Interest and Delinquent report

MamandmM (Maryland)
Posts: 1

Posted:

I am a board member, serving as secretary. Our HOA charges late fees and interest. We are in Maryland so, although our docs state that payments may after 10 days past the due date are late, Maryland HOA Act takes that to 15 days.

I have two questions:

1. If a payment is due on the 1st of the month, late on the 16th (15 days after the due date) can interest be charged back to and including the first of the month? Currently, our management company is doing that and I believe it is inappropriate to include the due date in the calculation.

2. Our aging report uses the columns Current - Over 30 - Over 60 etc. If a payment is due on the first and has not been received by the 31st, I would put that payment in the Current column (as it is not PAST 30 days.) They put it in the past 30 days column.

The reason I ask is, to be consistent with our docs, we cut services (trash pickup, etc.) on members who's payments are over 60 days late.

I could see someone suing us for charging interest on the due date or cutting services too soon.

Thanks!

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Concerning yourself with a lawsuit at every turn is something needing to improve on. The reality is that if someone choose to sue their HOA, it would be like suing themselves and their neighbors. Which is my response is whenever someone threatened to sue us. People threaten to sue all the time. No need to fret and worry about it until the papers are served. Then guess what? The HOA can save itself time and money but filing a countersuit. It's cheaper and better option than them filing a suit against anyone. So next time someone threatens to sue, stop, breath...and look at the reality of what they are suing for and if that is something that isn't a bunch of hot air.

As for the interest on late fees...Here is my view on this. I don't believe in charging interest on the late fees at all. The time and place for that interest is more during the accural time of continued non-payment. Meaning I wouldn't charge interest on late fees since those are in themselves a punishment/incentive to pay on time. However, when it came to the time to place a lien or foreclose on the property, that would be the time to add on the interest as part of the overall bill. The bill for a lien/foreclosure usually includes non-paid dues, Special assessments, late fees, interest on the total amount owed (Dictated by your documents or state law to the amount of interest), and legal costs associated with filing the lien/foreclosure. It is at this point that charging the interest has more of a hammering effect with forcing a person to pay.

Make sure your documents say that you can deny certain services for non-payment. It's not always an option. Our HOA could turn the water off to a non-payer at one point in our history. However, that was because we had one water meter and our rules stated as such. It may sound unfair to provide services to those who don't pay but those services can't always be deprived. We couldn't stop mowing someone's yard because our HOA's main purpose was to provide lawncare. So non-payers got their lawnmowed but also had liens against them. So be careful in this area more than the charging of interest.

Former HOA President