Board Forgiving Late Fees?

SF7 (Texas)
Posts: 9

Posted:

HOA located in Texas. Several homeowners have past due HOA delinquent accounts with late fees/interests. The homeowners who owes the most amount of money knew that he was delinquent (we have proof of this) but just chooses not to pay. But few other homeowners who are on the list for smaller amounts have valid reasons as to why they should not have been charged late fees and have been trying to coordinate a solution with the management company for months without any success (it's a long story). Recent election chose new board members who are now trying to figure out this mess.

Question: Can the board choose to forgive the late fees/interests of some homeowners and not others? Or do ALL homeowners have to be treated the same (meaning if you forgive one, you have to forgive ALL)? Is there any law in Texas that addresses this? Our bylaws are silent on this matter.

RichardP13 (California)
Posts: 3,868

Posted:

You can't/shouldn't waive past due assessments, BUT late fees and/or interest is always on the table for negotiation purposes.

SF7 (Texas)
Posts: 9

Posted:

Quote:

Posted By RichardP13 on 05/16/2018 9:58 AM
You can't/shouldn't waive past due assessments, BUT late fees and/or interest is always on the table for negotiation purposes.

Thank you. We have no plans to forgive late assessments. We are wondering about the late fees/interest only.

The one homeowner who has not paid on purpose, his late fees/interests alone totals well over $3000! But the other 3 homeowners are all less than $100. We are just trying to figure out if we can forgive the late fees/interests on the homeowners who owe less than $100 and still go after that one guy who hasn't been paying on purpose. Frankly, we don't want to forgive any of his (again, long story there). As mentioned, our bylaws are silent on this and I can't seem to locate any Texas law.

TimB4 (Tennessee)
Posts: 21,062

Posted:

Yes, the Board can waive late charges on a case by case basis.

Typically, if the payment history is good, as Treasurer (with Board approval), I'll offer to waive charges if the account is brought current by mm/dd/yyyy. Otherwise, the charges stay.

If it's a long term delinquency, in order to avoid collections, we will offer to waive some (not all) of the charges providing the account is brought current through the end of the year.

BarbaraT1 (Texas)
Posts: 821

Posted:

You do run the risk of being accused of selective enforcement if you waive fees for some owners, but impose them on others. I suppose if your criteria is something like amount owed, or length of time owed vs. something more subjective, that risk might be mitigated, but you should probably ask a lawyer how defensible that position would be.

Late fees and interest are soft costs; you didn't incur any expenses to impose them so you won't be out any money by waiving them. At the end of the day, the goal is to collect the assessment, not punish the owner.

So, if you do want to offer waivers, I would suggest offering them to all owners, as a one time "amnesty" with a strict due date by which the remaining past due balance must be paid or a payment plan instituted (because in Texas, you do have to offer a payment plan). If they don't pay by that date, the fees remain in place.

Your homeowner who is refusing to pay will probably continue to refuse to pay, even with the waiver.

Make sure you separate out any collection or attorney fees though - these are fees your HOA paid to the management company or attorney to pursue collections and should not be waived.

BenA2 (Texas)
Posts: 1,273

Posted:

I don't believe there is any Texas law that would prevent you from waiving fees or penalties but you do have to treat all homeowners the same, but not necessarily every situation. In other words, if two homeowners are in the same or very similar situation you cannot waive fees for one and not the other. Obviously, someone who hasn't paid in several years and someone who missed one assessment are very different situations.

If you are going to waive fees and penalties you should have a defined policy to ensure everyone in similar situations are treated the same. If you decide to waive the penalty this year for everyone who owes less than $100 and (possibly a different board) decides not to next year, you could find yourself in a lawsuit for discrimination. Also, owners who pay on time will probably not like you waiving penalties for those who don't pay on time.

I would recommend not waiving penalties and fees except for established grace periods that apply to all. They are there to encourage people to pay on time. It is easy to forget a payment but it’s not unreasonable to pay a penalty when that happens. Most people understand that.

The only exception I would consider is when you are negotiating a settlement or payment plan. I don’t see anything wrong with forgiving some penalties and fees if you don’t believe you would get paid otherwise. However, if you keep up with filing liens you should eventually get all the money owed to you when the property is sold.

There is a Texas law (Sec. 209.0062) that requires you to have an alternative payment plan policy in which you cannot charge ADDITIONAL penalties, but you can charge interest and reasonable costs for administering the payment plan.

http://www.statutes.legis.state.tx.us/SOTWDocs/PR/htm/PR.209.htm

SF7 (Texas)
Posts: 9

Posted:

Thank you everyone!

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Late fees/Interest is a negotiable item. That is because they aren't "dues". They are more of a "fine". So if an owner is looking for a way to lower the amount owed but still paid, these can be removed. For me, an owner willing to pay and/or catch up on their dues deserves some negotiation.

Now having dealt with a person who refused to pay, they were fully charged everything. The legal costs of filing the liens, any outstanding special assessments, costs of notifications, late fees, interest, and any other associated collection costs. Plus we went ahead with foreclosure notification. Gave them notification we intended to foreclose on the lien. Which we ended up doing in the end.

Keep in mind foreclosure ONLY stops the bleeding. You don't make a "Profit" from foreclosing. It's a way to get the message out the HOA isn't above foreclosing if they have to. Otherwise, your going to get jerks like this thinking they can get away with it.

Former HOA President

KellyM3 (North Carolina)
Posts: 2,239

Posted:

Waiving one month's late fees allows the board to forgive an honest mistake and give cover for a homeowner to catch up without penalty. It's also reasonable and should apply to anyone really. Beyond that, it's not fair to the paying homeowners.

