Charging HOA Late Fees and Interest

For a more precise answer, you probably need to consult the association attorney, as most of us aren't attorneys and what may be true in my state and governing documents may not be the same in yours.

In my community, we charge late fees for every month the owner is behind, and after 45 days, the account is sent to our attorney for collection. The homeowner also has to pay a collection fee (I think it's currently $50) to cover the fee our property manager changes to send out the letters and monitor the accounts. There are also fees for returned checks (paper or electronic) - we usually charge whatever the bank would charge us.

As for the late fee itself, it doesn't look to me like the statute states where this 5% would come from. For example, if your monthly fee is $150, does the statue allow you to charge $7.50 (which isn't very much)? Unless someone from Virginia can chime in on how this works, it may be better to start with charging a late fee, but once it goes to the attorney, take on 5% interest for every month the balance remains unpaid. For example, after 3 months of nonpayment, you might have $450 in dues and $75 in late fees ($25 for every month). Five percent of that ($525) would be $26.25, and now the homeowner is looking at owing the association $551.26, and you take on 5% on the balance every month thereafter. Have your attorney explain the statute and perhaps give you some scenerios where this could work for or against the association, and then make a decision. Be sure you notify the homeowners every year on late fees and interest and how they're computed, so they can't squawk they didn't know. We send outs a copy of the collection policy every year.

As a former Board treasurer, I looked at late fees as an incentive to pay assessments in full and on time every month, not as a money-maker for the association. That's why we found it easier to go with a late fee, collection costs after 45 days - and then we accelerated the assessments in that the rest of the year's assessments would immediately become due. All that, plus the homeowner is responsible for attorney fees and other legal expenses incurred in collecting the debt (such as filing a lien on the property). This wey we didn't have to bother with computing interest, as the ensuing balance was enough to make the homeowner take notice.

All that said, when a homeowner went chapter 13, the court usually made him or her pay interest on whatever amount it ordered the homeowner to repay us - we'd happily accept it, and although repayment often takes a long, long, LONG time, we'd get all the money back.

i agree the low amount doesnt deter....

so we charge the late fee at state maximum, say $5. But we have a lawyer do the paperwork, so add another $200 fee to pay the lawyer. 100% no late payments anymore.

I take back whatever I posted.

Charge whatever you think you can get away with.

If you're going to add language to your documents providing for late fees you should also consider language that allows the Board to waive them. Sometimes that's a desirable thing to do.

I guess throw out state statues and governing docs. I love it!

Wrong. In 1978, the U.S. Supreme Court unanimously decided in Marquette National Bank v. First of Omaha Corp. that credit card companies could export interest rates from where they were located to other states. HOAs cannot import interest rates from another state.

I did NOT post a thing about any number a state can charge. Simply stating that as a "Guide" to view what Banks/Credit companies comply to. It's NOT a perfect scale. Just a way to gauge if it's excessive or not enough. How hard is this to understand???

Going to dictate my answers and free advice now? If you think your HOA is overcharging or not charging enough, then looking at what OTHERS charge is usually a good GAUGE if your in the right ballbark. I am not responsible for looking at every single state or HOA document to provide someone an answer to every question they have. Can just give them a GAUGE if it seems out of place.