Are HOA and regime fees fixed

May 27, 2008

The short answer is no.

Here’s why.

The short answer is that costs may rise in the future.

The HOA sets a budget for the year and bills the homeowners an annual fee. This takes care of the neighborhood including landscaping of the common areas as well as maintaining the clubhouse, pool, playgrounds, tennis courts and other amenities available to the homeowners. The HOA generally makes a contribution to a reserve account to save for scheduled capital improvements when they become necessary.

A monthly regime fee is common when purchasing a townhome or a condominium. The regime fee may or may not cover insurance on the building exterior, flood insurance, termite bond and maintaining all or part of the property including landscaping of the common areas as well as landscaping of the individual units.

Let’s just use the price of gas as an example. Most communities set their annual budgets when gas cost $3 per gallon. Today, it is nearly $4. The landscapers use gasoline to run their lawnmowers and other equipment. Their costs have gone up this year and you can bet that they will increase their price next year if gas continues to increase in price.

Now who is going to pay for that increase. The community will do their best to negotiate the very best price for landscaping services but the cost of gas impacts every landscaping firm so it’s likely that all will be charging more next year. The bottom line to you, the annual fee can increase.

When you buy a home, if you obtain a 30 year fixed rate mortgage, you can be assured that your monthly payment for principal and interest will not change over the course of the loan. But if your insurance or taxes increase, you are going to have to pay a little more each month to maintain your escrow account.

If you are cutting your own lawn, you still have to fill up your little red gas container once in a while. It costs more to do so today. The same is true on a larger scale when the HOA takes care of your maintenance.

But don’t forget that the homeowners have a say in the management of their community. Read more about homeowners associations at wikipedia.