New condo or homeowners may have a lot of questions when joining a condominium, homeowner (HOA), or townhome community association. Board members and property managers should be prepared to address inquiries involving regarding pet policies, exterior alterations, and short-term rental restrictions.

However, some of the most common questions about community associations revolve around fees and assessments.

  • What is a condo or homeowners association fee?
  • Are condo or homeowner association fees tax deductible?
  • Who is responsible for past due condo or HOA fees?
  • Are renters responsible for condo or HOA fees?
  • Who is responsible for condo or HOA dues after foreclosure?
  • What does the condo or HOA association fee cover?

Below is a summary of assessments and responsibilities.

 

What is an assessment?

An assessment is a fee paid by owners in an association. These fees are paid to cover the costs of amenities, property maintenance, capital improvements, and other association operational expenses.

While each community association is different, reviewing the association’s governing documents will specify when owners are expected to pay their assessments (ex. monthly, annual).

 

What do association fees pay for?

Utilities and Municipal Services – Association fees can be used to pay for shared community services including security, trash removal, and internet. Association fees may also pay towards utilities for shared spaces such clubhouses and pools.

Insurance – Although owners need an individual insurance policy for their home, the condo or HOA association also carries insurance to protect against damage and incidents in shared spaces within the community.

Reserve Funds – Part of the fees that are paid into the association may go to a reserve fund. The reserves can be viewed as a savings account for any emergency association maintenance needs.

Property Management Company and Other Staff – Association assessment can be used to pay for property management services. Manager responsibilities can include overseeing day-to-day community operations, maintenance, and administration.

Some associations will utilize association fees to pay the salaries of on-site staff (ex. lobby attendance, lifeguard, security guard).

 

Are there other association fees?

There are two fees outside of any reoccurring association fees: special assessments and fines.

Special Assessment – Associations may be forced to adopt a special assessment due to an unforeseen, major expense that cannot be funded by the current budget and/or reserves. This can be a catastrophic loss that is not fully covered by the association’s insurance coverage or when the association finds itself in a position where construction defect litigation becomes necessary.

Special assessments can involve a variety of legal issues including proper meeting notices, owner approval, and owner’s right to veto. Furthermore, funds collected through a special assessment are generally restricted for the approved project as well as any ancillary costs (ex. engineering fees, building permits, construction bonds).

Fines – Owners who violate the association’s rules & regulations may be fined. These violations vary by community and you will need to refer to your association’s governing documents for clarification.

What are the legal repercussions for not paying association fees?

Community associations have legal options when owners become delinquent and do not pay their assessments.

Collections – When owners purchase property in a community association, they agree to pay an assessment. If an owner is unable to pay or chooses not to pay, the association can utilize its collection policy to obtain a resolution.

There are various state and federal laws that apply to debt collection (ex. Fair Debt Collection Practices Act). Accordingly, board members and property managers should work with the association’s attorney to place a delinquent owner into the collection process.

Lien – If an owner does not pay their association fees, a lien can be placed on their property. The owner will not be able to sell their unit easily and they will need to remove the lien from their title.

While each community association is different, reviewing the association’s governing documents will specify if an owner with a lien is also liable for other expenses related to the unpaid assessments including attorney fees, late fees, and interest.

Lawsuit – In some cases and based on applicable legislation, a community association can pursue a lawsuit against the delinquent owner.

 

Legal Resource

Do not hesitate to contact our law firm if your community association has questions regarding assessments, special assessments, collections, or other legal concerns.

Please call 855-537-0500 or visit www.ksnlaw.com.

 

Since 1983, KSN has been a legal resource for condominium, homeowner, and townhome associations. Additionally, we represent clients in real estate transactions, collections, landlord/tenant issues, and property tax appeals. We have four office locations, serving hundreds of clients and thousands of communities throughout Illinois, Indiana, and Wisconsin. Our attorneys are also licensed in Arizona, Florida, and Missouri.

 

Please note the material contained in this article is for educational and informational purposes only and does not constitute legal advice. No attorney-client relationship is established by your review or receipt of the information contained in this article. You should not act on the information discussed in this article without first obtaining legal advice from an attorney duly licensed to practice law in your State. While KSN has made every effort to include up-to-date information in this article, the law can change quickly. Accordingly, please understand that information discussed in this article may not yet reflect the most recent legal developments. Material is not guaranteed to be correct, complete, or up to date. KSN reserves the right to revise or update the information and statements of law discussed in the article law at any time, without notice, and disclaims any liability for your use of information or statements of law discussed on the article, or the accessibility of the article generally. This article may be considered advertising in some jurisdictions under applicable law/s and/or ethical rules/regulations. © 2022 Kovitz Shifrin Nesbit, A Professional Corporation.