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The bills still have to be paid, recession be damned! Yet too often condo associations straddle the line between collection and having their late fee charges deemed unreasonable in an attempt to collect late association fees or other property-related bills.

Associations are allowed to charge reasonable late fees. But the definition of reasonable, and the frequency and application of reasonable, could land your association in hot water should you not lay out your terms from the start. Late fees should not outpace the amount due, nor should they be so high that collection becomes impossible. Many associations assess a $25 late fee, which meets the reasonable criteria.

Look at your late-fee process. Do your bylaws allow for a late fee to be collected should association fees become past due? If so, make sure the fee is reasonable, and that you and your occupants understand the assessment process and frequency of any subsequent late fees. Courts in the past have found that compounded late fees do not fall within the definition of reasonable fees because associations have not openly stated the fees will compound each month the bill remains unpaid.

Also, make sure that it is clearly defined in your contracts with unit owners how late fees will be assessed. It is well within your rights as an association to charge a late fee for each overdue bill. For example, if Fred Smith is late with his $350 June assessment, a late fee off $50 applies to that bill. Should it remain unpaid in July, associations should not tack on another late fee. It is past due at $400. However, if Fred fails to pay his July assessment as well, he now owes the association $400 for July in addition to the $400 he owes for June.

To make sure you’re able to collect late fees, establish a written collection process, with clearly stated late fees and application of those fees. If you intend to compound late fees, say so in your documentation. Also, provide each unit owner with the process, in writing, preferably on the agreements signed upon occupancy. If you need assistance devising a workable late fee/collection process, contact us.

Flickr photo credit:  David Blackwell