Illinois Court Rules Cumulative Late Fees in Condo Associations Are Unenforceable
Assessments are a community association’s lifeblood, and community associations should ensure that they are timely receiving assessments from owners. Generally, community associations will levy late fees on owners who fail to timely pay their assessments. However, Hidden Grove Condo. Ass’n v. Crooks, 318 Ill. App. 3d 945, 744 N.E.2d 305 (3d Dist. 2001), is an Illinois appellate court case that serves as an important reminder for condominium associations regarding the enforceability of late fees and penalties. This blog article analyzes the court’s ruling in Hidden Grove Condo Ass’n and provides practical guidance for Illinois community associations to ensure an association’s collections policies are enforceable.
Background
The Hidden Grove Condominium Association (the “Association”) sued a unit owner, Katherine Crooks, to recover unpaid assessment fees and accumulated late charges. Each unit owner was required to pay a monthly assessment of $88.23. If an owner failed to make timely payments, a $25 late fee was imposed for each month of delinquency pursuant to the Association’s bylaws.
Crooks failed to make timely payments on multiple occasions between 1997 and 1999, accumulating a substantial amount in late fees due to the Association’s policy of adding an additional $25 per month for each unpaid assessment. The trial court ruled in favor of the Association, awarding it $1,696.21 in unpaid assessments and late fees. Crooks appealed the trial court’s ruling.
Appellate Court Decision
On appeal, Crooks argued that the late charges constituted an unenforceable penalty. The Illinois appellate court agreed and reversed the lower court’s decision. While the court held that the one-time $25 late fee was reasonable, it found that the compounding nature of the penalty—where an unpaid assessment resulted in multiple months of accumulating late fees—was excessive and unenforceable.
The court determined that cumulative late fees did not reflect a reasonable estimate of actual damages incurred by the Association. Instead, they acted as a punitive measure, which is not permitted under Illinois law. As a result, the court ruled that the late fee charges outlined in the association’s bylaws were an unenforceable penalty.
Review & Update Late Fee Policies to Ensure Legal Compliance
Illinois community associations should review their governing documents and collection policies to confirm that late fees are legally enforceable. The Illinois Condominium Property Act (765 ILCS 605/18.4(l)) allows associations to impose late charges for delinquent payments but does not permit punitive penalties.
To remain compliant:
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- Associations can charge a reasonable, one-time late fee per missed payment.
- Associations cannot impose compounding or cumulative late fees that escalate month over month.
- Collection policies should align with Illinois law to avoid legal challenges.
Additionally, community associations governed under the Common Interest Community Association Act (CICAA) should consult their declaration and bylaws to determine the scope of permissible late fees. Since Illinois courts have ruled against excessive penalties, it is crucial for a community association attorney to review governing documents and ensure collection policies are enforceable.
Conclusion
Late fees are a tool community associations may use to ensure unit owners are timely paying assessments. However, the Illinois appellate court’s decision in Hidden Grove establishes that cumulative and compounding late fees are not enforceable. Accordingly, associations can levy a one-time late fee against a unit owner if the late fee is reasonable and proportionate to the monthly assessment amount. Associations should be cautious of bylaw provisions that impose compounding or cumulative late fees as such fees are not enforceable.
Illinois community associations should consult legal counsel to ensure that all late fees levied against defaulting unit owners are enforceable. The attorneys at Hirzel Law, PLC are experienced community association attorneys who can draft and review legally compliant collection policies to protect associations from legal disputes while ensuring timely assessment payments.
Jeremy Fernando is an Associate Attorney at Hirzel Law, PLC. Mr. Fernando is licensed to practice law in the State of Illinois. He concentrates his practice on community association law, condominium law, homeowners association law, and real estate law. Mr. Fernando’s legal career includes serving in corporate practice where he represented insurance companies and institutional investors in U.S. and cross-border private placements of securities, including transactions in the Netherlands, England, Ireland, Australia, and Germany. Mr. Fernando earned his Juris Doctor from Marquette University Law School, where he graduated with honors and ranked in the top 15% of his class. He also served as an Associate Editor of the Marquette Law Review. Mr. Fernando is committed to providing effective legal representation to his clients and is passionate about helping communities navigate complex legal challenges. He may be reached at 312-552-7669 or jfernando@hirzellaw.com.
