then rates would return to normal.

Perhaps the best way for an HOA to avoid substantially raising homeowners’ fees is by taking out an HOA loan. HOA loans offer a range of benefits for communities, including:

  • Funding projects upfront so they can be completed sooner, saving the extra expense of a project being drawn out over time
  • Providing community improvements right away to maintain property value and attract new buyers
  • Preserving the HOA’s reserve fund for emergencies

Unlike a special assessment, an HOA loan can be paid off over a longer period of time, so increases in fees can be kept to a minimum.

It’s natural for HOAs to occasionally have to increase their dues, but try to avoid sharp or frequent increases to keep your homeowners happy.

Valley is an industry leader in HOA banking and can create a customized loan program that meets your HOA’s unique needs. With years of experience and expertise dealing with HOAs, property managers, and condo associations, our team will work with you to get you competitive terms and the funding you need. Learn about our loan options, or fill in the form below to have on our team members contact you.

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