Can Michigan Community Associations Charge Late Fees On Delinquent Assessments? Why Your HOA’s Governing Documents Matter
Timely payment of assessments is essential for Michigan condominium and homeowners associations (HOAs) to fund maintenance, operations, and community services. When co-owners fail to pay assessments on time, many associations impose late fees as an incentive for timely payment and to recover administrative costs. However, the ability to charge late fees, as well as the amount charged, depends entirely on the association’s governing documents. Charging late fees without proper authority can lead to disputes and potential refunds.
This article explains the differences between condominium associations and HOAs regarding late fees, highlights the importance of reviewing governing documents, and provides guidance to ensure compliance with Michigan law.
Homeowners Associations
HOAs may only charge late fees if their recorded declaration clearly authorizes them. If the declaration does not reference late fees, the board has no authority to impose them through rules and regulations or board meeting resolutions and must amend the governing documents before doing so.
If the declaration specifies a late fee amount, that is the only amount the HOA may charge. The board cannot increase or otherwise change the fee through rules and regulations or board meeting resolutions.
In Conlin v Upton, 313 Mich App 243; 881 NW2d 511 (2015), the Michigan Court of Appeals held that an HOA could not impose additional fees through rules and regulations or board meeting resolutions because doing so created a new burden not contained in the recorded governing documents. Longstanding practices or statements that “late fees have always been charged” cannot substitute for clear authority in the declaration.
Condominium Associations
Always start with your bylaws read them carefully. This is the single most important step before attempting to adopt or enforce late fees. The most common pitfall boards encounter is attempting to address a topic through rules and regulations or board meeting resolutions that does not have a basis in an existing bylaw provision, which effectively results in amending or changing the bylaws without following the required amendment procedures.
In Meadow Bridge Condo Ass’n v Bosca, 187 Mich App 280, 282; 466 NW2d 203 (1990), the Michigan Court of Appeals explained that a condominium association’s rules and regulations are “tool[s] to implement or manage existing structural law, while an amendment presumptively changes existing structural law.” Accordingly, a condominium association can properly adopt a rule or resolution that implements or manages existing provisions within the condominium documents, but any change to an existing provision must be made through a formal amendment to the condominium documents.
Condominium associations must confirm that their recorded bylaws or master deed expressly authorize late fees. Co-owners must be on notice, through the recorded condominium documents, that late charges may be imposed.
Once this authority exists, the Michigan Condominium Act provides a framework that allows condominium associations to adjust or increase late fees through rules and regulations or board meeting resolutions. Specifically, MCL 559.206(c) states:
“…the condominium documents may provide…for the imposition of late charges for nonpayment of assessments as provided in the condominium bylaws or rules and regulations of the condominium.”
It is important to note that the Condominium Act does not independently create the authority to charge late fees. Boards may only use rules and regulations or board meeting resolutions to implement or adjust late fees after the authority is established in the bylaws.
If the condominium bylaws do not reference late charges, the bylaws must be amended before late fees can be assessed. As the Court of Appeals reiterated in Conlin v Upton, rules and regulations or board meeting resolutions may be used to interpret and implement existing provisions but cannot impose new burdens on co-owners.
Why Governing Documents Matter
Boards must carefully review their governing documents before assessing or increasing late fees. If the declaration (for HOAs) or the bylaws (for condominium associations) do not contain clear authority, late fees cannot be imposed. Attempting to create this authority through rules and regulations or board meeting resolutions, or relying on past practices, exposes the association to disputes and the risk of having to refund previously charged fees.
Conclusion
Michigan community associations must ensure their governing documents provide a clear basis for charging late fees on delinquent assessments. HOAs may only assess late fees if the recorded declaration authorizes them, and if the declaration specifies a fee amount, that amount is the maximum the HOA may charge. Condominium associations must start by reviewing their bylaws carefully. If the bylaws do not authorize late fees, they must be amended before any late fees may be implemented or adjusted under MCL 559.206.
If the governing documents do not provide authority for late charges, the proper course is to amend the documents rather than rely on past practices, rules and regulations, or board meeting resolutions. Reviewing and, if necessary, updating the declaration or bylaws will help protect the association from unnecessary disputes and potential liability.
Sarina Saravi obtained her Bachelor of Arts degree with a specialization in Criminology and a minor in Sociology with High Distinction from the University of Toronto in 2018. She continued her academic journey at Michigan State College of Law where she pursued her Juris Doctorate (J.D.) degree and graduated Cum Laude in 2023. During her time at MSU College of Law, Ms. Saravi was a diligent student and actively engaged in various roles and responsibilities. She served as a Research Assistant, contributing to legal research that pushed the boundaries of knowledge in the field. Her commitment to academia extended to her roles as a Teaching Assistant for both Research, Writing, and Advocacy, and as an Advocacy Teaching Assistant, where she helped nurture the next generation of legal minds. Beyond her professional commitments, Ms. Saravi is deeply committed to giving back to her community. She volunteered at Expungement Fairs, organizing two events, one with Legal Services of Eastern Michigan in July 2021, and another with the MSU Law Criminal Defense Association in January 2023. Her dedication to helping individuals with legal matters demonstrates her unwavering commitment to justice. She may be reached at (248) 986-2290 or ssaravi@hirzellaw.com.