Correct way to calculate Interest per Annum

CarlosB3 (Florida)
Posts: 47

Posted:

Hi Everyone,

Aside from charging a late fee on past due HOA assessments, we are also allowed to charge an interest fee
*In Florida we can charge 18% per annum

From my understanding, the 18% per annum is divided by 12 months and this gives us a monthly rate fee of 1.5%

If the above is accurate, my question is do we charge a monthly 1.5% on the late fees of the current month assesments or
is the fee applicable for the total balance due (accumulated of several months past due)

Example Below:
The monthly Fee is for $166.00
Owner 1 has not paid his assessments in 60 days and has a past due balance of $500.

At the end of the month is owner 1 charged 1.5% on only the monthly fee of $166
or is owner 1 charged 1.5% on the total past due of $500

I am unsure which is the correct way to calculate

Per our ByLaws
"If any Assessment is not paid within thirty (30) days (or such other
period of time established by the Board) after the due date, a late fee of $50.00 per month (or
such greater amount established by the Board). together with interest in an amount equal to the
maximum rate allowable by law (or such lesser rate established by the Board), per annum,
beginning from the due date until paid in full, may be levied"

Thank you

SheliaH (Indiana)
Posts: 6,964

Posted:

Why not talk to your association accountant about this? If you use spreadsheets like Excel, there are several formulas you can use to calculate stuff like this.

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

DeanJ
Posts: 1,786

Posted:

18% per annual isn’t much of a late fee.. On $500 your HOA may collect $7.50. My HOA has a late fee of 10% per month.

ElleN (Idaho)
Posts: 1,333

Posted:

Carlos, your HOA is subject to FS 720, correct? If so I am keeping mind that FS 720 says: "compound interest may not accrue on assessments and installments on assessments that are not paid when due." I believe this means no interest on either the interest or the late fees may be billed.

Quote:

Posted By CarlosB3 on 02/17/2025 6:30 AM

From my understanding, the 18% per annum is divided by 12 months and this gives us a monthly rate fee of 1.5%

I agree.

Quote:

Posted By CarlosB3 on 02/17/2025 6:30 AM

If the above is accurate, my question is do we charge a monthly 1.5% on the late fees of the current month assesments or
is the fee applicable for the total balance due (accumulated of several months past due)

Example Below:
The monthly Fee is for $166.00
Owner 1 has not paid his assessments in 60 days and has a past due balance of $500.

At the end of the month is owner 1 charged 1.5% on only the monthly fee of $166
or is owner 1 charged 1.5% on the total past due of $500

The interest owed for the third month only is 1.5% x $500.

The total owed is all the interest from the last three months + late fees + principal. If a typo were not too easy to make, I would type out the total owed.

I want someone to double who is math/accounting literate to double check me.

ElleN (Idaho)
Posts: 1,333

Posted:

Quote:

Posted By ElleN on 02/17/2025 9:30 AM
I want someone to double who is math/accounting literate to double check me.

Typo. The above should read:

I want someone who is math/accounting literate to double check me.

DeanJ
Posts: 1,786

Posted:

Quote:

Posted By ElleN on 02/17/2025 9:30 AM
Carlos, your HOA is subject to FS 720, correct? If so I am keeping mind that FS 720 says: "compound interest may not accrue on assessments and installments on assessments that are not paid when due." I believe this means no interest on either the interest or the late fees may be billed.

Posted By CarlosB3 on 02/17/2025 6:30 AM

From my understanding, the 18% per annum is divided by 12 months and this gives us a monthly rate fee of 1.5%

I agree.

Quote:

Posted By CarlosB3 on 02/17/2025 6:30 AM

If the above is accurate, my question is do we charge a monthly 1.5% on the late fees of the current month assesments or
is the fee applicable for the total balance due (accumulated of several months past due)

Example Below:
The monthly Fee is for $166.00
Owner 1 has not paid his assessments in 60 days and has a past due balance of $500.

At the end of the month is owner 1 charged 1.5% on only the monthly fee of $166
or is owner 1 charged 1.5% on the total past due of $500

The interest owed for the third month only is 1.5% x $500.

The total owed is all the interest from the last three months + late fees + principal. If a typo were not too easy to make, I would type out the total owed.

I want someone to double who is math/accounting literate to double check me.

If the HOA charged 1.5% per month and compounded the interest, the rate would be more than 18% over 12 months on the first missed payment. Per annum limits the rate to 18% a year on each missed payment.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By DeanJ on 02/17/2025 10:06 AM

If the HOA charged 1.5% per month and compounded the interest, the rate would be more than 18% over 12 months on the first missed payment. Per annum limits the rate to 18% a year on each missed payment.

I agree with you.

