HOA Demand Letter and Payoff Letter Explained: Fees and Rights

Quick Answer

"HOA demand letter" means two different things. In a sale or refinance, a demand or payoff letter is the association's statement of what is owed on a unit so title and escrow can close, and the association may charge a fee to prepare it. In collections, a demand or collection letter is the written notice sent to a delinquent owner before the association adds attorney fees, records a lien or starts a case. Many states regulate the timing, contents and charges for both.

Two Kinds of HOA Demand Letters

The "demand fee" people search for is usually the charge for preparing the first kind, though some owners use the phrase for fees added by a collection letter. The two situations follow different rules, so read the section that matches your letter.

The Payoff Letter at a Sale: What It Contains and What It Can Cost

A payoff statement gets the buyer and lender confidence that nothing is owed that will follow the unit. It also protects the association, because in several states a buyer who relies on an accurate statement is protected from claims for more. Our resale certificate and transfer fees guide and estoppel letters guide cover the full document package. Here is how four states treat the payoff piece, as examples.

Example: Florida (Statutes 718.116(8) and 720.30851)

Florida calls the document an estoppel certificate. The association must issue it "within 10 business days" of a written or electronic request. It must itemize amounts owed, and an amount the association fails to list generally cannot be collected from a person who relied on the certificate in good faith. The statutes cap the preparation fee: up to $250 if nothing is delinquent, plus $100 if delivered on an expedited basis within 3 business days, and an additional fee of up to $150 if money is owed. Those amounts are adjusted every five years for inflation, and the state's regulator publishes the current figures, so check the current numbers before charging. If the association misses the 10-business-day deadline, it may not charge a fee for that certificate.

Example: California (Civil Code 4525 and 4530)

California requires the seller to give a buyer "a true statement in writing obtained from an authorized representative of the association" showing current assessments, unpaid assessments, fines, and "late charges, interest, and costs of collection." Under section 4530, the association must deliver requested documents within 10 days, may charge "a reasonable fee from the seller based upon the association's actual cost," and must state the fees separately from other transfer charges. The seller pays the association for these documents.

Example: Texas (Property Code 207.003)

Texas uses a resale certificate that must be delivered within 10 business days of a verified request. It must show "the total of all amounts due and unpaid to the property owners' association" attributable to the property, the amount of any administrative transfer fee, and "a statement of all fees associated with the transfer of ownership." The association may charge a reasonable fee "not to exceed $375" to assemble, copy and deliver the information, and not more than $75 for an update. Updates are due in seven business days.

Example: Michigan (Condominium Act, MCL 559.211)

Michigan condominium purchasers are "entitled to a written statement from the association of co-owners" of unpaid assessments, interest, late charges, fines, costs and attorney fees. The purchaser is not liable for amounts above the statement. If the purchaser does not request it "at least 5 days before sale," the purchaser can be liable for the unpaid amounts. This section covers condominiums, so an HOA that is not a condominium should confirm its own rules.

The Collection Demand Letter: Who Can Charge What

When a payment is late, the first letter is usually a simple reminder. The formal demand comes next, and that is where state law tends to set a clock and a script. A clean demand letter typically names each charge separately: assessment, late fee, interest, collection costs and attorney fees.

Example: California (Civil Code 5650 to 5660)

• Assessments are delinquent 15 days after they are due unless the declaration allows more time (5650(b)).
• The late charge may not exceed "10 percent of the delinquent assessment or ten dollars ($10), whichever is greater," and interest may not exceed 12 percent a year, starting 30 days after the due date, unless the declaration sets lower figures (5650(b)).
• Payments are applied "first to the assessments owed," then to collection costs, attorney fees, late charges and interest (5655(a)).
• At least 30 days before recording a lien, the association must send a certified-mail notice that includes an itemized statement, the owner's right to meet with the board, the right to dispute through the association's meet and confer program, and the right to request alternative dispute resolution (5660).
• The notice must include the bold warning that the separate interest "MAY BE SOLD WITHOUT COURT ACTION" if foreclosure follows (5660(a)).

Example: Texas (Property Code 209.0063 and 209.0064)

Before an owner can be held liable for a collection agent's fees, the association must send written notice by certified mail that "specifies each delinquent amount," describes the options to avoid referral to a collection agent (including any payment plan), and "provides a period of at least 45 days for the owner to cure the delinquency." Payments are applied to delinquent assessments first, then current assessments, then attorney and collection costs tied to assessments, then other attorney fees, then fines (209.0063(a)). An owner is also not liable for collection agent fees if the agent's pay is contingent on amounts recovered (209.0064(c)).

