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Subject: Late fees 50k+ 3 years late 18% per annum $25 per month increasing $5 per month
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ChristopherB8
(Texas)

Posts:5


05/11/2020 3:08 PM  
Hello everyone,

I have a question about the current late fees at my HOA.

We charge 18% per annum and a $25 late fee per month increasing $5 per month.

My question is there a Cap to late fees?

The current delinquent owner owes around $110k on two units they haven't paid on since 10/17.

That's around

$27k in past dues
$6-7K in interest
$80k in Late fees

With that said we voted to increase the late fees $5 a month after the Same Owner did this once before. We wiped all fees and interest and gave the owner a clean slate.

The owner voted on the $5 per month increase, which was put in place to decentivize this from happening again.

I just want to make sure we are within the law. We never anticipated someone would fail to pay dues for almost three years. These two units account for %30 of the total dues for the HOA. We have had to increase dues for other units and cut back on any maintenance and even ask people to pre-pay dues just to pay the bills.

Please help me get my HOA in order. Thank you in advance!
MarkW18


Posts:1168


05/11/2020 3:16 PM  
First, the amount you charge for late fees should be spelled out in your CCR's.

At first glance and bvased on what you posted, your monthly dues are $7.00 and if you're late, $25.00 is tacked on, plus the interest.
ChristopherB8
(Texas)

Posts:5


05/11/2020 3:19 PM  
Monthly Dues are $861 between two units with 18% per ammum and $25 the fist month $30 the second $35 the next.
MarkW18


Posts:1168


05/11/2020 3:30 PM  
Posted By ChristopherB8 on 05/11/2020 3:19 PM
Monthly Dues are $861 between two units with 18% per ammum and $25 the fist month $30 the second $35 the next.



So, how do you get $27K is past due assessments and $80K in late fees?
SheliaH
(Indiana)

Posts:3302


05/11/2020 4:20 PM  
If this person owes the association $110K in assessments, the amount of late fees is the least of your worries - why haven't you pulled the trigger and taken legal action???? The longer you wait, the less likely you stand to collect and for the board to let this ride this long is totally unacceptable.

Since the laws vary by state, you should check with what's happening in yours - and get this account to your association attorney post-haste to file a lien and take whatever legal action is necessary. Make sure your attorney also asks that the homeowner pay all costs, legal and otherwise, that the association incurred in pursuing this (finally).

And work with your attorney to develop a real collection policy and distribute it to the homeowners with an effective (immediately would be good) and start enforcing it. Ours sends delinquencies to the attorney after 45 days, homeowners lose their right to vote in board elections, run for a spot or must step down if they become delinquent, are prohibited from renting the clubhouse (also applicable to the tenants if they rent out their units), payment plans have to be approved by the board and its decision is final, and collection efforts can and will include garnishment and foreclosure as a last resort. WE also file proof of claims if there's a chapter 7 or 11 bankruptcy filing. Those are things you can consider depending on your community's needs.
MelissaP1
(Alabama)

Posts:9408


05/11/2020 4:58 PM  
Late fees and interest are PUNITIVE charges. It is meant to correct the not paying dues.

Now I am not sure if your HOA has a lien on file for this property? If not, why not? This is a way to force the owner to pay up if they sell those properties. They can't sell the home without paying the amount owed on the lien.

It could be at the point of considering foreclosure (after lien filed). However, that is just a "stop the bleeding" option. Your most likely not going to see a dime of the money. It is just to get them out so can get new owners in that WILL pay their dues.

You don't say if the bank is foreclosing or not. They are making their mortgage payments, then a HOA foreclosure may be a consideration. If they are being foreclosed on by the bank, then HOA should just keep lien on file. Otherwise doing the work of the Bank as they get paid first regardless.

Now will say that some charges can be negotiated when lifting a lien or trying to prevent foreclosure. Those fees for late and interest can be tossed out if willing to pay straight dues owed. That often works to negotiate terms to get money owed.

Former HOA President
MarkW18


Posts:1168


05/11/2020 5:12 PM  
Posted By ChristopherB8 on 05/11/2020 3:08 PM
Hello everyone,

I have a question about the current late fees at my HOA.

We charge 18% per annum and a $25 late fee per month increasing $5 per month.

My question is there a Cap to late fees?

The current delinquent owner owes around $110k on two units they haven't paid on since 10/17.

That's around

$27k in past dues
$6-7K in interest
$80k in Late fees

With that said we voted to increase the late fees $5 a month after the Same Owner did this once before. We wiped all fees and interest and gave the owner a clean slate.

