When a homeowner fails to pay their dues, HOA late fees are usually the first penalty they face. That said, not all associations may have the authority to charge late fees, especially for amounts over a certain threshold. Board members must check state laws and their governing documents to confirm authority and avoid liability.
What are HOA Late Fees?
In an HOA, homeowners are obligated to pay regular dues. These dues cover the association’s day-to-day expenses. When dues are late, owners stand to face certain consequences, the first of which are homeowners association late fees.
Late fees are additional charges that associations levy when owners fail to pay their dues on time. These late fees serve as a deterrent for late payments. Because these fees can accumulate, they also push owners to settle their debt before the balance can grow.
To the association, late fees promote cash flow. When owners don’t pay their dues, the funds dry out. A high HOA delinquency rate can lead to deferred maintenance and halted services. Board members may be forced to increase dues for other paying owners, charge special assessments, or apply for a loan.
Can an HOA Charge Late Fees on Unpaid Dues?
State laws and the governing documents determine an association’s authority to charge HOA late fees. In Virginia, for instance, Section 55.1-1824 says that an HOA can charge a late fee if an owner doesn’t pay their dues on time, but there are a few limits.
First, boards must check the governing documents. If the CC&Rs or bylaws say something different about late fees, those rules control. If the documents are silent, then the board can still charge a late fee.
That said, it can’t exceed the maximum penalty allowed under Section 58.1-3915. Additionally, the late fee only applies if the payment is at least 60 days overdue. The board can’t charge it before that point.
Similar provisions exist for condominiums under Section 55.1-1964.
Key Features of an HOA Late Fee Policy
Associations should establish a fair late-fee policy and enforce it consistently across all residents. While the specifics can vary, such a policy typically addresses the timing, amount, and notice requirements for HOA late fees.
Timing
The policy should first outline when late fees for HOA dues take effect. Many associations offer a short grace period after the due date. During this time, payments are considered late, but no penalties are charged.
In Virginia, state law allows late fees only if the payment is 60 days overdue. Anything before that isn’t permitted. In many cases, fees continue to accrue until owners pay the balance. Because of this, debt can quickly balloon, making it even more difficult for owners to catch up.
Amount
Excessive HOA late fees are not allowed, with courts agreeing that the amount must be reasonable. In Virginia, Section 58.1-3915 caps late fees at 5% of the unpaid amount. The exception to this is if the governing documents say otherwise. Similar provisions exist for condominiums under Section 58.1-3915.
HOA Late Payment Notice
Most CC&Rs and bylaws require the board to provide notice before levying a late fee. This notice informs the owner that their regular fees are already overdue and that they will incur late fees if the debt remains unpaid. Additionally, the notice should clearly outline how much the owner owes.
Board members must remember to impose a deadline for settling the late fee, along with the principal amount. They should also inform the owner in the notice that other penalties may apply, such as liens and foreclosure.
How to Fight HOA Late Fees
Because late fees add to an owner’s financial burden, many seek ways to avoid paying the amount. This is not always possible. If the association followed proper procedure, then the late fee stands. Owners must pay them along with their principal debt or else face other consequences.
Of course, that doesn’t mean owners can’t attempt to negotiate with their HOA or condo board. An owner may ask the board to waive all late fees if they settle the original delinquent amount in full. If a one-time payment doesn’t seem feasible, the owner may request to enter a payment plan. Most boards will agree if this is the owner’s first case of delinquency.
Proper documentation is key here. Board members must mark the record clean after the owner has paid their debt. Similarly, the owner should ask for an acknowledgment receipt that proves they no longer owe the association money.
Can You Be Evicted for Not Paying HOA Fees?
While “eviction” isn’t the right term, an owner can lose their home if they fail to pay their dues. Late fees are only a small piece of the pie. Continuous failure to pay can lead to a host of other penalties, including foreclosure.
First, an association might take legal action against the owner. A court may order the owner to pay the debt or garnish their wages. A collection agency may also step in.
If those options don’t work, board members may file a lien against the home. Liens make it notably more difficult for an owner to sell their home or refinance their mortgage. They would need to settle the lien first.
Liens are not the worst of it, too. An HOA can foreclose on the lien, forcing the owner out of their own home. The association will then sell the home at a foreclosure sale to recover the unpaid amount.
The Best Approach
It is clear that HOA late fees are only the first step in a long collection process. Homeowners should diligently pay their dues to avoid incurring late fees and possibly graduating to more extreme collection measures. On the board’s part, while late fees are generally allowed, it is important to follow the requirements and procedures set forth in state laws and the governing documents. This way, they can protect the association and limit legal exposure.
Keymont Community Management offers expert management services to associations in Virginia, Maryland, and Washington, DC. Call us today at 703.752.8300 or request a proposal to start your journey!
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