Basic Legal Requirements for Condominium Associations to Charge Fines, Capital Contributions, Membership Fees and Late Fees

February 21st, 2021 | Community Association Law Blog

By Eric F. Frizzell. February 23, 2021.

Condominium associations commonly charge fines, late fees, capital contributions, and membership fees to unit owners. Before imposing any such charges, however, it is important for a board and management to confirm that the association is complying with applicable requirements under New Jersey law. Here are key requirements.

Under the Condominium Act, a condominium association may impose reasonable fines upon unit owners for failure to comply with the provisions of the master deed, by-laws or rules and regulations, only if:

– the fine is authorized by the master deed or by-laws

– the amount of the fine does not exceed $500 for a single violation or $5,000 for a continuing violation

– the unit owner is given written notice of the fine imposed, the basis for the fine, and is advised of the right to participate in alternative dispute resolution.

If the unit owner elects to engage in ADR, the fine should not become final and should not be added to the unit owner’s account, pending the outcome of the ADR.

Capital contributions and membership fees
Under the Condominium Act, a condominium association may levy and collect a capital contribution, membership fee, or other charge upon the initial sale or subsequent resale of a unit, only if:

– the fee is authorized by the master deed or by-laws

– the amount collected is “earmarked for the purpose of maintenance of or improvements to common elements to defray common expenses or otherwise”

– the charge does not exceed nine times the amount of the most recent monthly common expense assessment for the unit. If an association charges both a capital contribution fee and membership fee, it is our opinion that the combined fee should not exceed this “nine times” maximum

Late Fees and other charges against a delinquent account
Under the Condominium Act, an association can charge interest, late fees and reasonable attorneys’ fees to a unit owner who has failed to pay common expenses, but only if authorized by the master deed or by-laws.

The amount of a late fee and interest must be reasonable or else a court may not allow the association to collect those charges if the matter goes to litigation.

Changing the amount of any of these charges
If an association’s master deed or by-laws specifies the amount, or maximum amount, of a late fee, fine, capital contribution or membership fee, the board cannot change it by enacting a resolution. Instead, the master deed/by-law provision specifying the amount of the charge must be amended in accordance with the requirements of the master deed/by-laws.

As always, please contact us if you have any questions about these topics.