Why are some HOA fees so high?

Homeowners Association Law

The advantages and disadvantages of owning a home or condo that is part of a homeowners association cover just about everything, even the kitchen sink. Your relationship with the HOA can be reassuring, annoying, and sometimes even risky.

On the plus side, the HOA often foots the bill for major expenses, such as when a roof needs to be replaced or major landscaping is performed. The money for such maintenance comes from the dues you pay. Some reports indicate that homes in an HOA sell for a better price compared to those that don’t belong to the association.

“When you invest in a homeowners association, you’re really getting into business with a lot of other people you don’t know,” says Marjorie Murray, president and CEO of the Center for California Homeowners Association Law.

That’s why Murray pays attention to and tracks the most serious cases, such as the one where an HOA manager in San Mateo County, California, embezzled $2.8 million in the period from 2007 to 2013, and the case in Charleston, South Carolina, where a property manager was charged in October with stealing $700,000 from dozens of homeowners associations.

Difference between homeowners’ association and condominium

The Association may federate with other national, community or international associations or entities, join other existing ones and form branches, groups or sub-sectors within the Association.

2.  The Association shall pursue its general purposes in full compliance with the applicable legal system and, in particular, with the rules governing the right of assembly and the defense of Competition within the scope of action of its members.

Read more  What do building control Want to see?

3. In compliance with its general purposes, the Association shall manage, by itself or through agreements with third parties, a file for the automated processing of information relating to the fulfillment or non-fulfillment of its pecuniary obligations by third parties contracting with its members and non-member members.

4. Likewise, in compliance with these same general purposes, the Association, by itself or by means of agreements with third parties, shall manage files for the automated processing of information leading to the prevention of fraud and money laundering in the financial sector.  Additionally, the Association, by itself or by means of agreements with third parties, may develop economic activities such as the rendering of services aimed at the fulfillment of its purposes.

Non-profit organizations

Sometimes, the borderline between one and the other situation is very doubtful… for example, the Treasury considers that the advisory and technical support services provided by an association to its members in exchange for a specific economic consideration other than the ordinary membership fees would not be exempt and therefore would pay corporate income tax.

The implications of other taxes, such as VAT, must also be taken into account. This means that those economic retributions received by the association for activities carried out outside its statutory purpose will be subject to VAT and quarterly VAT returns will have to be filed.

Therefore, the question we posed at the beginning is not so easy to answer. It will be necessary to study in each specific case the statutes of the association with the functions foreseen therein and compare them with the activities actually carried out to determine the extent of the exemption.

Read more  Is challenger school a private school?

Membership fees for associations

VAT regulations contemplate the existence of a series of activities or situations in which VAT should not be charged, since these activities are considered to be exempt activities by their nature in accordance with Article 20 of the VAT Law.

Prior to 2013, entities that wanted to apply any of the specific exemptions for non-profit entities, either for membership fees or for the recognition of the social character, had to request prior recognition from the Tax Agency.

Currently, this requirement is no longer necessary, but, nevertheless, if an entity wants to have the explicit recognition of social character entity, you can apply to the tax agency.

To the extent that activities considered exempt from VAT are carried out, the possibility of deducting input VAT on acquisitions is lost, and this becomes a cost for the entity.

In any type of activity carried out by an entity (including an Association), there is a general presumption that links the activity carried out by the association or non-profit entity with the exercise of an economic activity. Therefore, the administration uses means recognized in law to prove the existence of the same.

Why are some HOA fees so high?
Scroll to top