When HOA boards allow a homeowner to purposely not pay, then it's acting negligently and should take collections action immediately. Your responsible (and paying) homeowners are subsidizing this person in part.

RichardP13 (California)
Posts: 3,868

Posted:

Quote:

Posted By KellyM3 on 05/16/2018 6:05 PM
Waiving one month's late fees allows the board to forgive an honest mistake and give cover for a homeowner to catch up without penalty. It's also reasonable and should apply to anyone really. Beyond that, it's not fair to the paying homeowners.

When HOA boards allow a homeowner to purposely not pay, then it's acting negligently and should take collections action immediately. Your responsible (and paying) homeowners are subsidizing this person in part.

If a homeowner is, say, $2000.00 behind, including late fees and interest and they offer to bring the account current, I'll waived late fees and interest every day of the week and twice on Sunday. My job is to collect the assessments.

TimB4 (Tennessee)
Posts: 21,062

Posted:

Quote:

Posted By RichardP13 on 05/16/2018 6:27 PM

If a homeowner is, say, $2000.00 behind, including late fees and interest and they offer to bring the account current, I'll waived late fees and interest every day of the week and twice on Sunday. My job is to collect the assessments.

Agree. The goal is to have the assessments paid.
A side goal might be to have any costs associated with collecting covered (for example, we do not waive legal expenses).

The bottom line is the budget is based on assessments.
Late charges and other monetary penalties are there to encourage payment on time. The are not there as a revenue stream.

RichardP13 (California)
Posts: 3,868

Posted:

Quote:

Posted By TimB4 on 05/16/2018 7:28 PM

Posted By RichardP13 on 05/16/2018 6:27 PM

If a homeowner is, say, $2000.00 behind, including late fees and interest and they offer to bring the account current, I'll waived late fees and interest every day of the week and twice on Sunday. My job is to collect the assessments.

Agree. The goal is to have the assessments paid.
A side goal might be to have any costs associated with collecting covered (for example, we do not waive legal expenses).

The bottom line is the budget is based on assessments.
Late charges and other monetary penalties are there to encourage payment on time. The are not there as a revenue stream.

I have been fortunate in that I have never had to use a lawyer to collect assessments.

BenA2 (Texas)
Posts: 1,273

Posted:

Quote:

Posted By TimB4 on 05/16/2018 7:28 PM

Posted By RichardP13 on 05/16/2018 6:27 PM

If a homeowner is, say, $2000.00 behind, including late fees and interest and they offer to bring the account current, I'll waived late fees and interest every day of the week and twice on Sunday. My job is to collect the assessments.

Agree. The goal is to have the assessments paid.
A side goal might be to have any costs associated with collecting covered (for example, we do not waive legal expenses).

The bottom line is the budget is based on assessments.
Late charges and other monetary penalties are there to encourage payment on time. The are not there as a revenue stream.

True, you should not count on fees and penalties in your budget but it is still money owed to the association. Treating it like it is fluff and not as accounts receivable could get you in trouble.

Forgiving part of a debt may be in the best interests of the association in some circumstances but, generally, the board has a duty to collect it.

RichardP13 (California)
Posts: 3,868

Posted:

Quote:

Posted By BenA2 on 05/16/2018 8:43 PM

Posted By TimB4 on 05/16/2018 7:28 PM

Posted By RichardP13 on 05/16/2018 6:27 PM

If a homeowner is, say, $2000.00 behind, including late fees and interest and they offer to bring the account current, I'll waived late fees and interest every day of the week and twice on Sunday. My job is to collect the assessments.

Agree. The goal is to have the assessments paid.
A side goal might be to have any costs associated with collecting covered (for example, we do not waive legal expenses).

The bottom line is the budget is based on assessments.
Late charges and other monetary penalties are there to encourage payment on time. The are not there as a revenue stream.

True, you should not count on fees and penalties in your budget but it is still money owed to the association. Treating it like it is fluff and not as accounts receivable could get you in trouble.

Forgiving part of a debt may be in the best interests of the association in some circumstances but, generally, the board has a duty to collect it.

IF there is a management company involved, these are fees we would have negotiated in our contract. Same as a lawyer getting their fees if you allow them to handle collections.

MarkM19 (Texas)
Posts: 1,459

Posted:

Richard,
You commented on something I wanted to bring up.
Everyone in collections has 3 parts to the debt. First part is the actual assessment (You should never waive any of this) Second is the Late Fee say $10.00 (This fee is paid by the association monthly to the PM company and if waived will affects your HOAs bottom line) Third is the Interest on this debt (this is usually easy to right off if they pay the principle). I have always put in the offer letter to the person who you are negotiating with that if they are ever late again these fees can be added to the new debt.
The other comment I want to make is since Collections is a private matter between the Board and the debtor each negotiated deal is independent of the next deal. I do not see any way of a lawyer from a current debtor being able to get any records of past debtor’s deals.

RichardP13 (California)
Posts: 3,868

Posted:

Mark,

First, as you say, assessments are NEVER waived. Late fees generally are $10.00 or 10% of the assessment. If assessments are $400.00 per month, that can be a $40.00 late fee. Unlike other management companies I worked for in the past, I only collect a late fee ONCE a homeowner has paid it. The association is never out any money in that regard. Interest charged on any unpaid balance would always go to the HOA.

I handle the collection process all the way through filing and recording liens. Knock on wood, I have never had to use an attorney for any matter within an HOA.