ElleN (Idaho)
Posts: 1,333

Posted:

Quote:

Posted By DeanJ on 02/17/2025 10:06 AM

Posted By ElleN on 02/17/2025 9:30 AM
Carlos, your HOA is subject to FS 720, correct? If so I am keeping mind that FS 720 says: "compound interest may not accrue on assessments and installments on assessments that are not paid when due." I believe this means no interest on either the interest or the late fees may be billed.

Posted By CarlosB3 on 02/17/2025 6:30 AM

From my understanding, the 18% per annum is divided by 12 months and this gives us a monthly rate fee of 1.5%

I agree.

Quote:

Posted By CarlosB3 on 02/17/2025 6:30 AM

If the above is accurate, my question is do we charge a monthly 1.5% on the late fees of the current month assesments or
is the fee applicable for the total balance due (accumulated of several months past due)

Example Below:
The monthly Fee is for $166.00
Owner 1 has not paid his assessments in 60 days and has a past due balance of $500.

At the end of the month is owner 1 charged 1.5% on only the monthly fee of $166
or is owner 1 charged 1.5% on the total past due of $500

The interest owed for the third month only is 1.5% x $500.

The total owed is all the interest from the last three months + late fees + principal. If a typo were not too easy to make, I would type out the total owed.

I want someone to double who is math/accounting literate to double check me.

If the HOA charged 1.5% per month and compounded the interest, the rate would be more than 18% over 12 months on the first missed payment. Per annum limits the rate to 18% a year on each missed payment.

If you are objecting to the calculations I posted, say so.

TimB4 (Tennessee)
Posts: 21,059

Posted:

See:

How to Calculate Monthly Interest

In regards to your question "do we charge a monthly 1.5% on the late fees of the current month assesments or
is the fee applicable for the total balance due"

You charge it on the current month assessment.

Otherwise, you would be charging compound interest which, as I read the citation you posted, is not allowed.

ElleN (Idaho)
Posts: 1,333

Posted:

Quote:

Posted By TimB4 on 02/18/2025 3:23 AM
In regards to your question "do we charge a monthly 1.5% on the late fees of the current month assesments or
is the fee applicable for the total balance due"

You charge it on the current month assessment.

Just saying: I am trying to avoid wording like "the current month assessment." This is because I believe Declarations say late fees and interest become an "assessment." In the latter case, charging interest on the "current month assessment" does result in charging interest on interest.

People should keep in mind that this is Florida, which has a statutory "non-compound interest" clause. Once the one-year mark is reached, and but for this statutory clause, things will be different, re charging interest on interest.

ElleN (Idaho)
Posts: 1,333

Posted:

Quote:

Posted By ElleN on 02/18/2025 6:17 AM
This is because I believe Declarations say late fees and interest become an "assessment."

Qualify the above with "often," please. That is, Declarations do not always say the above.

DeanJ
Posts: 1,786

Posted:

Quote:

Posted By ElleN on 02/17/2025 4:06 PM

Posted By DeanJ on 02/17/2025 10:06 AM

Posted By ElleN on 02/17/2025 9:30 AM
Carlos, your HOA is subject to FS 720, correct? If so I am keeping mind that FS 720 says: "compound interest may not accrue on assessments and installments on assessments that are not paid when due." I believe this means no interest on either the interest or the late fees may be billed.

Posted By CarlosB3 on 02/17/2025 6:30 AM

From my understanding, the 18% per annum is divided by 12 months and this gives us a monthly rate fee of 1.5%

I agree.

Quote:

Posted By CarlosB3 on 02/17/2025 6:30 AM

If the above is accurate, my question is do we charge a monthly 1.5% on the late fees of the current month assesments or
is the fee applicable for the total balance due (accumulated of several months past due)

Example Below:
The monthly Fee is for $166.00
Owner 1 has not paid his assessments in 60 days and has a past due balance of $500.

At the end of the month is owner 1 charged 1.5% on only the monthly fee of $166
or is owner 1 charged 1.5% on the total past due of $500

The interest owed for the third month only is 1.5% x $500.

The total owed is all the interest from the last three months + late fees + principal. If a typo were not too easy to make, I would type out the total owed.

I want someone to double who is math/accounting literate to double check me.

If the HOA charged 1.5% per month and compounded the interest, the rate would be more than 18% over 12 months on the first missed payment. Per annum limits the rate to 18% a year on each missed payment.

If you are objecting to the calculations I posted, say so.

I trying to state per annum is not compounded interest and why it isn’t.

ElleN (Idaho)
Posts: 1,333

Posted:

Quote:

Posted By DeanJ on 02/19/2025 10:03 PM
I trying to state per annum is not compounded interest and why it isn’t.

Year over year it certainly is compounded UNLESS state law forbids compounding.