The owner voted on the $5 per month increase, which was put in place to decentivize this from happening again.

I just want to make sure we are within the law. We never anticipated someone would fail to pay dues for almost three years. These two units account for %30 of the total dues for the HOA. We have had to increase dues for other units and cut back on any maintenance and even ask people to pre-pay dues just to pay the bills.

Please help me get my HOA in order. Thank you in advance!


I probably would have suggested asking questions, maybe, two and a half years ago.
ChristopherB8
(Texas)

Posts:5


05/11/2020 5:33 PM  
We have had liens for over a year and we have come to the end of our waiting period to foreclose on both units.

The owner has been in the process of selling the units which is why we held up on forclosure.

One of the units is closing next month so I'm just trying to get the paperwork squared away. The other will be forclosed on unless we are made whole when the sale of the unit goes through.

If the sale doesn't happen they will both be foreclosed on.
ChristopherB8
(Texas)

Posts:5


05/11/2020 5:36 PM  
(1) Post any relevant topic you like, but please keep it clean, "helpful, positive" and friendly.
ChristopherB8
(Texas)

Posts:5


05/11/2020 5:50 PM  
Is there a cap on late fees?
DaveP8
(Oklahoma)

Posts:19


05/12/2020 6:20 AM  
Late fees and interest more than 3 times the actual dues amount seems excessive. If this went to court, it's unlikely any judge would approve those fees.
BillH10
(Texas)

Posts:510


05/12/2020 7:28 AM  
Christopher, are you in a HOA or condominium association? The Property Codes which apply to HOAs in Texas are very different than those which apply to condominium associations. Also, if you are in the Houston area, there are special carve-outs in the codes regarding certain counties.

Both the 18% past due interest and escalating late payment charge seem excessive. A flat rate of $25.00 per month per account does not. I am not aware of a cap on late payment charges, the escalator clause does give me pause.

If two units/homes are involved you should have two separate accounts regardless of common ownership. Each account should be assessed its own late payment charge.

If you are in a HOA, as SheilaH suggests above you should have long since had in place a documented, distributed, and filed collection process, including a timeline. Creating and filing one was pretty much mandated by the Legislature for HOAs in the 2011 session. If you are in an HOA, do you have such a policy? Is it being followed? Is the Association attorney involved in what is taking place?

Since one unit/home is scheduled to close soon, who prepared the (TREC) Resale Certificate and Resale Certificate package for the use of the title company and the buyer? The Resale Certificate should contain instructions to the title company to withhold funds from the seller's proceeds of the sale for remittance to the Association to meet the outstanding obligations.
MelissaP1
(Alabama)

Posts:9408


05/12/2020 3:48 PM  
The limits are probably defined in your state laws under "Loan sharking". Which typically applies to how much one can fine or collect interest on. It varies for each state. Our By-laws or CC&R's had in it what we could based on the prime rate plus 5% or something like that in it for interest could charge.

Loan sharking laws apply in cases of trying to collect more money in "fees/fines" than one is entitled to. So that would be something need to consider when collecting.

Former HOA President
JaredC
(Texas)

Posts:260


05/12/2020 7:49 PM  
Former Texas HOA president here with an exactly similar problem, previously. The main question was asked but not answered: HOA or COA? More specifically are you governed by Chapter 80/81 or 209.

Quick answer: If the properties are foreclosed upon by a bank that, probably, has first right of foreclosure then kiss your fees goodbye. Get on the stick and solve these problems within months not years. Don't be the nice guy manipulated by people who don't pay. Follow your collection policy as hopefully filed according to Texas state law. Have your open meetings that include special sessions which are authorized to pursue legal enforcement actions and make sure to summarize those minutes, without detail, in the official minutes. Get it early, get it fast. Just sayin.
JaredC
(Texas)

Posts:260


05/12/2020 7:54 PM  
Oh. My Bad. No. There is no limit on late fees.
JaredC
(Texas)

Posts:260


05/12/2020 8:01 PM  
A few days, perhaps a few weeks, and even a few months of missed payments can be due to a job loss or some understandable situation that requires board discretion. If it's more than 6 months of bad payments then you're being smilef****ed. Use state law, offer payment plans longer than the 90 day requirement, use your discretion but don't be taken advantage of.
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Forums > Homeowner Association > HOA Discussions > Late fees 50k+ 3 years late 18% per annum $25 per month increasing $5 per month



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