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Subject: How to calculate late fees in North Carolina
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SusanH31
(North Carolina)

Posts:24


10/04/2021 12:56 PM  
My HOA was created by a developer and turned over to the residents this past March. I am the first treasurer, and we are not using a management company. Would anyone like to help me figure out how to calculate late fees, please? First I'll post the NC law and relevant CC&R language.

North Carolina law (G.S. 47F-3-102 #11):
the association may "Impose reasonable charges for late payment of assessments, not to exceed the greater of twenty dollars ($20.00) per month or ten percent (10%) of any assessment installment unpaid and, after notice and an opportunity to be heard, suspend privileges or services provided by the association (except rights of access to lots) during any period that assessments or other amounts due and owing to the association remain unpaid for a period of 30 days or longer."

The HOA's CC&Rs:
"In the event any Assessments or any portion thereof are not paid when due the same shall be subject to a late charge in an amount determined and uniformly applied by the Board from time to time and the Owner of such Lot or Dwelling shall be deemed in default herewith. In the event any Assessments or any portion thereof are not paid within thirty (30) days after the due date of the same, then the unpaid portion of the Assessment shall accrue simple interest at the lesser of eighteen percent (18%) per annum or the highest rate which may be charged to said Owner by law (the "Applicable Rate") from and after the thirtieth (30) day from the due date until the same is paid in full. In the event the Association employs an attorney or otherwise takes any legal action in attempting to collect any amounts due from any Owner, such Owner agrees to pay all attorney's fees, court costs, and all other expenses paid or incurred by the Association in attempting to collect any unpaid Assessments."

The NC law talks about the greater of $20 per month or 10% of an unpaid amount. Am I supposed to calculate this once a month? The CC&Rs talk about 18% per annum. Should that be calculated monthly too? In other words, if someone owes $170, and they are 34 days late, do I charge them $170 * (.18 / 365 * 4) for 4 days after the 30 and a different amount if they paid after 7 days, or do they get hit with a month's worth whether they pay it 1 day or 30 days late? $170 * (.18 / 12)

While I'm asking, how do you handle due dates? Is it reasonable to say the monthly amount is due on the 1st of each month and that late fees begin after 30 days?

Thanks in advance!
HenryS6
(Arizona)

Posts:80


10/04/2021 12:57 PM  
I would highly recommend hiring someone to do this for you, rather than for you to spend a lot of your personal time to save your neighbors $4/month.
PatJ1
(North Carolina)

Posts:254


10/04/2021 1:11 PM  
Our governing documents caps "interest on late payments" at 12%. It does not mention late fees charged. We charge a flat late fee and don't call it interest. We may be in the wrong. Another issue for research on the list.

Board members are volunteers. Many have no idea what they're doing. Educate them. Don't beat them up.
PatJ1
(North Carolina)

Posts:254


10/04/2021 1:18 PM  
No edit button here. Our monthly dues are due on the 1st, payable until the 30th. If there is a balance after the 1st, it gets a late fee of $20.00 if the balance on the account is over $50.00. Allows for those couple of months when dues might increase at the 1st of the year. The $50.00 was a board decision many years ago and has helped not charging late fees on our tiny allowed dues increase of $4-5.00.

Board members are volunteers. Many have no idea what they're doing. Educate them. Don't beat them up.
SusanH31
(North Carolina)

Posts:24


10/05/2021 9:48 AM  
So if someone owes $75 and they pay on the 5th of the month, are they charged an extra $20?
SusanH31
(North Carolina)

Posts:24


10/05/2021 1:25 PM  
Wouldn't the person be charged $20 instead of $7.50 since the NC law says they can be charged the GREATER of $20 or 10%?
JohnC46
(South Carolina)

Posts:11539


10/05/2021 1:31 PM  
Let us not forget that any collection expenses can also be added to unpaid dues amount. We had one late payer who the actual amount late was of unpaid sues was $1,800.00 (3 years) but with late payments, interest fees, collection costs, lawyer costs, they ended up owing over $5,000.00.
JohnC46
(South Carolina)

