Initiation Fees

Is there a maximum amount an HOA can charge as an initiation fee to new homeowners? I live in Florida.

My understanding is that there isn't a limit in the statute (FS 720) on capital contributions (that's the language most people use instead of "initiation fee" - a club usually has an initiation fee). However it should be spelled out in your declaration if a capital contribution is allowed in your community and how much. Our capital contribution is now $1500 paid by the buyer at closing.

Here's the language from our documents (done in 2021).

Working Capital Fund. The Master Association has established a Working Capital Fund. Contributions to the Working Capital Fund will be collected by the Master Association from each Parcel purchaser, at the time of conveyance, in such amount as is established by the Board from time to time by written resolution adopted at a Board meeting, provided, however that the Board may not increase the amount of the Working Capital Fund contribution more than once in any 12-month period. Each Parcel’s share of the Working Capital Fund shall be collected and transferred to the Master Association at the time of closing of the sale of each Parcel. The purpose of this fund is to assure that the Board will have cash available to meet any legitimate Master Association expense, or to acquire additional equipment, property, or services deemed necessary or desirable by the Board. Amounts paid into the Working Capital Fund at closing are not to be considered advance payment of any Assessments under this Article 6 and are not refundable or transferable. For purposes of this Article, the term “conveyance” shall mean the transfer of record legal title to a Parcel by deed or other authorized means of conveyance, with or without valuable consideration, and shall also refer to a transfer of possession and beneficial ownership by means of an agreement for deed. The following conveyances shall be exempt from payment of the Working Capital Fund contribution: (a) between and among co-Owners of the same Parcel being transferred; (b) to the Owner’s estate, surviving spouse or other heirs, resulting from the death of an Owner; (c) to a trustee or the Owner’s current spouse, solely for bona fide estate planning or tax reasons; (d) to a mortgagee, the Master Association, or a Condominium Association, pursuant to a final judgment of foreclosure or deed in lieu of foreclosure; and (e) to an Owner who owned and occupied a Parcel in Reflection Lakes within the ninety (90) days prior to the date of the subject conveyance, which Owner previously paid a Working Capital Fund contribution upon acquiring such prior Parcel within the Community. It is the responsibility of the Owner to apply with the Association for an exemption under any of (a) through (e) above, prior to the date of conveyance. Provided, however that upon a transfer that occurs following the exempt transfers described in (a) through (e) above, the Working Capital Fund shall be due and payable.

Personally I think these garbage sales fees are an unwarranted cash grab by associations, and just add fuel to the fire of things giving HOAs a bad name. If there are actual costs to the association related to a change of ownership, charging a fee to defray those costs is fine. Trying to balance the budget on the backs of buyers and sellers rather than setting dues at an appropriate level to fund the association seems like bad policy to me. What happens when the association is counting on those fees and fewer homes sell in a given year?

Mark

Is it fair to place a burden on new owners? If there is financial trouble, it was caused by existing owners not new owners. I say raise the dues.

JohnC,
Sorry I am just seeing your question. For some reason I have stopped receiving the note when a new post is made on the site.

Is it fair to place a burden on new owners? If there is financial trouble, it was caused by existing owners not new owners. I say raise the dues.

John this is a fair question and from my personal perspective I think that when you buy into an HOA as one of the first homes built you suffer because Amenities are not built out and you are paying dues without them. In some cases, this takes years. I also recognize that when you buy early in some states you can see your property values climb during those years. I think the saying goes "Paying Your Dues". LOL

Bad management can cause some HOAs to get into financial trouble and this is where doing as much research as you can to spot this problem and avoid buying into a troubled community. The initial fee at closing I view as a membership fee similar to joining a Club or organization that has perks and a small list of customers.

As someone who has been president of 2 HOAs the first in Ca for 8 years without Fee and the last 6 in Texas with the $300.00 Fee I think if the money is going to reserves or capital improvements, I am for it. By the way in my Texas HOA, we have probably had nearly 2000 closing and Fees charged on everyone since the start, and I have never heard or saw anyone complain. This could be becuase as Douglas mentioned all the other Fees as closing confuse buyers and they just want the Keys to their new property.

Many associations are originally funded by a developer advance. The original home typically bear the burden to repay the advance. I see no reason subsequent buyers shouldn’t have to pay an initiation fee.