Interest on Fines

I am aware that there is a CA statute that prohibits charging interest on fines.

I'm wondering if other states have a similar prohibition.

Thanks.

I had not really thought about this issue before but I found some puzzling language in ARS 33-1803(B):

"After notice and an opportunity to be heard, the board of directors may impose reasonable monetary penalties on members for violations of the declaration, bylaws and rules of the association. Notwithstanding any provision in the community documents, the board of directors shall not impose a charge for a late payment of a penalty that exceeds the greater of fifteen dollars or ten percent of the amount of the unpaid penalty. A payment is deemed late if it is unpaid fifteen or more days after its due date, unless the declaration, bylaws or rules of the association provide for a longer period. Any monies paid by a member for an unpaid penalty shall be applied first to the principal amount unpaid and then to the interest accrued. Notice pursuant to this subsection shall include information pertaining to the manner in which the penalty shall be enforced."

The puzzling part is that there is a fixed limit on the amount of late fees yet there is mention of interest accrued.

NPS

Is a late payment fee the same as interest? I do not believe so. I believe it is a separate allowable charge.

I have seen associations that deduct fines from dues and then be able to charge fees on the late dues.

I also believe one valid method is to allow multiple or increasing fines for the same offense if one reoffends in a given period of time like one year.

I think there are several different ways (as in several ways to skin a cat) to bring an offender into compliance.

We have one habitual dues non-payer. She owes $2400.00 ($600 per year) but the last bill presented to her by our law firm was for in excess of $6,000.00 what with interest, late charge, legal fees, etc. All perfectly legal according to our attorney.

I say there are several ways to skin a cat.

The reason fines can't be charged interest, as unlike late charges and assessment, which are contracted and specifically spelled out in the CCRs. Fines are not. Unless a fine was assessed for damaging the common area or property, fines have to be excluded from the lien and foreclosure process.

Associations generally are given the authority to create Rules and Regulation from the CCRs and the fine schedules, 99.9% of the time, will be in the Rules. But the fine in one association could be three times or more in another association for the same offense.

Interesting. In PA, lien amounts can be recovered through the foreclosure process.

The right to fine is established in the CC&Rs, but specific fines are revised by vote of the HOA Board.

Thanks everyone else for your thoughts. The specific question I was asking was much narrower than some of your replies. I was trying to find out if tacking interest charges on top of fines was allowed in your state.

Example. $500 fine. At 12% interest, the HOA could tack on another $5 (1%) a month on top of the $500. Over the course of a year, the $500 obligation grows to $560. But if interest on top of fines isn't allowed in your state, the obligation remains at $500 even if it doesn't get paid for many years.

We apply all payments first to charges, fines, attorney fees, etc. and then to assessments.

Typically, this means that any collections that requires the inclusion of interest is on assessments only.

Disagree.

The part about "the board of directors shall not impose a charge for a late payment of a penalty that exceeds the greater of fifteen dollars or ten percent of the amount of the unpaid penalty" is a pretty clear prohibition against charging any other fees, no matter what you call them.

BTW, Arizona HOA's brought this on themselves. About fifteen years ago an elderly widow got into a dispute with her association about trimming the rose bushes. They fined her and fined her before they foreclosed. Her $150,000 home sold at auction for just $26,000. That brought about some serious limitations on fines.

Actually, my reading of this statute is that there is one - and only one - remedy that the board may impose for unpaid fines. The board of directors may impose a charge for a late payment of a penalty that does not exceed the greater of fifteen dollars or ten percent of the amount of the unpaid penalty.

Had not thought about this part before but it looks like the member controls when this penalty is imposed. That is, the penalty may be levied whenever a late payment is made but there seems to be no provision for periodically imposing additional penalties. If the board levies a fine of $100 against me and I do not pay for two years, then I would owe $115 (fine + penalty). But if I paid $50 last year and $50 this year then each payment would be $65 ($50 + penalty). There is no provision for levying a penalty at any time other than when a payment is made.

BTW, here's the PA statute. As I read it, everything's fair game. Do you agree?

5315(A) "The association has a lien on a unit for any assessment levied against that unit or fines imposed against its unit owner from the time the assessment comes due. ... Unless the declaration otherwise provides, fees, charges, late charges, fines, and interest charged under section 5302(a)(10), (11), and (12) (relating to power of unit owners' association) and reasonable costs and expenses of the association, including legal fees, incurred in connection with collection of any sums due to the association by the unit owner or enforcement of the provisions of the declaration, bylaws, rules or regulations against the unit owner are enforceable as assessments under this section. "

Here's the other cited code sections:

§ 5302. Power of unit owners' association.
(a) General rule.--Except as provided in subsection (b) and subject to the provisions of the declaration and the limitations of this subpart, the association, even if unincorporated, may:
(10) Impose and receive payments, fees or charges for the use, except as limited by other provisions of this subpart, rental or operation of the common elements other than the limited common elements described in section 5202(2) and (3) (relating to unit boundaries).
(11) Impose charges for late payment of assessments and, after notice and an opportunity to be heard, levy reasonable fines for violations of the declaration, bylaws and rules and regulations of the association.
(12) Impose reasonable charges for the preparation and recording of amendments to the declaration, resale certificates required by section 5407 (relating to resales of units) which shall be one charge that may be made by the association solely because of the resale or retransfer of any unit or statement of unpaid assessments. In addition, an association may impose a capital improvement fee, but no other fees, on the resale or transfer of units ...

The "subsection (b)" exception only applies to HOAs where declarant is in control.

So I think our declaration is the only limiting factor.

My takeaway is that there are big differences in how you can handle fines and interest charges from state to state. My impression from what I've read here is that in CA, there are specific restrictions against charging interest on fines. In PA, it appears wide open.

Maybe this difference is because CA is more enlightened in the way that the state protects the individual against the HOA.

Or maybe PA is wide open because there hasn't been a widespread need to crack down on HOAs for mis-use of penalties.

I really don't know.

But I thought it was worth a shot trying to find out how different different states deal with the issue.

To answer your question - Do I feel "superior" because my HOA has more "power" than if we were in CA? Not at all.

I think that PA homeowners must be wary of over-reaching boards and that PA boards must have reasonable and consistent policies on how they impose penalties.

Interesting. So that might be one of the reasons that PA doesn't need to restrict interest on fines.

Here, full disclosure at ownership transfer is mandated by statute with the buyer getting walk-away rights if she doesn't like anything in those docs.

If wrong docs are provided, new owner can hold the HOA to the docs received. Errors do get made, and they can sometimes be corrected, but if it had to go to court, I don't think I could predict which way it would go. Really difficult situation.