HOA Fees in San Diego

What the dues pay for

Dues fund whatever the association is responsible for under its governing documents, which differ from one community to the next. The association's annual budget report shows where the money goes. Under Civil Code section 5300 it is sent to owners 30 to 90 days before the fiscal year ends and has to include, among other items:

• a pro forma operating budget of estimated revenue and expenses;
• a summary of the reserves and of the board's reserve funding plan;
• whether the board has deferred or decided not to do repairs or replacements of major components with a remaining life of 30 years or less, and why;
• whether the board expects to need one or more special assessments to repair, replace or restore major components, and if so the estimated amount, start date and duration;
• any outstanding loans with a term of more than one year;
• a summary of the association's property, general liability, earthquake, flood and fidelity insurance, with each policy's limit and deductible.

Compare the insurance summary with the coverage you plan to buy for the home itself, so you know which risks the association's policies carry and which fall to you.

Reserves and the reserve study

Reserves are the savings an association builds to repair and replace the major components it is responsible for. Under Civil Code section 5550, the board must have a visual inspection of those components done at least once every three years as part of a reserve study, and review the study every year. The budget report summarizes it, and the full reserve plan is available to members on request.

Read the summary for the gap between what the study says the association should have saved and what it actually holds. A shortfall, a deferral statement or an expected special assessment each signals that your costs could rise after you buy.

Special assessments and dues increases

A special assessment is a charge on top of regular dues, for example to repair or replace a major component the reserves do not cover. Civil Code section 5605 limits what a board can do on its own. Without the approval of a majority of a quorum of members, at a member meeting or election, it cannot:

• raise the regular assessment more than 20% above the previous fiscal year's;
• impose special assessments that together exceed 5% of the association's budgeted gross expenses for that fiscal year.

Any annual increase in regular dues also requires either a member vote or a board that has met most of the section 5300 budget report requirements for that year. Governing documents can set tighter limits. The caps do not apply to emergencies: section 5610 exempts an extraordinary expense ordered by a court, one needed to address a threat to health or safety, or a repair the board could not reasonably have foreseen when it prepared the budget (the last one requires a board resolution explaining why).

The resale disclosures you receive

When you buy into an association, the seller must give you a package of documents "as soon as practicable" before title transfers, under Civil Code section 4525. It includes:

• the governing documents (CC&Rs, bylaws and rules);
• the most recent annual budget report and related documents;
• a written statement from the association of the current regular and special assessments and fees, plus anything unpaid on the unit;
• any assessment changes the board has approved that are not yet due;
• a statement describing any ban on renting the unit out;
• any unresolved notice of a rules violation sent to the owner;
• on request, the minutes of board meetings from the previous 12 months.

Under section 4530, the association has to produce these within 10 days of a written request, and may charge the seller its actual cost of preparing them. Ask for the board minutes too: they record the repairs and assessments the board has discussed.

How HOA dues change the price you qualify for

Fannie Mae's Selling Guide lists owners' association dues and special assessments in the monthly housing expense, alongside the mortgage payment, property tax and insurance. The total is the housing figure in your debt-to-income ratio, so every dollar of dues uses budget that could otherwise go to the loan payment.

The engine behind the report puts a number on it. At each income below, with a 43% debt-to-income ceiling, this is how much lower the highest qualifying price is for each $100 a month of HOA dues:

The same figure applies to Mello-Roos and to other monthly debts, which is why a home with both an HOA and a special tax can sit well outside a budget its price alone would fit. The affordability guide for $150,000 shows the full calculation, and how to check a home for Mello-Roos covers the special tax some homes carry on top of HOA dues.

A sounding report adds the HOA dues you enter to the home's monthly cost for every loan program and to the income it estimates you need to qualify.