Management Company Charging HOA for homeowner fees

Started by ThomasO5 • 10 replies • 866 views

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ThomasO5 (Texas)
Posts: 38

Posted:

Is it legal in Texas for an HOA management company to charge the HOA for administrative fees that are unpaid by individual property owners? I don't understand why the HOA should have to pay those fees because of delinquent homeowners. Why should those of us who responsibly pay have to subsidize those who don't?

If it is illegal for a management company to do that, yet they do it, would that constitute embezzlement?

ThomasO5 (Texas)
Posts: 38

Posted:

Any law/legal reference would be greatly appreciated. Thanks.

SheliaH (Indiana)
Posts: 6,964

Posted:

If you want legal advice, go to an attorney - there are too many variables that may need to consider, so practicing "Internet law" is not a good idea.

That said, it sounds like you're referring to the fees the property manager may charge to send out late notices and keep track of if/when the person didn't pay, how much is owed, etc. That takes time and effort, so the association should pay for this service - and then change the delinquent homeowner to recoup those costs.

Our association's collection policy states that delinquent homeowners must pay late fees when assessments aren't paid in full and on time, and after 60 days we send the account to the association attorney. At that point, there's a $95 fee the homeowner must pay to cover the administrative costs, along with the late fees and delinquently assessments. If they still don't pay, legal expenses and attorney's fees will also be added to the bill.

All this should be part of your collection policy - read ALL OF IT to see what it says (there may be language saying the delinquent homeowner shall pay all collection costs and attorney's fees incurred by the association to pursue the debt). If you don't see that' talk to your board - which you should have already done - and urge them to add that language to the collection policy. Don't have a collection policy - enact one immediately!

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

AugustinD
Posts: 5,144

Posted:

My take: This dispute you have is the stuff of contract law, not criminal law. If the HOA does not think the contract authorizes the fees, then the HOA Board should have a talk with the management company.

As far as the HOA having to pay some of the costs of delinquent homeowners: This is likely covered in your HOA's governing documents (Declaration; CC&Rs; et cetera). Per the governing documents, often a HOA has the legal authority to lien the homes of delinquent homeowners. This often includes charging the delinquent homeowners the administrative costs of collecting the delinquent dollar amounts. Also many Declarations permit the charging of interest on money owed the HOA.

ThomasO5 (Texas)
Posts: 38

Posted:

Quote:

Posted By AugustinD on 04/16/2018 7:38 AM
My take: This dispute you have is the stuff of contract law, not criminal law. If the HOA does not think the contract authorizes the fees, then the HOA Board should have a talk with the management company.

As far as the HOA having to pay some of the costs of delinquent homeowners: This is likely covered in your HOA's governing documents (Declaration; CC&Rs; et cetera). Per the governing documents, often a HOA has the legal authority to lien the homes of delinquent homeowners. This often includes charging the delinquent homeowners the administrative costs of collecting the delinquent dollar amounts. Also many Declarations permit the charging of interest on money owed the HOA.

I need to better distinguish our HOA account as a separate account from individual homeowner accounts. I'm not saying the board has an issue with fees against individual homeowner accounts. My point is that our community manager is charging our HOA account for uncollected fees from individual accounts. That effectively means all the owners who are diligently paying assessments to the HOA account are effectively subsidizing delinquent accounts. Does that clarify my question?

ThomasO5 (Texas)
Posts: 38

Posted:

Quote:

Posted By AugustinD on 04/16/2018 7:38 AM

As far as the HOA having to pay some of the costs of delinquent homeowners: This is likely covered in your HOA's governing documents (Declaration; CC&Rs; et cetera).

Ok, I re-read your response and see that you suggested our governing docs might state whether our HOA is obligated to pay costs of delinquent homeowners. No, they do not make any such authorization. So my question about whether or not there is a state law that would apply is still an open question for me. Thanks for taking time to help me with the question.

ThomasO5 (Texas)
Posts: 38

Posted:

Quote:

Posted By SheliaH on 04/16/2018 7:17 AM
If you want legal advice, go to an attorney - there are too many variables that may need to consider, so practicing "Internet law" is not a good idea.