Example: Florida (Statute 720.3085)

For HOAs, the association "may not require payment of attorney fees related to a past due assessment" without first mailing a written Notice of Late Assessment giving the owner 30 days to pay without attorney fees (720.3085(3)(d)). Before filing a claim of lien, a written demand must give the owner "45 days following the date the notice is deposited in the mail" and be sent by certified mail and first-class mail (720.3085(4)). Interest defaults to 18 percent simple interest if the documents are silent, and the administrative late fee is capped at "the greater of $25 or 5 percent" of each late installment (720.3085(3)). Florida's HOA statute also requires payments to be applied to interest, late fees, costs and attorney fees before the assessment itself.

Our reading: the states differ on application of payments, notice periods and charges, so a template letter copied from another state can be wrong in yours. Our collections guide shows where the letter fits in the full process.

How to Respond to a Demand Letter

As an owner

• Check each line item against your payment history. Request a ledger if you have not seen one.
• Check that late fees and interest match the governing documents and state limits.
• Ask in writing for a payment plan before the deadline passes, and keep a copy.
• Pay the undisputed assessment portion if you can, and dispute the rest in writing.
• Keep proof of mailing and of every payment. Our guide to unpaid fines shows what comes next if charges are ignored.
• Consult a licensed attorney in your state if a lien or foreclosure is threatened.

Payment plans

Texas section 209.0062 is an example of a statute that requires larger associations to adopt payment plan guidelines. It sets a minimum three-month term and lets the association decline plans that extend past 18 months or for owners who defaulted on a prior plan in the past two years. For California, see our case summary on payment-plan waivers and section 5655. Where no statute requires a plan, a board policy still helps.

What Boards Should Do

• Adopt a written collections policy with a calendar: reminder, demand, plan offer, referral, lien.
• Itemize every charge on the letter, and check that each is authorized by the documents and state law.
• Send the letter the way your state requires (certified mail, first class, or both) and keep proof.
• Post payments in the order the law requires, and train anyone who handles the ledger.
• Offer a payment plan and put its terms in writing.
• Set the payoff statement fee by board resolution or contract where required, and never exceed statutory caps.
• Apply the policy to every owner the same way, and record board decisions in the minutes. See HOA financial management explained.

Frequently Asked Questions

What is an HOA demand letter?

It is a written notice. In a sale, it states what is owed on the unit so closing can happen. In collections, it tells a delinquent owner the amounts due and a deadline to pay before the association takes further steps.

What is an HOA payoff letter?

A payoff letter, also called a payoff or demand statement, shows the balance owed to the association at closing. Some states call it an estoppel certificate or statement of account, and some require specific contents and turnaround times.

What is an HOA demand fee?

It usually means the fee charged for preparing the payoff or demand statement. Some states cap it. Florida, for example, limits estoppel certificate fees, and Texas limits the fee for assembling resale information to $375.

Can an HOA charge attorney fees for a collection letter?

Often only after specific notice steps. Florida HOA law requires a Notice of Late Assessment and 30 days before attorney fees may be required. Texas requires a notice with at least 45 days to cure before collection agent fees can be charged to the owner.

Does an HOA have to offer a payment plan?

Not everywhere. Texas requires associations with more than 14 lots to adopt payment plan guidelines. Many other states leave it to the board, but a written plan helps both sides.

How long do I have to respond?

The deadline is on the letter and may be set by state law. California requires at least 30 days' notice before a lien is recorded, and Florida HOAs must allow 45 days before recording a claim of lien. Respond in writing before the date.

How APM Helps

Association Property Managers provides HOA and condo management from offices in East Lansing, Michigan and Dublin, California, and remote management for associations elsewhere starting at a flat $99/month per community with no per-door fees or long-term contracts. See pricing, remote management or request a free proposal, delivered within three business days. Laws and licensing rules differ by state, and we confirm the requirements for your state when we build your proposal.

Legal disclaimer: This article is general information, not legal advice. Laws change and associations differ. Confirm the current statute text and how it applies to your governing documents with a licensed attorney in your state before acting.