Posts:11539


10/05/2021 1:35 PM  
Posted By RollandE1 on 10/05/2021 1:33 PM
Posted By JohnC46 on 10/05/2021 1:31 PM
Let us not forget that any collection expenses can also be added to unpaid dues amount. We had one late payer who the actual amount late was of unpaid sues was $1,800.00 (3 years) but with late payments, interest fees, collection costs, lawyer costs, they ended up owing over $5,000.00.




and that's why people hate hoa's and the irs. the fees are beyond ridiculous.



Do you expect your association to "eat" the non payments and collection fees?
JohnT38
(South Carolina)

Posts:768


10/05/2021 1:35 PM  
Posted By RollandE1 on 10/05/2021 1:32 PM
Posted By SusanH31 on 10/05/2021 1:25 PM
Wouldn't the person be charged $20 instead of $7.50 since the NC law says they can be charged the GREATER of $20 or 10%?




you can do what ever you want, if the hoa really needs that extra $13 go for it. Just remember Karma. If you start treating your neighbors like a bank account you not be very well liked.




I don't give a shit if I'm liked or not. I'm always going to try and set the monthly fees and the reserve fund based on supporting data that backs it up.
SusanH31
(North Carolina)

Posts:24


10/05/2021 1:35 PM  
Thanks for weighing in. Let me see if I understand about the grace period. Say the due date is the 1st of the month. Without a grace period, would the dues be late AND subject to one month's worth of late fees if not received on the 2nd of the month?

I think our CCRs should be legal because they say interest owed on the unpaid dues is the LESSER of 18% (divided by 12 for 1 month) -OR- the highest rate allowed by law. Quoting the relevant sentence below...

"In the event any Assessments or any portion thereof are not paid within thirty (30) days after the due date of the same, then the unpaid portion of the Assessment shall accrue simple interest at the lesser of eighteen percent (18%) per annum or the highest rate which may be charged to said Owner by law"

Your mention of a grace period also makes me think our CCRs specify a 30 day grace period. Does it sound that way to you too?

Thanks again!
SusanH31
(North Carolina)

Posts:24


10/05/2021 1:41 PM  
I'm trying to figure out what the rules are in the first place. It sounds like my CCRs specify that if the unpaid dues are $170, and they are late 1 month, all I can charge is 1 month's worth of interest at 18% which comes to a whopping $2.55.
MaxB4


Posts:1394


10/05/2021 1:44 PM  
Posted By SusanH31 on 10/05/2021 1:41 PM
I'm trying to figure out what the rules are in the first place. It sounds like my CCRs specify that if the unpaid dues are $170, and they are late 1 month, all I can charge is 1 month's worth of interest at 18% which comes to a whopping $2.55.



Just curious, what is your role in the HOA?
SusanH31
(North Carolina)

Posts:24


10/05/2021 1:46 PM  
I'm the Treasurer but not a lawyer, so I'm trying to get this right.
SusanH31
(North Carolina)

Posts:24


10/05/2021 1:50 PM  
Does the CCR language sound like it mandates a 30 day grace period to y'all? For example:

Due date of September dues: Sept 1
Last day of grace period: Sept 30
Late date: Oct 1
Amount due on or after Oct. 1 = $170 + $2.55 + $170 for October dues.

Correct?
MaxB4


Posts:1394


10/05/2021 1:57 PM  
Posted By SusanH31 on 10/05/2021 1:46 PM
I'm the Treasurer but not a lawyer, so I'm trying to get this right.



You may need to speak with an attorney. None of us here have access to your governing docs.

Many governing documents will states assessments are due on the 1st and become delinquent after the 15th. On the 16th, a late fee can be assessed. Your mortgage note will have similar language. State law may or may not have higher authority than your governing docs. So in short, you need to know what is state law and does it conflict with your docs. What is the max allowed for late fees, what is the max allowed for interest, What are your priority of payments. When do assessments first become delinquent.

