HOA Late Fees

Started by DeniseG • 3 replies • 3416 views

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DeniseG (Colorado)
Posts: 9

Posted:

We are a 12 unit HOA that charges homeowners $15 a month late fee and a finance charge of 6% on any outstanding balance. My question is, if a unit owes $1000 and pays $100 (which are the monthly dues) is he still charged the $15 late fee? One owner thinks that if he pays $100 he should not be charged a $15 late fee because he paid the last months dues, eventhough he has an outstanding balance of $1000.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Denise,

That would depend if the $100 payment was identified by a comment in the memo line and/or a letter or coupon indicating what the payment was for. It would also depend on what your Association published policies are on how payments are applied.

Example:

If I failed to pay Jan but in Feb you received a payment with Feb coupon or it was annotated in the memo line that it was for Feb Assessment, I would only owe a late fee for the Jan payment plus interest on the Jan payment.

However, if you have a published policy saying all payments will be applied to outstanding debts first, or if there was no indication on what the payment was specifically for, then the payment received in Feb (irregardless of the annotation) is applied for JAN and I would owe another late fee plus interest.

Personally, I believe that if there is no published policy, the benefit of the doubt should go to the homeowner and the Association should adopt and publish a policy. Especially if this is a hicup and not the norm with this homeowner. I would recommend working with the member this time.

Tim

MaryA1 (Arizona)
Posts: 7,043

Posted:

Denise,

IMO, it would depend upon your collection policy and how the late fees are calculated. Are they levied for each month the account is delinquent or for only one month? IMO, this account is still delinquent and should be subject to late fees. Check your state laws to see if there is a statute dealing with this. In AZ, state law says payments must first be applied to the assessment but I've heard of some states where the payment is first applied to the late fees.

RogerB (Colorado)
Posts: 5,067

Posted:

Denise, you should have a published policy on delinquent assessments which has been given to all owners. We suggest the following be part of that policy "payments shall apply to the oldest outstanding balance" and "a late charge of $XX.00 shall be applied when there is an outstanding account balance over $XX.00 after a XX day grace period."

Regarding interest, if charged, we suggest 1.00% or 2.00% monthly. What does 6% mean? If you mean 6.00% APR how do you calculate it each month? And is the amount worth the time involved in the calculation and posting? Following are two examples:
1) 6.00% APR. balance on 2/1/10 of $423.68. What would interest charge be on 3/1/10?
2) 1.00% per month. balance on 2/1/10 of $423.68. What would interest charge be on 3/1/10? answer = $4.24

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