Texas HOA assessment late charges

Started by MistyB • 9 replies • 4529 views

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MistyB (Texas)
Posts: 5

Posted:

Our BOD is now self-managing our HOA in San Antonio Texas. We are sending out 2007 assessments and per our Covenants we cannot charge any late charges only the highly amount of interest allowed by law. What is the highest amount of interest we can charge by law? So far I have been told 6% and 18%. If you know what it is please let me know ASAP.

Thank you.

RogerB (Colorado)
Posts: 5,067

Posted:

Misty, I don't know the highest interest rate allowable in Texas. Whatever the maximum percentage is I suggest your HOA amend their Covenants to allow charging late fees. I have found late fees are a more effective means to encourage owners to pay assessments promptly. Only when accounts a severely delinquent do interest charges become sufficiently large to be meaningful. By then it is too late use this as a means to encourage payment.

Plus it can be very difficult to calculate the amount owed using interest rate. For example the following, while not accurate to the penny, illustrates the difficulty of using interest rate:
applying 48% APR interest to a delinquent accounts with assessment of $100/month:
after 1 m 100 + (100 x .48/12) = 100 + 4.00 = 104.00
after 2 m 104 + 100+(104 x .48/12) = 104 + 104.16 = 208.16
after 3 m 208.16 + 100+(208.16 x .48/12) = 208.16 + 108.33 = 316.49
after 4 m the above examples are approximate, can you calculate the correct amount? I'd bet the owners can't.

applying $20/month late charge to a delinquent accounts with assessment of $100/month:
after 1 m 100 + 20 =120
after 2 m 120 + 100 + 20 = 240
after 3 m 240 + 100 + 20 = 360
after 4 m any owner can calculate it.

MistyB (Texas)
Posts: 5

Posted:

Roger, thank you so much for your quick response. In order to change the by-laws we need to have it voted on at an annual meeting, correct? We are having a meeting on January 26th.

HaroldS (Arizona)
Posts: 906

Posted:

You will need the percent of votes required by your documents to make changes - not just those in attendance at the meeting.
And why would anyone vote for such a change? Who knows down the road if they might be late in making a payment? We have never been late with out payment, but I certainly would never vote for this change if I lived in your association. How are you going to explain the reason for your request to make this change? To bring in more money as Roger suggested? Or to make your life easier in calculating? There are dozens of interest calculators on google. Find one that works for you. A simple call to your state attorney general should get you the legal interest rate allowed in your state. Harold

MistyB (Texas)
Posts: 5

Posted:

Of course there needs to be a quorum before anything is voted on.

The HOA is a business and needs to be run as such. The interest is so low and doesn't even pay for postage most of the time. If there was a $25 or even $10 late charge then homeowners would take more notice. Misty

RogerB (Colorado)
Posts: 5,067

Posted:

Misty, I think you missed Harold's point. You can vote at the meeting to TRY to get approval to amend (a straw vote). But to amend the Covenants is not an easy matter which can be achieved by a vote at a meeting of just a quorum of the members. Your Covenants specify the percent required approval of all owners - usually 67% or more.

RogerB (Colorado)
Posts: 5,067

Posted:

Harold, all knowledgeable owners who pay on time should want late charges. It is the habitually delinquent owners who are against them.
The purpose of late charges is not to generate income. The primary purpose is to encourage prompt payment. A second reason is to not penalize those owners who pay on time. Because can cost the association more money for collection than the amount received; this cost can run into 1000's of dollars!

When there is no late charge there are usually many more delinquent accounts. It can get so bad that some associations do not have sufficient income to pay their annual expenses.

Yes Harold, you really do want late charges if you pay on time.

MistyB (Texas)
Posts: 5

Posted:

Roger, I didn't miss Harold's point. I know that trying to change Covenants are almost impossible. We do have By-laws that can be changed with just a quorum at the meeting right? After reading the by-laws again not the Covenants, they do say we can charge a late fee or use an attorney to collect the assessments which we do not want to do by any means. The attorney's fees are outrageous. I would rather pay a late charge then attorney's fees anyday. Misty

GlenL (Ohio)
Posts: 5,491

Posted:

Misty we do both, $35.00 late fee is charged each month for the first three months then it goes to the attorney who adds his fees on top of what is owed the Association. When he collects the delinquent homeowner in effect pays to be collected upon; better for everyone that they just pay on time.

Studies show that 5 out of 4 people have problems with fractions

MistyB (Texas)
Posts: 5

Posted:

Thank you so much everyone for all your information. I think I have enough to take to the Board and Members. Misty

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