Administering HOA fee due dates and late fees

It's good that you have searched your Bylaws. Have you searched your CC&Rs?

From what you have provided, I would interpret that to be:

1) Assessments are set on an annually (January - December)
2) Assessments are to be paid monthly
3) The monthly assessment is to be equal to 1/12 of the annual assessment.
4) The monthly assessment is due on the 1st of each month.

Typically, the CC&Rs will be the authority for establishing late charges and may even say when those charges apply. This is why I suggested reviewing the CC&Rs as well as the Bylaws.

CC&Rs = The Declaration of Covenants, Conditions and Restrictions.

They may also be referred to as simply "the Declaration." Basically, it's the document that is recorded with the County and attached to your deed specifying that you are part of an Association and these are the covenants, conditions and restrictions to your property that you must comply with.

In addition to the documents you speak of, your governing documents may also contain Articles of Incorporation (if your Association is incorporated) and various resolutions (formalized decisions of the board establishing various policies or guidelines)

An Annual Assessment is the amount of money each member (homeowner) of the Association is required to pay annually so the Association may meet it's expenses identified in the budget. An annual assessment is typically calculated by:

(total expected/budgeted annual expenses minus total annual/budgeted non-assessment income) divided by number of lots = amount of annual assessment per lot.

Non-assessment income (for the purpose of this calculation) may include: interest earned, fees for disclosure packages, transfers from the reserve funds, etc.

Sometimes, Assessments are referred to as HOA fees or dues.

Our Board had similar issues with unclear language in the legal documents. After clarification from our attorney, we established a policy for the collection of assessments and the imposition of late fees. I have attached this policy for your review. You must make sure that any provisions that you adopt are entirely consistent with your legal documents as others have suggested.

Jim

I found checking with your states collection policy helps. It is basically the same if someone wrote a bad check. Which banks are legally allowed to charge a fee on usually in the 20 to 30 range. Stay within those limits as a guide if not stated in the docs. Interest should also be addressed. It may say can not charge over the prime limit by over a certain amount of %. This is around 5 to 6% above prime rate. This is found in the loan sharking laws of your state. Judges do not like extreme amounts charged illegally.

We had a rule of pay by the 15th. After that a $20 late fee was charged. Our dues were $50 a month. So the late charge was nearly half the dues owed. However, do not judge your dues by the same proportion. You may just be able to charge the max amount of a bad check writing fee allowed in your state. It is a punitive thing to have a late fee but has to be reasonable and legal.

Ron

Attitudes will run from f'em they are behind so we can be capricious and gouge them (especially if we do not like them) to them poor folks are struggling so let us ease their burden.

I say the best course of action is be fair, reasonable, legal, consistent, let all know the procedure, and be politely firm.

Ron if your documents are silent on it, then my lay interpretation is that state law would prevail and late fees could be imposed after ten days grace period. Furthermore unless the documents provide differently ORC also proscribes how the fees shall be credited:

5311.18 Lien for common expenses.

(A)

(1) Unless otherwise provided by the declaration or the bylaws, the unit owners association has a lien upon the estate or interest of the owner in any unit and the appurtenant undivided interest in the common elements for the payment of any of the following expenses that are chargeable against the unit and that remain unpaid for ten days after any portion has become due and payable :

(a) The portion of the common expenses chargeable against the unit;

(b) Interest, administrative late fees, enforcement assessments, and collection costs, attorney's fees, and paralegal fees the association incurs if authorized by the declaration, the bylaws, or the rules of the unit owners association and if chargeable against the unit.

(2) Unless otherwise provided by the declaration, the bylaws, or the rules of the unit owners association, the association shall credit payments made by a unit owner for the expenses described in divisions (A)(1)(a) and (b) of this section in the following order of priority:

(a) First, to interest owed to the association;

(b) Second, to administrative late fees owed to the association;

(c) Third, to collection costs, attorney's fees, and paralegal fees incurred by the association;

(d) Fourth, to the principal amounts the unit owner owes to the association for the common expenses or penalty assessments chargeable against the unit.

To see the rest of this section or the entire 5311 you can go to: http://codes.ohio.gov/orc/5311

We simply do not have such a document. All we have are 1) our adopted community rules, 2) by-laws, and 3) the declaration. I have scanned all of them from front to back and there is nothing whatsoever about grace period (ie, when the fee is actually considered late), late fees, and the amount of the late fee. Would I need to contacted my county's recorder?

I have come across this in the ORC. However, it does not say anything about the grace period (when the fee is considered late) or who determines the amount of the later fee. That's where the issue is here.

We had a policy of 6 months we liened unless you were working with us to catch up on payments. A year we would CONSIDER foreclosure. It's because at 6 months that was the breaking point of our legal costs to file the lien. Plus it weeded out those who were "protesting" or just ignorant. Foreclosure CONSIDERATION was a year later. That's because there are many factors going into deciding to foreclose or keep a lien. You can't foreclose on active military personnel. Which deployments last about a year or more. It takes about a year of non-payment to the bank before they start foreclosure proceedings. Which you NEVER EVER want the HOA to foreclose on a house already in bank foreclosure. The bank is ALWAYS paid first. Which leaves only the "leftovers" for the HOA if there are any. Even in a HOA foreclosure, the bank is paid first and foremost. So your basically doing the work of the bank in many cases.

I say there is nothing wrong with keeping a lien on a property as long as you keep pressure on as well. However, it's important to have such a policy in place so that there is pressure and acknowledgement that action will be taken against those who owe.

you have the docs in PRECISELY reverse order

Our Association was all over the place until we adopted a formal collection policy and procedure. Before that, the debt collection was all over the place- the Board would place a lien against and foreclose on $400 past due but would do nothing with a past due account of $5K other than file a lien. It also didn't help that our Board president would go behind the scenes and "forgive" debt for his buddies. Our policy is to send 3 letters with the third letter serving as notice that the account would be sent for collection. Late fees incur after the 10 day grace period. Interest incurs as well (30 days past due?) at whatever rate is allowed per state law.

If you plan on foreclosing on liens, make sure you have a defined goal that will not hurt your community in the long run. In my Association's case, they foreclosed on some liens and auctioned off the Certificate of Titles. All that did was create a system where fly-by-night investors rented out the homes until the banks foreclosed. It has done nothing to give the neighborhood any stability. These "investors" do not do credit checks or background checks. They simply don't care about who is in the house- their only goal is to get their money out of it until the bank takes possession. They do not have the same vested interest as a legitimate owner who is renting out their property. Some "investors" have stripped the homes out prior to the bank taking possession. Things like major appliances that can be sold on the local Craigslist. In the meantime, the Association may be getting their payments, but it has also come at a greater price. To be honest, we would have been better off for the banks to foreclose anyway and just live a slight increase in our fees to make up for it. Our Board was too short sighted to think about all of the implications of foreclosing on these liens.

The key is to have a policy in place that is fair and evenly applied to all homeowners and a system that will benefit the community.

Ron,

You seem to have a common rule for collections w/ payment due on the first of every month, much like my community. Here are my HOA's rules:

1. Dues are due on the 1st

2. No late fees apply until you're a full 30 days late (the 1st of the next month) - Our late fee is $10 on a $41 monthly assessment

3. Optional: "Friendly" reminder letter sent at Day 45 (the 15th of the FOLLOWING month)

4. Follow your state collections law (or HOA collections law in some states) to a "T" when accounts reach greater than 45 days late.

Your HOA by-laws clearly set the 1st of every month as a due date, as you report it. Late fees and other collections logistics will fall to the HOA board to craft by local policy in accordance with state collections laws since your governing documents are silent.