HOA management companies charge various fees for their labor and resources. How much a given HOA management organization costs can affect whether it’s a good choice for your community or not.
What Are HOA Management Fees?
HOA management companies charge fees to homeowners associations they work with initially and on a monthly basis. When you pay an HOA management company, you’re paying for services such as:
- Accounting and financial advising services. HOA management companies may control your homeowners association’s books, review fees, and manage dues
- Overseeing collections actions, such as collecting HOA dues from members who are delinquent
- Enforcing homeowners association rules, such as preventing rule-breakers from adjusting their properties against community guidelines
- Contacting and overseeing contractors, like general contractors, maintenance technicians, etc.
- Creating newsletters and other community messaging documents
- Handling insurance claims
- Assisting with tax returns
- Drafting or amending governing documents for the homeowners association
- Participating in homeowners association board meetings, including keeping minutes, contributing to meeting agendas, etc.
Note that your HOA management company contract will include a full breakdown of all the services you can expect from the organization.
Average Cost of HOA Management
On average, an HOA management organization will cost your board:
- An initiation fee of several thousand dollars at minimum
- An ongoing monthly management fee of between $10-$20 per unit per month
- An exit fee if you decide to terminate your management contract early
The size of the initiation fee varies depending on the size of your community and the policies of the management company you choose to work with. More reputable companies with greater services or perks may charge as much as $20-$50 per unit per month. But most companies charge between $10 and $20 per unit per month.
Full-Service vs. Remote vs. HOA Consulting Fees
While the above numbers are good averages for estimating the cost of working with an HOA management company, it’s important to keep in mind that different companies will charge different numbers based on their sizes and exact services. There are three types of HOA management organizations you can work with:
- Full-service HOA management companies – These provide the full range of services described earlier, such as collecting dues, providing accounting work, negotiating with contractors, and talking with delinquent homeowners. Full-service HOA management companies are perfect for larger homeowners associations or those who don’t have enough board members to tackle all the work involved with keeping a community running smoothly.
- Remote HOA management companies – These are smaller management companies that primarily provide assistance with financial or administrative duties. They don’t handle any on-site operations, so HOA boards are responsible for things like collecting dues. Instead, remote HOA managers help with things like maintenance tracking, violation notifications, and contract reviews. They’re more cost-effective and affordable compared to full-service HOA management organizations.
- HOA consulting services – These are one-time or project-based HOA managers who advise your homeowners association board on what needs to be done to resolve a particular issue. After the project is complete, the contract is terminated. Your fees will be completely different for this type of partnership, as you won’t pay a month-to-month rate. Instead, you’ll pay an initial or upfront fee or a project completion fee depending on your contract
Keep this information in mind when trying to estimate how much working with an HOA management company will cost your board budget.
HOA Management Fees Broken Down
HOA management companies charge both monthly fees and one-time or conditional fees. Depending on the total cost of these charges, an HOA management organization may or may not be too expensive for your homeowners association. The four types of HOA management fees include:
- Initiation fees
- Monthly management fees
- Extra services fees
- Termination or transition fees
Initiation Fees
Initiation fees are one-time charges homeowners associations only have to pay at the beginning of an HOA management contract. Depending on the size of the community and the work involved with transitioning a community into an HOA management company’s systems, the fee can be a few thousand dollars or more than $30,000.
Initiation fees are negotiated based on factors like:
- The workload required (often correlated with homeowners association size)
- The number of homes in the community – If a homeowners association only has a dozen or so homes, the fee may only be a few thousand dollars at most. If the community has several hundred homes included, the fee could be in the tens of thousands of dollars
- The extra labor that may be associated with bringing a new homeowner’s association into the company’s systems – For example, if there’s a lot of administrative bookkeeping work that has to be done before the transition completes, your HOA might be charged extra because of that
Initiation fees do not have to be paid again so long as the HOA in question stays with the same management company. If an HOA decides to leave a management company, then re-contract with them again, they’ll have to pay the initiation fee again at that later date.
Monthly Management Fees
Monthly management fees are the primary fees HOAs pay to management companies. Ongoing monthly management fees range from $10-$20 per unit per month on average. However, they can be much more, even up to $50 per unit per month depending on the reputation and resources of the management company.
Monthly management fees are negotiated on the management contract and do not normally fluctuate. This means that even if an HOA management company has a difficult month with lots of work, the fees will not increase. Note, however, that your contract with an HOA management company might state that the fees are “per unit” or “per occupied unit”.
