Excluded as Income. There is a difference of philosophy on whether associations should include late fees and fines as income in their budgets. Some argue against budgeting such income because it relies on the bad behavior of owners to supplement the association's income. In addition, projecting such income may be unreliable as members' behavior may change from year to year.
Included as Income. Others favor the inclusion of all sources of income so owners are not assessed too much money and the budget balances out at the end of the year. The caveat is that such income must be realistically collectible. It cannot be hoped-for income. Fines are notoriously difficult to collect and if late fees and fines are included in the budget, projections should be conservative.
Recommendation: Boards should work with their management companies to decide which approach is best for their association.
ASSISTANCE: Associations needing legal assistance can contact us. To stay current with issues affecting community associations, subscribe to the Davis-Stirling Newsletter.