California HOA late charges on delinquent assessments

California limits what an HOA can add to a late payment. Under Civil Code 5650, the late charge cannot exceed $10 or 10 percent of the delinquent assessment, whichever is greater. On a $400 monthly assessment, for example, the late charge is capped at $40.

The association can also charge interest, at an annual rate of up to 12 percent, beginning 30 days after the assessment becomes due, and it can recover its reasonable collection costs and attorney fees. What it cannot do is impose a flat late fee above the cap or stack compounding charges.

Before you make an offer, read these against Civil Code 5650:

• The late-fee and interest provisions in the CC&Rs and the collection policy. Compare them to the $10 or 10 percent cap and the 12 percent interest limit.
• Any flat late fee, such as a fixed $25 or $50 charge, that would exceed the cap on a small delinquency.
• The delinquency rate in the financial statements, which shows how often the collection rules come into play.

Late charges matter most if you ever fall behind, but a collection policy that charges more than the law allows is also a small signal: it means the board has not kept its governing documents current with the statute, which can point to looser governance elsewhere.

The rules are in the CC&Rs and the collection policy inside the disclosure packet. An HOA Notes brief reads them, flags any fee that exceeds the statutory cap, and cites the page it came from.

Civil Code section 5650 (Late charge limits). A late charge on a delinquent assessment must not exceed $10 or 10 percent of the delinquent assessment, whichever is greater; the association cannot compound late charges. The association may also charge interest at an annual rate not exceeding 12 percent and may recover reasonable collection costs and attorney fees.

When you read the disclosure packet, watch for late fee of $25, late fee of $50, monthly late charge, and late charge of $XX regardless of assessment amount. HOA Notes flags each of these against the statute and tells you which restrictions are actually enforceable.