Late Charges & Interest
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LATE CHARGES & INTEREST

As provided for in Civil Code §5650(b), regular and special assessments are delinquent 15 days after they become due (unless an association's governing documents provide a longer period of time). If an assessment is delinquent, associations may recover all of the following:
  1. A late charge not to exceed 10% of the delinquent assessment or $10.00, whichever is greater (unless the CC&Rs specify a smaller amount).

  2. Interest on delinquent assessments, reasonable fees and costs of collection, and reasonable attorney's fees, at an annual interest rate not to exceed 12%, commencing 30 days after the assessment becomes due, unless the CC&Rs specify a lower interest rate, in which case the lesser rate applies.

  3. Reasonable attorneys' fees and costs incurred in collecting the delinquent assessment.

Authority to Collect. The authorization to collect late charges and interest need not be in the governing documents. Authority is granted by Civil Code §5650(b).

Fee or Penalty? Some try to argue that late fees cannot be greater than documented expenses to the HOA due to the delinquency. They use Civil Code §5600 to make their argument because the statute restricts associations from imposing assessments or fees that exceed the amount necessary to defray the costs for which it is levied. This fee restriction does not apply to late charges. Associations are allowed to charge a 10% fee regardless of the true costs incurred. That's because the 'fee' is actually a penalty to encourage owners to be on time with their payments.

No Interest on Fines. Associations cannot charge interest on unpaid fines. Civil Code §5725 prohibits an association from characterizing or treating a monetary penalty “imposed by the association as a disciplinary measure for failure of a member to comply with the governing instruments, except for the late payments” as an assessment. As provided for in Civil Code §5650(b)(3):
Interest on all sums imposed in accordance with this section, including the delinquent assessments, reasonable fees and costs of collection, and reasonable attorney's fees, at an annual interest rate not to exceed 12 percent ...
Since a monetary penalty does not fall into any of the categories described above, associations cannot charge interest on fines.

ASSISTANCE: Associations needing legal assistance can contact us. To stay current with issues affecting community associations, subscribe to the Davis-Stirling Newsletter.

Adams Stirling PLC