Associations typically charge both late charges and interest for the late payment of assessments. Some associations charge only a late charge and some charge only interest. Any one of those scenarios is acceptable.
For the purpose of this article, we will focus only on late charges. It is customary that when an owner does not pay his assessment on time, the association will charge a late charge. Some associations will charge a fixed late fee, such as $10, $25, or some other reasonable amount. Some associations will charge the late fee based upon percentage of the amount of the monthly assessment not timely paid, such as 10% or 25%. Either method is correct. In Oregon, there is no cap on the amount of a late fee, but it must be reasonable.
Typically, the late charge is assessed after some period of time in which the payment was not paid. Some declarations, CC&Rs, or Bylaws will state the date on which a late charge will accrue. If the documents are silent as to when to levy a late charge and the documents do not prohibit late charges, it will be up to the board to establish when the late charge will be levied. Most associations typically assess a late charge for assessments anywhere from 10 to 30 days late. Any date within that period is acceptable under Oregon law.
Associations should not, however, charge multiple late charges for the same past due payment. Figure 1 gives a good example.
On January 1, the assessment was due. Since it was not paid within 14 days, a late charge for the January assessment was levied. On February 1, a new assessment was due. The balance was then $225 ($100 each for January and February, plus the late charge of $25). No payment was received in February. A new late charge was assessed for the late February payment only. It is normally not appropriate to charge a late charge for the late January payment a second time, since the association is usually compensated in such circumstances by accruing interest.
Note in the example that a payment was received on March 6 for $100, but the association still charged a late charge for the March assessment. The reason a late charge was still levied was because the $100 payment received on March 6 was applied to the earlier balance first. Thus, the March payment was still delinquent. Unless the prior balance is paid in full, it is appropriate to charge a late charge for the March assessment.
It is recommended that associations levy both late charges and interest for the delinquent assessments to encourage owners to make their assessment payments in a timely manner.
Timothy J. Zimmerman
Attorney at Law