Frequency of Late Fees
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FREQUENCY OF LATE FEES

QUESTION: If a payment is received on or after the 16th of the month, a late charge is applied. Can additional late charges be applied to the same unpaid amount every month thereafter? After all, the HOA does not have the use of that payment.

ANSWER: No, you cannot levy late charges month after month on the same unpaid assessment. A late charge is a one-time penalty of 10% or $10 (whichever is greater) to encourage timely payment of assessments. (Civ. Code §5650) Thereafter, you can charge interest at 12% until the assessment is paid (unless your governing documents set a lesser amount). (Civ. Code §5650) If you applied a late charge every month on the same delinquent assessment plus 12%, the effective interest rate would be an exorbitant 22%--a usurious rate reserved for credit card companies. Some argue that the effective annual interest rate is not 22% but more like 132%--10%/month x 12, plus 12% interest. Either way, the percentage is excessive.

Chronic Delinquency
. Even so, the same effect (of continuous late charges) can be achieved if an owner is paying his assessments but fails to bring them current, i.e., there is always an outstanding delinquent assessment, i.e., a chronic delinquency.

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Adams Stirling PLC