Buying a home in an HOA community comes with numerous benefits. However, new homeowners must comply with various fees and financial obligations at closing, including paying a capital contribution for HOA. This guide explains the HOA capital contribution fee and its significance to the community.
HOA Capital Contribution Explained
All home sales have closing costs above the property price. Buyers may have to pay real estate commissions, insurance, taxes, and origination fees. In an HOA community, new homeowners may be subject to a non-refundable initiation fee, also called a capital contribution fee for HOA.
So, what is a capital contribution fee?
As the phrase suggests, capital contributions are fees imposed on new homeowners by an HOA upon transferring the property to the homebuyer. Some HOAs refer to a capital contribution as a transfer fee, working capital contribution, initiation fee, buy-in fee, or new owner fee.
Paying a capital contribution gives new homeowners equity within the HOA community. It is part of the association’s reserve fund and goes toward future maintenance costs, repairs, and replacements. The contribution might also come in handy in the case of emergencies and disasters.
How Much Is an HOA Capital Contribution Fee?
A capital contribution for HOA varies from one association to the other. The HOA might decide how much to charge based on the size of the community, age, property condition, and other details in their governing documents. However, some states limit how much developers and HOAs can charge capital contributions.
What Happens If You Don’t Pay Your HOA Capital Contribution Fee?
While an HOA capital contribution fee is a requirement in most HOAs, not all associations charge an initiation fee for new members. HOAs charge it as a one-time fee outlined in their governing documents. Other homeowner’s associations impose capital contributions on new owners for all resales.
Failure to comply can lead to grave consequences. The HOA can impose hefty penalties, fines, and interest on the outstanding balance for non-compliant homeowners. Some associations go to the extent of placing liens on unpaid homes, potentially leading to foreclosures.
Managing Capital Contribution Fees for HOAs
Like all HOA fees, a capital contribution requires professional HOA accounting. In any case, it also determines the association’s financial health and stability. Abel Accountants can help homeowner’s associations manage their capital contributions and reserve funds. Contact us for HOA bookkeeping services in Atlanta and surrounding areas.