By Josh Davis, Associate Editor
(Feb. 28, 2019) The Ocean Pines Board of Directors on Feb. 16 sharply reduced interest rates on unpaid assessments, citing the presumption of increasing collections.
Legal reasons may have contributed to the reduction as well.
Association President Doug Parks said governing documents require establishing the annual interest rate by February of each year.
“While the delinquency rate has been 20 percent over the last several years, a more conservative approach of 6 percent is recommended to further uniform application and collectability,” Parks said.
Director Ted Moroney noted some association declarations of restrictions limit the rate to no more than 6 percent.
Parks said discussions with Ocean Pines’ attorney also indicated “judges are more favorable in their opinions regarding the 6 percent than they are some large amount. Six percent is also what’s on the state laws for Maryland, too.”
Directors voted 7-0 in favor of setting the new rate.
Parks, on Monday, emailed a response as to whether any legal concerns prompted the rate change.
According to the Maryland Homeowner’s Association Act, “The declaration or bylaws of a homeowners association may provide for a late charge of $15 or one-tenth of the total amount of any delinquent assessment or installment, whichever is greater, provided the charge may not be imposed more than once for the same delinquent payment and may be imposed only if the delinquency has continued for at least 15 calendar days.”
According to Parks, “The declarations of restriction validly authorizes the board of directors to set interest rates. However, over the last several years, we understand that Maryland courts have increasingly scrutinized the equitableness of all fees charged by homeowners associations.
“As a result, to ensure uniform imposition of interest throughout all stages of the collection process, the board elected to reduce interest rates for delinquent accounts during the FY2019-2020 budget year to 6 percent consistent with similar sized homeowners associations in Maryland. The board will continue to monitor this issue moving forward.”