Recording HOA Dues, Regular Assessments and Special Assessments

What are HOA dues, regular assessments and special assessments?

HOA dues, also called regular assessments, are the monthly charge each owner pays toward the yearly budget. A special assessment is a one-time charge for a cost the budget and the reserves do not cover.

Each owner's dues cover 2 things: the year's running costs and the savings for major repairs. At Demo Ridge HOA the dues are $350 a home a month. $280 of that stays in operating and $70 moves to reserves.

The 3 charges at Demo Ridge HOA, invented data

Dues are the income side of HOA accounting explained for board members.

How do you record HOA dues when they are billed?

On the billing date, record each owner's dues as income and as an amount owed by that owner. For 60 homes at $350, that is $21,000 of income and $21,000 owed.

1. 1On the billing date, bill every owner the dues the budget set. At Demo Ridge HOA that is 60 homes at $350.
2. 2Record the total as income of the month: $21,000.
3. 3Record the same total as owed by the owners, one account per owner, $350 each. The 60 balances add to $21,000.

Billing the month's dues at Demo Ridge HOA, invented data

The income is recorded on the billing date, before any money arrives. That is what lets the board see who owes what. The account names used here come from the HOA chart of accounts.

How do you record an HOA dues payment?

Record the money in the operating bank account and take the same amount off that owner's balance. Income does not change, because it was recorded when the dues were billed.

One payment of $350 from one owner looks like this. The money goes into the bank, and the owner's balance goes down by the same amount.

One dues payment at Demo Ridge HOA, invented data

Every owner has an account with 3 columns: billed, paid, balance. Here is one owner for 3 months. In the second month the owner pays 2 months at once, so the extra $350 sits as money owed back to the owner until the month it covers.

One owner's account for 3 months, invented data

A balance below zero means the association holds the owner's money. It is not income until the month it pays for is billed.

What are assessments receivable in an HOA?

Assessments receivable is the total that owners have been billed and have not yet paid. It should equal the sum of the owner balances, owner by owner, every month.

The plain name is dues owed by owners. Here is the month at Demo Ridge HOA: 4 owners owed $4,900 at the start, $21,000 was billed, $21,000 was collected, and the same 4 owners owe $4,900 at the end.

The month's roll of dues owed by owners, invented data

The $4,900 is the sum of 4 owner balances: $350, $700, $1,050 and $2,800, which is 1, 2, 3 and 8 months of dues. If the owner balances do not add to the total on the balance sheet, a payment was put on the wrong owner, and we find it before the report goes out.

What do the HOA's books show when an owner pays late?

The unpaid amount stays on the owner's account and moves into an older column on the list of owners behind. A late fee, if the governing documents allow one, is billed as its own charge.

At Demo Ridge HOA the $4,900 owed by 4 owners is spread by age: $1,400 under 30 days, $1,050 at 31 to 60 days, $700 at 61 to 90 days and $1,750 over 90 days. A late fee, where one is allowed, is billed to the owner's account as its own charge and recorded in 4100 Late fees, never mixed into dues. A late balance is followed up under the association's own policy. What that list looks like, and what the books should show before a lawyer is called, is in the HOA delinquency report.

How do you record an HOA special assessment?

Bill each owner's share on the date it is due, in its own income account and its own fund. Track what each owner owes on it apart from regular dues.

1. 1The board votes the assessment and the books get a line for it. At Demo Ridge HOA: a water main replacement by Sample Plumbing, $90,000, $1,500 a home, billed in 3 parts of $500.
2. 2On the due date of the first part, bill each home $500. Record $30,000 as special assessment income and $30,000 as owed by owners on the special assessment, apart from regular dues.
3. 3Record each payment as it arrives. After the first part, 57 homes have paid $28,500 and 3 homes owe $1,500.
4. 4Bill the second and third parts the same way, and follow the balances until the last payment is in. Raised in all: $90,000.

The first part of the special assessment at Demo Ridge HOA, invented data

The special assessment has its own income account and its own owed-by-owners account, and it is tracked as its own fund. An owner who is current on dues and behind on the assessment shows that way on the list.

What an association may assess, how an assessment is approved and which late fees it may charge are set by state law and the governing documents, so that is a question for the association's attorney.

How do you record spending HOA special assessment money?

Pay the project invoices from the special assessment money and record them in the same fund. The fund then shows what was raised, what was spent and what is left.

At Demo Ridge HOA the invoices from Sample Plumbing for the water main total $90,000. Each one is paid from the special assessment money and recorded in the special assessment fund, not as an operating cost and not as reserve spending.

Paying the water main invoices, invented data

The project summary, invented data

The board sees the 3 lines on every report until the project closes. If the invoices come in under what was raised, the governing documents say what happens to the rest.

HOA special assessment vs reserve fund contribution: what is the difference in the books?

A reserve contribution is part of regular dues and moves to the reserve fund every month. A special assessment is a separate one-time charge, billed and tracked on its own.

Reserve contribution and special assessment, side by side

How the reserve share of dues moves each month is in HOA reserve fund accounting.