If it’s the latter, the HOA management company only charges your homeowners association for occupied homes that have residents. If it’s the former, keep in mind that your homeowners association will be paying a fee to maintain homes that don’t have anyone living in them. The latter option is usually ideal, so be sure to read through your contract carefully, preferably with an attorney at your side.
Generally, ongoing management fees are more expensive in areas where there are higher costs of living. Furthermore, your HOA management company may charge you a higher monthly management fee for each unit it oversees if it has to travel a great distance to reach those units (for example, if your HOA is in a rural or mountain community and the management company is based an hour or more away).
Extra Services Fees
From time to time, your homeowners association may require extra work outside the scope of specific contracted duties. If your HOA management company takes care of that work, it may charge you extra service fees.
For instance, imagine that your HOA management company has to evict a problematic homeowner that doesn’t pay their dues. In that case, the HOA management company has to pay various fees to work with the court systems and to contact law enforcement. It also has to have personnel remain on-site and handle the stressful work of the eviction process.
Because of all this, it charges your HOA board an extra fee for this full service. Extra services fees can vary wildly in terms of overall cost and quantity. Therefore, it’s a good idea for your homeowners association to keep a certain amount of money in reserve just in case your HOA management company charges you extra.
Note that repair fees do not normally count as “extra” fees unless stated otherwise in your contract. The monthly management fee should cover stated repairs and maintenance duties performed by your HOA management company.
Depending on your contract, your HOA board may need to maintain a reserve escrow account of repair or maintenance money to cover the cost of necessary fees. When the HOA management company dips into that escrow account to pay for fixes, you will then need to replenish it to a predetermined amount.
Termination/Transition Fees
When you end your business relationship with an HOA management organization, you may be required to pay a termination or transition fee. They can be anywhere from $50 to several hundred dollars in total. Also called “exit fees,” these costs only kick in when you transition from one HOA management organization to another one or if you break your contract early.
Generally, termination fees are very cheap. They cover the cost of accounting, bookwork, and minor labor needed to ensure a smooth transition from one HOA manager to another. This is only true, though, if your contract expires normally (e.g., at the end of one year and you had a one-year contract with the company).
If you end your contract early, you may face an additional early termination fee. Your HOA board may need to pay up to several hundred or several thousand dollars, as the HOA management company will want to be compensated for the time and resources it dedicated to your community that it can no longer expect income from.
Be sure to read the contract clauses carefully regarding early termination fees, however. Some companies may try to sneak in high termination fees even if you end your contract with the organization in question at an appropriate time. That can cost your HOA board massively, even if you didn’t do anything wrong.
Fees to Watch Out For
In addition to the above charges, some HOA management companies charge fees you should watch out for. These fees are almost always unnecessary or may indicate that the company is trying to take advantage of your neighborhood. These fees include:
- Per activity collection fees
- Meeting fees
- Sneaky fees
Per Activity Fees
Some HOA management companies may charge per activity fees, which are surprising fees charged each time the management company does a specific task. These red flag fees may be technically contractually allowed, but use confusing language to squeak by legally.
For example, an HOA management company’s contract may include a clause stating that it can collect another $75 each time it collects dues from HOA community members. On paper, this looks fine. But you don’t realize that the HOA management company means it gets to collect another $75 per unit, per collection, not as a whole. It doesn’t mean it gets $75 per month to cover the labor of dues collection.
If left unchecked, per activity fees can be devastating to your HOA board’s finances and coffers. Be sure to read through any HOA management contract carefully to catch these fees. If you see even one of them, consider working with a different company, as the current candidate can’t be trusted.
Meeting Fees
Meeting fees are charged whenever a management company worker attends any HOA board meetings. You might think that this should be included by default with the monthly fee or the initiation fee. But if it’s not outright stated as such in the contract, you could be charged meeting fees every time one of your management company’s personnel stops by to take minutes or offer advice.
Meeting fees can vary, but they’re always bad signs. Again, take care to read through your contract line by line so you don’t get taken by surprise by charges like this.
“Sneaky” Fees
Some HOA management companies may charge other miscellaneous or sneaky fees. For example, an HOA management company might try to charge your homeowners association for the mileage that its employees rack up when reaching your units. Or it may try to charge you for things like toner, supplies, and so on: all things that should be covered by the monthly management fee.
The secret lies in your management contract. Hiring an attorney and having them read through the contract very carefully is vital so they can catch any sneaky fees you may have to pay later down the road. Even if the fees are minimal, they can add up over time, especially if the language for the fees allows the management company to collect on a per-unit basis.