If you have a PM, they should know this stuff. If you are self managed, get professional help, this is not an area you want to screw up.
MelissaP1
(Alabama)

Posts:10534


10/05/2021 2:58 PM  
First late fees are NOT considered "income" for the HOA. They are PUNITIVE charges. So you can't base anything in your budget based on punitive charges. This includes fines. Late fees are charged as punishment for not meeting the deadline. Thinking your going to use this money for "projects" in your HOA is not the way to go. Plus fines/late fees/interest are often used as negotiation tools when trying to get someone to avoid lien/foreclosures.

I think people are forgetting the best resource to look at for what to charge... Bank charges for returned checks. Go to any store and look at what stores charge for returned or bad checks. That is most likely the best gauge of "legal" charges you can charge in your area. Banks and Credit Card companies follow the laws when it comes to late fees/charges. Why would you not charge someone the same for a bad check since the HOA has to pay that charge?

Former HOA President
MaxB4


Posts:1394


10/05/2021 3:10 PM  
Posted By RollandE1 on 10/05/2021 3:02 PM
Posted By MelissaP1 on 10/05/2021 2:58 PM

I think people are forgetting the best resource to look at for what to charge... Bank charges for returned checks. Go to any store and look at what stores charge for returned or bad checks. That is most likely the best gauge of "legal" charges you can charge in your area. Banks and Credit Card companies follow the laws when it comes to late fees/charges. Why would you not charge someone the same for a bad check since the HOA has to pay that charge?



because the CC&R's state 18% annually is the late fee. she's doing the math right.



What is the state max, as that will always take precedence?
MelissaP1
(Alabama)

Posts:10534


10/05/2021 3:18 PM  
I am not debating the math. Just the legal gauge one should use when establishing late fees. Just because it says 18% doesn't mean the state law allows it.

Former HOA President
MaxB4


Posts:1394


10/05/2021 6:50 PM  
Posted By RollandE1 on 10/05/2021 6:39 PM
sorry did not clarify. the state max listed is $20 or 10% which ever is greater per month, since they are larger than her hoa's 1.5% per month late fee (18% annually) the hoa math is the way to go.



One is late fee, the other is interest rate.
MelissaP1
(Alabama)

Posts:10534


10/05/2021 8:37 PM  
The HOA can't exceed state/local/federal laws. Just because the CC&R's say this amount does not make it legal.

Former HOA President
MichaelH34
(North Carolina)

Posts:43


10/06/2021 2:42 AM  
Posted By MelissaP1 on 10/05/2021 8:37 PM
The HOA can't exceed state/local/federal laws. Just because the CC&R's say this amount does not make it legal.




Add to this that we have very clear guidance from our lawyer and other sources that the order of precedence is Fed / State / CCRs / Bylaws / Rules and Regs and that the only time regs at a lower level apply is where they don't conflict with a higher level or where the higher level is silent on the subject.
PatJ1
(North Carolina)

Posts:254


10/06/2021 3:00 AM  
Posted By MichaelH34 on 10/06/2021 2:42 AM
Posted By MelissaP1 on 10/05/2021 8:37 PM
The HOA can't exceed state/local/federal laws. Just because the CC&R's say this amount does not make it legal.




Add to this that we have very clear guidance from our lawyer and other sources that the order of precedence is Fed / State / CCRs / Bylaws / Rules and Regs and that the only time regs at a lower level apply is where they don't conflict with a higher level or where the higher level is silent on the subject.




Thank you. Great way of putting it. Going to add this to a list I keep to explain HOA stuff.


Board members are volunteers. Many have no idea what they're doing. Educate them. Don't beat them up.
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Forums > Homeowner Association > HOA Discussions > How to calculate late fees in North Carolina



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