January 2010

A reader on the HOAleader.com discussion board asks a simple question that has vexed many HOA and condo boards: What's a reasonable late fee? Here's a brief primer.

Two Guides: Your Docs and State Law

Whether your late fees are reasonable—or whether it's even possible for you to assess them—depends on state law and governing documents.

"First, look to your association documents to see if they allow you to charge late fees," suggests Matt Zifrony, who advises homeowners and condo associations at Tripp Scott, a Ft. Lauderdale law firm, and who's also the president of a 3,000-home association. "If they don't, you can't. Assuming they do allow you to—which most do—then look to at your state's condo or homeowners association statute to see if it sets a cap."

In Florida, statutes do cap late fees for both condos and homeowners associations. "Late fees have to be authorized by the governing documents and are limited to $25 per payment or 5 percent of the assessment installment," explains Lisa A. Magill, a shareholder and association attorney at Becker & Poliakoff PA in Fort Lauderdale, Fla. "So if residents are paying an annual assessment of $2,500, you could have a late fee of $125. But if they're paying $200 per month, you could still get $25, not the lesser amount of $10."

South Carolina, on the other hand, doesn't have a statute setting caps on late fees. "Some associations, rather than charging $25 for an administrative fee for late payments, charge an onerous amount," says Jeff Vinzani, an attorney at Nexsen Pruet LLC in Charleston, S.C., who represents associations. "But the fees have to be reasonable."

What's reasonable? "You know it when you see it," answers Vinzani. "If the assessments are less than $1,000 a year, you shouldn't charge a 25 percent late fee. It should be 5-10 percent, maybe. But anything over that gets onerous and unreasonable."

Specifically because there's no guidance on that issue, says Vinzani, South Carolina lawmakers have been considering a statute to regulate condos and homeowners associations. "It was introduced in the state senate last year, but it didn't pass," he explains. "That's one of the issues that came up—late fees—along with special assessments."

Don't Just Assess Fees, Collect Them

Whatever your governing documents and state law allow, be diligent in collecting late fees you've levied. "If payment is due by the 10th of the month, and it's not there on the 11th, we're charging those fees and sending out notices," says Robert White, managing director of KW Property Management & Consulting in Miami, which oversees about 125 associations totaling 30,000-35,000 units. "The first half of your job is to charge the fee and send the past-due notice. The second half is collecting it."

Then, be judicious deciding when—if ever—to waive a late fee you've properly assessed. "Obviously the board can decide who it's going to waive late fees for," says White. "We as a management company monitor that to make sure nobody's getting preferential treatment because if your neighbor, the president, often gets it waived, you might get into legal problems."