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Use Check For Interest, Fees Before Assessments

Posted in Reader Q&A

Question: We have an owner in our condominium that fell behind in paying assessments because they lost their job. They were delinquent by nine months or so. The person got a job and was apparently able to put together the money to pay off the association. He sent a check to the association for the nine months worth of assessments marked “paid in full.” However, interest, late fees, and the money we had to pay our lawyer to send a late notice were not paid. We have three questions. Can we accept the check? Must we accept the check? Can we waive the interest, late fees, and attorney’s fees due to the hardship situation? J.F. (via e-mail)

Answer: Two of your questions are very easy, one is very difficult.

The association not only can accept the check, it must accept the check. You would then apply payments pursuant to Section 718.116(3) of the Florida Condominium Act which provides:  “Any payment received by an association must be applied first to any interest accrued by the association, then to any administrative late fee, then to any costs and reasonable attorney’s fees incurred in collection, and then to the delinquent assessment. The foregoing is applicable notwithstanding any restrictive endorsement, designation, or instruction placed on or accompanying a payment. A late fee is not subject to chapter 687 or s. 718.303(4).” You should then notify the owner that their account is not paid in full.

As to waiving interest, late fees and attorney’s fees, that is a very tough call. Because of the “application of payment” law, quoted above, the owner has actually already paid the interest, late fees and attorney’s fees, and still owes the principal of his past due assessment.

The Florida condominium statute prohibits excusing owners from paying assessments unless all other owners are likewise excused. A different part of the statute permits the association to settle legal matters.

Whatever the association does in one case will likely be precedent for other cases, whether the association likes it or not. Therefore, recognizing that the owner’s unemployment may have been an unexpected hardship, I would recommend against waiving those fees unless you can get an unequivocal letter from your legal counsel that the waiver is proper under the law and will not create a situation where the association compromises its right to collect in other cases. Unfortunately, I doubt you will be able to get your attorney to write such a letter.