HOA Policies re Imposition and Collection of Fines

The developers of homeowners associations typically include provisions within their governing documents (generally found in the CC&Rs or bylaws) that empower the association’s board of directors to impose fines for violations of the governing documents. If such authority is not directly provided for in the governing documents, there are generally provisions that allow for them indirectly by empowering the directors to adopt rules relating to the management of the development. Fines are not imposed on homeowners as a means of increasing HOA revenue. They are imposed for the purpose of curbing violations of the association’s governing documents by homeowners and for facilitating the association’s directors in fulfilling their duties to enforce the governing documents.

As one might expect, issues concerning the imposition of fines on members of homeowners associations are commonplace and are frequently the root of costly protracted litigation between homeowners and their homeowners association. To minimize the potential for becoming embroiled in such litigation, HOA board members and management personnel should be familiar with the provisions in their state statutes and in their own governing documents relative to the imposition of fines on homeowners for violations of their governing documents. As a general rule, before fines can be imposed on homeowners, the association should have a schedule that describes the monetary penalties for various violations of their governing documents (including rules) which is distributed to the homeowners along with other information that is distributed to the homeowners on an annual basis. Typically, the schedule of monetary penalties is included along with a more comprehensive enforcement policy that is adopted by the association’s board of directors relative to the imposition of fines for violations of the association’s governing documents. The enforcement policy provides both homeowners and future board members with a description of the process that the association will follow in order to enforce and address violations of the governing documents. Being familiar with and following the enforcement policy will facilitate fairness and consistency in the enforcement of the governing documents.

The amount that is imposed as a fine for violations of the governing documents is left to the discretion of the association’s board of directors but statutes and/or case decisions have held that the amount must be “reasonable.” What is considered reasonable is a question of fact for the circumstances of the case. Factors that would be considered include the economic status of the community (is it comprised of lower income blue collar workers or wealthy people that may not be motivated by the imposition of a $50.00 fine), and the seriousness of the violation (did it involve a threat to life or property or a relatively minor aesthetic violation such as the installation of improper window coverings or failing to remove weeds or trim shrubs). In determining the amount to impose for fines, HOA directors should consider how they would respond to a challenge of the amount of the fine if they were a judge that were called upon to decide the case in court. Would they feel the amount in question reasonable or excessive under the circumstances of the case?

Other common issues involved in connection with the imposition of fines pertain to the fines that are imposed for repeat and continuing violations of the association’s governing documents. Aside from the reasonableness of the amount of the fine, there are issues about the procedure that must be followed when there have been repeated or continuing violations. For example, if a fine is imposed following a violation by a homeowner in one month and the same violation occurs the next month, can the association impose another fine or must there be another hearing before the second fine can be imposed in order to satisfy due process requirements? When a homeowner repeatedly commits the same violations (i.e. not picking up after its dog), each time is a new violation that requires procedural due process, as opposed to a continuing violation which is a single violation that persists for an undetermined period of time (i.e. a homeowner paints his or her house a color that has not been approved by the architectural committee). With repeated violations, the association’s enforcement policy may provide for escalating fines for each successive violation (i.e. 1st offense- $100.00; 2nd offense – $150.00; 3rd offense- $250.00), but with a continuing violation the policy may provide for the imposition of a daily fine that continues until the violation is corrected by the homeowner.

Recognizing that the purpose of imposing the fine is to compel a homeowner to comply with the association’s governing documents after a fine has been properly levied, some associations make it a practice to offer to waive payment of the fine if the homeowner corrects the violation within a specific time period (i.e. 30 days). Such an offer tends to promote compliance and eliminate additional controversy over the violation(s). If the offending homeowner does not comply and refuses to pay fines that are properly imposed, the association’s next step in the enforcement process is to initiate appropriate judicial proceedings designed to obtain a judgment for the amount of the fines, plus costs and attorney fees, and to compel compliance through injunctive relief ordered by the court. While actions that are merely to collect a fine can be brought in a small claims court without an attorney, the commencement of an action for injunctive relief typically must be filed in a higher level court with the assistance of legal counsel.

When it comes to the imposition of fines for violations of governing documents, association directors and management personnel should not lose sight of the primary goal – which is to correct a violation and obtain compliance from the homeowner. If this can be accomplished through reasoning and peaceful negotiations, it is almost always going to be more desirable than becoming involved in costly protracted litigation over the matter. Before going down the adversarial path, put forth good faith efforts to resolve the issues amicably.