Who keeps late fees and interest on delinquent accounts?
Late fees and default interest are charges the association levies under its declaration and state law. They are association revenue. Where it gets murky is when a Management Company's fee schedule includes a separate charge to the account for producing the late notice — that charge is the company's revenue, it sits on the owner's ledger next to the association's late fee, and the owner cannot tell them apart.
Several states cap late fees, set the maximum interest rate, or require a specific grace period. Check yours before assuming your current practice is compliant; associations inherit these settings from a previous manager more often than they set them deliberately.
Ask to see a sample delinquent owner ledger with every charge type labeled and its recipient named. It is the fastest way to see how the collections economics actually work, and most Boards have never looked at one.
General information for Board members, not legal advice. State law and your governing documents control, and both vary.
More on where the money actually goes
- Can a management company mark up vendor invoices?
- Should the management company keep the interest on our bank accounts?
- Who pays for HOA resale and estoppel documents?
- Who pays collections costs — the association or the delinquent owner?
- Can the Management Company hold our association funds?
- Who should be signing association checks?
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