HOA Finances Explained

Two Buckets: Operating vs. Reserve

Every HOA manages two separate funds, and understanding the difference is critical for evaluating a community's financial health.

Operating Fund Funded by monthly dues. Covers day-to-day expenses: landscaping, pool maintenance, common area utilities, insurance on shared structures, and management fees. An operating deficit in the current year is a warning sign.

Reserve Fund Set aside for major future replacements — roofing, paving, elevators, pool resurfacing, exterior painting. Think of it as the HOA's savings account. A healthy reserve prevents sudden, large special assessments when big repairs come due.

What Dues Cover

HOA dues vary widely — from under $100/month to over $1,000/month — depending on community size, amenities, and location. In Florida, expect to see:

• Landscaping & common area maintenance
• Pool, gym, and amenity upkeep
• Insurance on common structures
• Reserve fund contributions
• Management company fees
• Sometimes included: cable, internet, water, or trash

Know exactly what's included before comparing fees across communities. A community with $800/month dues that includes cable, internet, and water may be cheaper all-in than a $400/month community where you pay those separately.

Reserve Fund Health

The reserve study is the HOA's financial roadmap. It estimates the remaining useful life and replacement cost of every major component — and recommends how much to set aside each year.

How to read it:

• Fully funded amount: What the reserve should hold based on age and condition of components
• Current balance: What it actually holds
• Funding percentage: Current ÷ fully funded — the key number

Florida law does not require HOAs to be fully funded, but it does allow members to vote to waive or reduce reserve contributions — which shifts the risk to future homeowners.

Special Assessments

When the reserve fund isn't enough to cover a major repair or unexpected expense, the board levies a special assessment — a one-time charge to all homeowners, on top of regular dues.

How they happen:

1. A major repair is needed (roof failure, elevator replacement, hurricane damage)
2. The reserve fund is insufficient to cover it
3. The board holds a properly noticed meeting and votes to levy the assessment
4. Homeowners receive notice with the amount and payment terms

Amounts can be significant. Depending on the repair and the number of units sharing the cost, special assessments can range from a few hundred to tens of thousands of dollars per unit. In older Florida communities with deferred maintenance, they can exceed $50,000 per homeowner.

Always ask about pending and recently voted assessments before closing. Florida FS 720.401 requires sellers to disclose these.

Dues Increases

Florida Statute 720 allows HOA boards to increase dues by up to 115% of the prior year's budget without requiring a member vote. Larger increases require membership approval.

Understand the historical rate of dues increases in any community you're considering. A community that raises dues 8% annually will double your monthly payment in about 9 years.

Questions to ask:

• What was the dues amount 3 years ago? 5 years ago?
• Have there been any board-imposed increases in the past 24 months?
• Is the current budget balanced, or is there a deficit?

Signs of a Financially Healthy HOA

Look for these indicators when evaluating a community's financial standing:

Positive signs:

• Reserve fund funded at 70%+ of fully funded level
• No special assessments in the last 3–5 years
• Stable or modest dues increases (under 5% annually)
• Clean, audited financials
• Upcoming maintenance is already budgeted

Red flags:

• Reserve fund below 50% with major repairs on the horizon
• Special assessments in consecutive years
• Large dues increase in recent years without improvement to amenities
• No reserve study, or a reserve study that's more than 3 years old
• Operating deficit in the current budget