One of the most common questions people have is the difference between condo fees vs HOA fees. Navigating the world of homeowners’ associations (HOAs) can be complex and sometimes overwhelming. When you layer in a Condo Owners Association (COA) that manages hundreds of apartment units, it can feel like a whole new level of complexity.
For many single-family rental (SFR) investors, the charm of condominiums comes with the challenge of adapting to the stringent rules set by COAs. Condo living offers appealing features, but it also introduces a unique set of financial obligations and regulations that can be daunting.
What Are Condo Fees?
A condominium, or condo, consists of multiple individual units that share common walls. Each owner possesses their unit’s interior while jointly owning the common areas and amenities.
Condo fees, also called maintenance or strata fees, are charges set by the Condo Association. These fees are essential for covering costs associated with maintaining and improving shared spaces within the condo complex. They are typically proportional to the size of each unit, so owners of larger condos generally pay more. These fees are mandatory, and non-payment can lead to late fees or even legal action.
What Are HOA Fees?
In contrast, Homeowners Association (HOA) fees are imposed on homeowners within a specific community. These fees, set by the HOA, help maintain and enhance the shared areas of the community.
HOA fees also ensure compliance with community standards and rules known as covenants, conditions, and restrictions (CC&Rs). Like condo fees, HOA fees are also mandatory, and failure to pay can result in penalties.
Key Differences Between Condo Fees and HOA Fees
Both condo and HOA fees serve the purpose of maintaining shared spaces, but they differ in how they are assessed and the type of properties they cover.
Condo Fee Coverage
Condo fees typically cover various services, including:
- Maintenance of common areas such as gyms, pools, and gardens.
- Upkeep of the building’s exterior.
- Services like security and waste management.
- Insurance for the entire property.
- Contributions to a reserve fund for future repairs or emergencies.
HOA Fee Coverage
In contrast, HOA fees often take care of:
- Maintenance of parks, trails, and community centers.
- Services like trash removal and snow clearance.
- Repairs of neighborhood amenities.
- Setting aside a reserve fund for unexpected expenses or significant community projects.
Ownership Structures: Condo vs. HOA
The ownership models of condos and HOAs influence how fees are assessed and responsibilities are shared. In a condominium, owners hold individual ownership of their units and shared ownership of common areas. Conversely, in an HOA, homeowners retain ownership of their properties, while the HOA manages the shared spaces.
Fee Amounts
Condo fees are generally higher than HOA fees because condo owners share the responsibility for maintaining the entire building and its amenities. In contrast, HOA fees typically cover only the maintenance of communal areas.
Both fee types can also be subject to special assessments for unforeseen expenses. However, condo owners might face a higher likelihood of additional costs due to their shared responsibility for common areas.
Assessing Fees
Condo fees are usually based on the size of each unit and its proportionate share of common areas. In an HOA, fees are typically divided equally among homeowners, regardless of property size. Both types of fees can change over time, driven by rising maintenance costs or new community projects.
Splitting Fees
In HOAs, all homeowners contribute equally to shared area maintenance. However, COAs often base fees on the size or value of individual units, a concept known as ‘unit entitlement’ in some regions, meaning owners of larger condos pay more.
Understanding how these fees are calculated is essential for potential investors, as they can significantly impact ongoing living costs.
Fees vs. Fines
Fees and fines have distinct roles in the governance of condos and HOAs. Regular condo fees are planned payments for maintenance and services, while fines are penalties for violating community rules.
HOA fees serve a similar function to condo fees but often cover a broader range of services and maintenance responsibilities.
Conclusion
Familiarity with the distinctions between condo and HOA fees is crucial for anyone exploring community living options. Whether you’re navigating the proportional fee structures of condos or the equal split model in HOAs, having clarity on these financial obligations is key to making informed decisions.
This knowledge helps demystify the financial aspects of property ownership, leading to smoother transactions and greater confidence in property investments. For more insights and practical tips on property associations, be sure to subscribe to our blog, where we share valuable resources for navigating the complexities of community living.
Want a better understanding of your condo or HOA fees? Run an Eli Report.