That said, it sounds like you're referring to the fees the property manager may charge to send out late notices and keep track of if/when the person didn't pay, how much is owed, etc. That takes time and effort, so the association should pay for this service - and then change the delinquent homeowner to recoup those costs.

Our association's collection policy states that delinquent homeowners must pay late fees when assessments aren't paid in full and on time, and after 60 days we send the account to the association attorney. At that point, there's a $95 fee the homeowner must pay to cover the administrative costs, along with the late fees and delinquently assessments. If they still don't pay, legal expenses and attorney's fees will also be added to the bill.

All this should be part of your collection policy - read ALL OF IT to see what it says (there may be language saying the delinquent homeowner shall pay all collection costs and attorney's fees incurred by the association to pursue the debt). If you don't see that' talk to your board - which you should have already done - and urge them to add that language to the collection policy. Don't have a collection policy - enact one immediately!

Thank you, Sheila. I'll investigate the collection policy.

KimberlyW2 (Tennessee)
Posts: 38

Posted:

Our management company charges a $10 " administrative fee " for each delinquent account- and they collect it each month out of HOA funds. However, the fee is always charged to the delinquent account along with a $15 late fee to be collected when the account is brought current by the homeowner. So, essentially the HOA pays it up front and is reimbursed ( so to speak ) by the delinquent owner at some point. I would think it is highly probable each of your delinquent accounts has this fee tacked on to the balance owed. Can you review each individual account and transaction history?

This extra " fee " charged to delinquent accounts is part of our contract with the management company.

Also, as a side note- sometimes our board will forgive late fees for an owner willing to pay in full, but we do not ever forgive the " administrative fee " because it has already been paid by the HOA.

Hope this helps!

K.

ThomasO5 (Texas)
Posts: 38

Posted:

Quote:

Posted By KimberlyW2 on 04/16/2018 8:10 AM
Our management company charges a $10 " administrative fee " for each delinquent account- and they collect it each month out of HOA funds. However, the fee is always charged to the delinquent account along with a $15 late fee to be collected when the account is brought current by the homeowner. So, essentially the HOA pays it up front and is reimbursed ( so to speak ) by the delinquent owner at some point. I would think it is highly probable each of your delinquent accounts has this fee tacked on to the balance owed. Can you review each individual account and transaction history?

This extra " fee " charged to delinquent accounts is part of our contract with the management company.

Also, as a side note- sometimes our board will forgive late fees for an owner willing to pay in full, but we do not ever forgive the " administrative fee " because it has already been paid by the HOA.

Hope this helps!

K.

Thank you, Kimberly. This answers my question. Thanks again.

BarbaraT1 (Texas)
Posts: 821

Posted:

Are you on the Board? If so, you should have access to the management contract which will state all the fees the management company will charge.

If they are charging fees that the Board agreed to pay per the contract, no that is not embezzlement.

When you review the contract, you should look for language regarding changing of fees and notification of such changes. If the contract is over a year old, the current fee structure might be different and the contract would probably address when and how the Board is notified of increases.

I know management companies have a terrible reputation and some of them may well deserve it, but there are costs associated with pursuing collections. The person sending out late notices and keeping track of delinquencies is a live human being who must be paid a living wage and employment tax, etc. The $10 or $25 the management company charges for a collection letter are what pays the salary of that person. And yes, there is a profit margin, because a management company is a for-profit enterprise.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

A HOA is only funded by it's members for it's members. Honestly, yes the "good" payers are paying for the "bad". I factored into our budget each month Atleast 5 - 7 out of 107 members NOT paying their dues that month. That may include those who are notoriously late or those with existing liens.

It's the old saying "To make money, you have to spend money". So if you don't like someone NOT paying their fair share, it costs money to collect. That maybe paying the MC to send out notifications, filing lien/foreclosure, or hiring a collection agency.

This is why late fees/penalties are also charged. To encourage those to pay their share or use that money to offset the cost of collecting from those who don't pay. It's the price you pay in being in a HOA if you want everyone to pay.

Former HOA President

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