Delinquent Homeowners Association Fees: Why You Must Collect

Let your neighbors slide on paying their home owners association fees, and other owners have to pick up the slack. If it gets too bad, home values and sales will fall.

Home owners association dues go toward maintaining community amenities, such as tennis courts. Image: Tanya Constantine/Blend Images/Getty Images

No one enjoys being the bad guy, but if your HOA or condominium association lets too many members fall behind on their dues, the association will come up short on funds for maintenance and improvements. Worse yet, it may become extremely difficult for home seekers to buy a home in your community.

“High delinquency rates put a lot of pressure on associations to meet their obligations to the home owners who are paying their fair share,” says Thomas M. Skiba, CEO of the Community Association Institute. “When some owners—including banks that have foreclosed on homes and now own them—don’t pay their share, other home owners often must make up the difference in higher regular or special assessments.”

Community upkeep suffers when HOA dues aren’t paid

Just a few people who stop paying their HOA fees cut into an association’s budget fast. Annual median home owners association fees are $420 for single-family homes and $2,400 for condos, the U.S. Census Bureau says.

HOA and condominium delinquency rates have more than doubled since 2005. Today, 65% of associations have dues delinquency rates exceeding 5%, up from just 19% of associations in 2005. More than 30% have delinquency rates exceeding 10%, and for one in 10—or close to 30,000 associations—the rate is more than 20%, CAI data shows.

Those fees pay for pools, clubhouses, tennis courts, landscaping, community insurance, and utilities.

The better your community looks, the more buyers will consider it. That helps preserve home values.

Lenders avoid communities with high HOA fee delinquencies

If too many of your fellow home owners association members stop paying fees, the government-sponsored enterprises (Fannie Mae, Freddie Mac, FHA) that guarantee most U.S. mortgages won’t make new loans to anyone who wants to buy a house in your association, although they will continue to allow refinances.

Why? Because home owners association delinquencies indicate home owners are in financial trouble. And, the thinking goes, if they’re in trouble with HOA fees, then mortgage problems aren’t far behind. That affects your home owners association’s finances, meaning things like maintenance may not get done, which in turn detracts from the community’s appearance—and perceived unit values.

Fannie Mae, Freddie Mac, and FHA won’t guarantee loans in condominiums where more than 15% of the home owners are 30 days or more overdue on home owners association fees.

The GSEs may make exceptions, but that’s something your mortgage broker or loan officer has to handle, because the agencies don’t take exception requests from home owners.

So, tell your neighbors to pay up. These are tough times, but let’s not make them any tougher.