On April 11, 2018, the West Virginia Supreme Court handed down a decision favorable to homeowners associations who wish to collect late fees, interest, and reasonable attorney’s fees on delinquent assessments. See Conkey v. Sleepy Creek Forest Owners Ass’n, 2018 W.Va. Lexis 284 (W.Va., April 11, 2018).
In Conkey, a homeowners association filed a lawsuit against a property owner in an attempt to collect past due assessments against the property owner, as well as late fees, interest, and reasonable attorney’s fees on that delinquency.
In response to the Complaint, the property owner filed a counter-claim against the homeowners association alleging that it engaged in unlawful debt collection practices in violation of Section 128(d) of the West Virginia Credit and Protection Act. Under this section, the following conduct is deemed to be unfair or unconscionable:
The collection of or the attempt to collect any interest or other charge, fee, or expense incidental to the principal obligation unless such interest or incidental fee, charge or expense is expressly authorized by the agreement creating the obligation and by statute.
W.Va. Code, 46A-2-128(d) (emphasis added). In support of his claim, the property owner maintained that (1) the additional fees/charges were not authorized by statute; and (2) the imposition of 10% interest on the delinquent assessments was usurious and violated W.Va. Code 47-6-5(b) (setting the general, legal rate of interest at 8%).
In granting summary judgment in favor of the homeowners association on the counter-claim, the lower court determined that the imposition of late charges was, in fact, authorized by both the underlying agreement and by the Uniform Common Interest Ownership Act. See W.Va. Code, 36B-3-116(a) (authorizing late charges and interests); and (f) (authorizing reasonable attorney’s fees). Upon review, the Supreme Court concluded that the lower court’s analysis was correct.
In addition, the lower court concluded that the 10% rate of interest was not usurious and did not violate the law. In this regard, the court noted that, despite the general statutory rate of interest at 8%, the Uniform Common Interest Ownership Act permits a homeowners association to establish an interest rate not exceeding 18%. See W.Va. Code, 36B-3-115(b). In reviewing the circuit court’s analysis, the Supreme Court once again concluded that the circuit court was correct and noted that “[t]he interest allowed under W.Va. Code, 36B-3-115(b) , manifests the Legislature’s intent to define the narrative regarding common interest ownership communities.”
On these issues, the Supreme Court affirmed the lower court’s decision.
WHAT IT MEANS TO YOU
If you are a homeowners association in West Virginia, this case specifically recognizes the statutory authority upon which a claim of recovery for late fees, interest, and reasonable attorney’s fees may be based. Of course, the caveat is that those categories must also be included in the agreement between the homeowners association and the property owner.
For other creditors and collectors, this case reinforces the statutory requirement that any fee or incidental expense attached to a debt must be authorized by both the underlying contract and by statute. In this way, Section 128(d) of the WVCCPA is substantively different from Section 1692f(1) of the FDCPA which requires express authorization by either the agreement creating the debt or permitted by law. Thus, if a fee or expense is authorized by contract but not by statute, then there will be a violation of the WVCCPA even though there is no violation of the FDCPA.