How To Set Late Penalties for Past-Due HOA Management Fees

Updated March 30, 2022.

When it comes to homeowners associations, one of the board's most important duties is to establish and enforce rules and regulations. This includes setting late fee penalties for homeowners who do not pay their dues on time. It's important to set a strict system for late fees so that everyone is aware of what will happen if they don't pay on time. This helps to ensure consistent collection processes and avoid any confusion.

What's the best way for HOAs and condominium association to set and enforce late penalties for past-due management fees? Check out these insights from our expert community association management team!

Why Should HOA Board Members Charge Late Fees?

One of the most important reasons for HOAs and condo associations to charge late fees is to ensure that homeowners pay their dues on time. Late fees help motivate homeowners to make timely payments, and they also provide a financial deterrent for those who might be tempted to delay payment.

In addition, late fees can help associations cover the costs associated with late payments. This includes costs such as postage, phone calls, and email reminders. By charging a late fee, associations can offset some of these expenses and ensure that they are not financially impacted by late payments.

How Should HOA Boards Charge Late Fees?

There are a few ways that boards can set late fee penalties. These can include:

• A set amount is charged for every day that the payment is late. 

• Charging a percentage of the total amount due.  This percentage usually increases with each passing month. 

• A flat fee for every late payment, which can still lead to homeowners owing thousands of dollars in penalties.

If you're not sure which type of penalties make the most sense for your homeowners' association, professional HOA management services can help you determine and enforce the best structure!

How Can HOAs and Condo Associations Enforce Late Penalties?

Once the board has set the late fees, it's important to ensure homeowners are aware of them. This includes having clear rules on how homeowners can pay their dues and what happens if they don't pay by the due date. Typically, this information will be included in homeowners' association bylaws, but boards may want to send out additional notifications, so homeowners are frequently reminded about their choices.

One way that homeowners associations can keep homeowners informed of these policies is through physical mail, like notice letters. Boards can also call homeowners to remind them of their dues payment and ask whether they plan to pay on time. Finally, email reminders can be a great way to make sure homeowners have all the information they need about late payments.

Reminders Can Help Boards Collect Late HOA Management Fees

It's also important for associations to keep track of late payments and send out second notices if necessary. This documentation can help boards show that they have made multiple attempts to collect from homeowners who are delinquent on their dues.

Be Flexible With Late Fees

While it's essential for homeowners to know what will happen if they don't pay their dues on time, that doesn't mean you should shut homeowners out completely if they can't make a payment. It's important to preserve good relationships throughout the fee collection process. Some homeowners may have an emergency come up and need time to catch up on their payments over the next several months. Others may simply be unable to afford the dues at one point in time but could work something out with the association so that they can get on a payment plan. 

Boards for homeowner associations should be flexible when homeowners request extensions or payment plans, as long as they communicate this request in a timely manner and show an effort to get caught up.

Final Steps: Seek Legal Action and Foreclosure Rights

If homeowners are still not forthcoming about making late payments or are unable to come to an agreement with the board, then the association may need to take more drastic steps. This could include seeking legal action or foreclosure on the home. 

A professional homeowner association management company can help associations navigate these difficult waters and ensure that homeowners are held accountable for their actions. Boards should always consult with an attorney before making any decisions that could lead to a legal battle, as these cases can be complicated and costly.

Set and Enforce Late Fees With Professional HOA Management Services

At the end of the day, it's important for homeowners association boards to remember why they charge late fees in the first place. These penalties should not be used as a punishment against homeowners but rather as a way to motivate them to make payments on time and keep the community running smoothly. With careful planning and organization, condominium associations can successfully set late fee penalties that homeowners will understand and agree to. 

If you're struggling to collect routine management fees and late penalties, let Trestle Community Management help! We can review your association's policies and help with the challenging tasks of collecting routine dues from neighbors. 

Learn more about operating a successful condo association or HOA when downloading our free resource, "Best Practices for HOA Operations: A Checklist."