Imposing Fines and Penalties for Homeowner Violations of Governing Documents

Homeowners associations that intend to impose fines or monetary penalties for violations of the association’s governing documents (including rules) by homeowners, their guests, or their tenants need to have a written policy explaining the association’s policy along with a schedule of fines that may be imposed, both of which must be distributed to the homeowners. Any fines or penalties that are imposed against homeowners must be based on a determination made in a disciplinary hearing that was conducted in accordance with the procedures contained in the written policy and schedule of fines.

A homeowners association’s adoption of a written policy re fines and penalties and a schedule of those fines and penalties must be by formal action of the association’s board of directors at an official meeting of the board of directors. The association’s board of directors should have a sample of the proposed policy and schedule of fines for review by each board member and discussion at the board meeting. The directors should discuss and be familiar with the content of the proposed policy and schedule prior to taking a vote on adopting the policy and schedule of fines. Typical items that should be considered by the association’s board of directors in evaluating a proposed policy and schedule of fines include:

a.     A determination that the amount of a particular fine should be reasonably proportionate to the violation for which it is levied. If the amount of the fine is disproportionate to the infraction, a court may refuse to enforce it.

b.     The schedule of fines should establish broad categories of violations rather than narrow more specific categories to avoid issues about whether or not a particular course of conduct constitutes a violation.

c.     The policy should clearly identify the “monetary penalty” in a manner that distinguishes it from an “assessment or fee” which is typically correlated to an amount that is necessary to defray the costs for which it is levied. The purpose of a fine or a monetary penalty is to gain compliance with an association rule.

d.   Consideration of the possibility of imposing a “continuous fine” for violations that continue following a hearing and the imposition of the initial fine (generally applies to architectural or maintenance violations). An example of a continues fine would be, “$100.00 per week for so long as the violation continues,” or if there are statutory limitations on the amount of a continuous fine, “$100.00 per week for so long as the violation continues, up to a maximum of $1,000.00 (or whatever the statutory maximum is).”

e.    Consideration of additional fines for repeated offenses of a similar nature.

f.    Consideration of a special category of fines or monetary penalties for conduct that creates an immediate danger to person or property such as the operating of a meth lab or engaging in activities that use dangerous explosive chemicals. Fines and penalties for such conduct should be more severe than fines and penalties for minor technical violations that do not pose a risk of serious danger to others or their property.

A homeowners association should not let fines accrue over a long period of time before action is taken to collect the amounts owed as courts may be reluctant to enforce the fines or penalties if too much unexplained time has passed. The association’s policy should consider the need to file a legal action seeking injunctive relief to prevent the continuation of the violation if the imposition of the fine or penalty has not resulted in a correction of the violation. Remember, all fines and penalties should be enforced in a nondiscriminatory fashion and only after an appropriate hearing. Furthermore, states may have differing statutes that impose restrictions or limitations on the enforcement of fines and penalties such as a maximum amount, or a prohibition on enforcement via a nonjudicial foreclosure of a lien resulting from the imposition of a fine or a penalty due to violations of an association’s governing documents.

A sample resolution adopting a policy re fines and penalties and schedule of fines is linked hereto and a usable form may be downloaded from the HOA Member Services Store.

Statutes, Forms, or Guides related to this Article:

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