HOA Loss Assessments: Is Your Wallet Ready?

SEPTEMBER 2, 2025

Across the U.S., more than 370,000 homeowners associations (HOAs) represent over 40 million households — accounting for more than 53% of all owner-occupied homes nationwide. In 2025, the number of homeowners associations (HOAs) is expected to increase by another 3,000 to 4,000.¹

While living in an HOA community offers perks, it can also come with steep financial risks. Homeowners in HOAs should understand the factors driving these risks so they can develop effective strategies to manage them.

What's a Loss Assessment?

HOAs typically carry a master insurance policy funded by member fees. Loss assessments are unexpected charges that homeowners may face when the HOA’s costs exceed its budget or insurance coverage proves to be insufficient to cover a loss. Common triggers include:

1. Natural disasters — Damage from events like hurricanes or wildfires not fully covered by insurance
2. Major repairs — Urgent fixes (e.g., roofs, parking lots) when reserve funds fall short
3. Legal judgments — Lawsuit losses not fully covered by the HOA’s insurance
4. Insurance gaps — Coverage shortfalls or high deductibles
5. Emergencies — Sudden issues like sewer collapses or structural damage
6. Financial trouble — Bankruptcy or mismanagement leading to unpaid debts

Ramifications of a Loss Assessment

In response to the Surfside condo collapse in 2021, Florida enacted strict safety regulations requiring older buildings to undergo structural inspections every 10 years and fully fund reserves for major repairs. While these measures aim to prevent future tragedies, they’ve led to steep costs for condo owners. A 2025 update to the law offers some relief by allowing a two-year pause on reserve contributions to prioritize urgent repairs — but for many, expenses remain overwhelming.²

In one striking example, a condo owner was hit with a $224,000 special assessment and saw monthly maintenance fees double from $1,500 to $3,000. Unable to manage the financial burden on a fixed income, he chose to sell his unit for $500,000. However, buyers would still be responsible for the assessment, effectively raising the cost to $724,000 — plus the ongoing higher maintenance fees. This situation highlights one way an HOA can negatively impact the best laid financial plan.³

Increase in Lawsuits

Lawsuits against HOAs are on the rise. Recently, an HOA in Santa Clara, California, was found liable for fraud, negligence, and elder abuse in its management of a condominium. The court awarded $1.8 million to the condominium owners.⁴ This case underscores the importance of the master policy coverage. If the master policy is not sufficient to cover the claim, the HOA could impose loss assessments on other condo owners.

Another option available to the HOA is to file bankruptcy. However, an HOA bankruptcy does not shield individual condominium owners from financial responsibility. Although condo owners and homeowners are rarely named in lawsuits, most HOA governing documents allow the association to pass on debts — including legal judgments — through loss assessments. As a result, condominium owners may ultimately bear the cost of the judgment.

Best Practices for Living in a HOA Community

If you live in an HOA-governed community, it’s crucial to stay informed, attend meetings, review records, and get involved in neighborhood decisions before issues escalate to lawsuits. Here are some practical strategies:

1. Review HOA documents carefully. Check the HOA’s bylaws, CC&Rs (Covenants, Conditions & Restrictions), and financial statements. These documents outline the HOA’s authority to levy assessments, the reserve fund status, and past assessment history.
2. Investigate the HOA’s financials, especially the reserve fund, which is a savings account used for major repairs and emergencies. Check if the reserve fund is adequately funded, as a well-funded reserve reduces the likelihood of sudden assessments. In addition, analyze monthly HOA expenses.
3. Build a personal emergency fund. Even with insurance, some assessments may not be covered, so having savings set aside can prevent financial strain.
4. Attend HOA meetings. Set up automated meeting reminders. Regular attendance helps you stay aware of upcoming projects, financial decisions, and potential risks. Further, know the HOA board, and get involved — voting on budgets and board members gives you a voice in how the HOA is managed.
5. Challenge unjust rules. Homeowners have the right — and should feel empowered — to challenge any HOA rules they view as unreasonable or misaligned with their interests. Keep track of all correspondence, which can help minimize misconceptions and strengthen arguments in a dispute. When residents are informed and engaged, HOAs can become powerful tools for enhancing community well-being, with governance shaped meaningfully by those who live there.
6. Increase loss assessment coverage. Homeowners or condominium policies usually provide $1,000 of loss assessment coverage; however, with a simple, low-cost endorsement, that can be increased to $100,000. The coverage may help pay for liability claims, medical expenses or property damage. Remember: loss assessment coverage does not cover property upgrades in common areas, like retiling a pool or the HOA’s insurance deductible.^5,6
7. Before buying, ask questions! If you're considering buying in an HOA community, perform due diligence. Ask about: