How much can HOAs collect in late fees and interest?

The amount of late fees and interest that can be charged by homeowners’ associations is usually established by a state’s HOA statute and the community’s declaration. Associations cannot charge late fees or interest arbitrarily—they must be able to rely on a declaration, state statute, or both.  See, e.g., O.C.G.A. §44-3-232; Tex. Prop. Code §204.010(10).

In many states, HOAs can charge interest rates and late fees up to a statutory maximum, and individual HOAs can charge less but not more. North Carolina and Florida, for example, set maximum rates of 18.00%.  N.C.G.S. §47F-3-115; Fla. Stat. §720.3085(3).  

Late fees up to the greater of $25 or five percent of the past-due installment can be charged in Florida.  Fla. Stat. §720.3085(3). In North Carolina, the maximum late fee cannot exceed the greater of $20 or ten percent of the delinquent amount. N.C.G.S. §47F-3-102(11).  

What other charges are HOAs allowed to collect?

As with interest and late fees, other permissible charges are determined by state HOA statutes and community declarations. Under the Uniform Common Interest Ownership Act (“UCIOA”), adopted by several states, HOAs can charge fines for violations of community rules and collection costs or attorneys’ fees if the association is required to incur them. UCIOA §3-116.  

Other sometimes-permissible fees include returned check charges and the costs of administering payment plans. Most jurisdictions let HOAs charge fees to homeowners who request to inspect HOA records. However, the amount is typically limited to the actual expense incurred by the association in producing the documents.  Fla. Stat. §720.303(5); Tex. Prop. Code § 209.005(i); N.C.G.S. §55A-16-03.  

Why do homeowners have to pay legal fees?

Though collection costs, attorneys’ fees, and other legal fees are not authorized in every jurisdiction, the majority of states allow HOAs to collect them from delinquent homeowners whose accounts are referred for collection. 

Often, recovery of these fees must also be authorized by the community’s declaration. The idea behind letting HOAs recover collection costs is that, when a homeowner does not pay assessments, the HOA must either refer the matter for collection or face a shortfall in its budget. 

Homeowner assessments fund HOA budgets, so a non-paying member’s share may need to be made up for through higher assessments to paying members. Collection costs and legal fees let the HOA recover the additional expense it had to incur due to non-payment, thereby protecting other homeowners from additional charges and allowing the association to stay on budget.

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