HOA Fines: Are Your Homeowner Associ . . .
HOA Fines: Are Your Homeowner Association's Rule Violation Policies "Fine"?
Is your association constantly assessing fines against members for rules violations? Are you considering implementing even more fines because the rules keep getting broken? Do you have trouble collecting the fines you assess? If you answered yes to any of those questions, ask yourself the following questions to determine whether your fines are valid and doing what you intend for them to do.
1. Are our fines fine? "In general, a fine should be reasonable and have some bearing or rational basis to the expense the association could incur," says Justin D. Park, an attorney at Romero Park & Wiggins in Bellevue, Wash., who advises homeowners associations. "The best example is a fee for the late payment of dues. Some states say late fees aren't allowed to be penalties, but only the passing on of expenses. So if an association has to delay paying a bill because it doesn't have the funds, it could incur some expense. There doesn't have to be a perfect relationship, but generally courts want to see that the fee and the expense are in the same ballpark." In one case when Park began representing an association, he had to inform the board that its $500 fee for walking a pet without a leash probably wouldn't be enforceable.
2. Are we consistent? "Whatever the fee, there has to be consistency," says Park. "It's possible through the legal theories of waiver or abandonment for an association to lose the ability to collect a fine if it doesn't actively pursue it. Most CC&Rs have a provision that prevents that from happening, but occasionally I run across one that doesn't have that provision." Be sure you're consistent in both assessing and enforcing fines. For example, if two owners park their cars on the street—which violates your rules—for a year, and you do nothing, don't expect to be able to enforce a fine imposed immediately on the third person who commits the same violation.
3. Do our fines serve a true purpose? Fines can't be arbitrary or unpredictable, and they should be related to a goal that's stated in your governing documents. In one case Park was involved in, an association's CC&Rs stated that it was important for the association to preserve owners' views, and to protect that goal, they imposed height restrictions on structures within the association. "A client wanted to build a house that we considered a reasonable height, but the association didn't," he explains. "We won that case because the height restriction was low and too arbitrary to protect the association's interest."
4. Are our fines high enough? "If you're imposing fines often, and they're being paid, you might need to increase the amount of the fine to force compliance or address the situation in a different way," says Park. "For example, fine structures can become outdated, and you may decide to give up on enforcing a particular fine because the community has effectively decided that the rule is no longer a value your community wants to protect."
5. Are fines our only option? If your fines aren't doing their job, consider other methods to enforce your rules. "Find a way to enforce your rules through a carrot or a stick," advises Park. "The stick has to be powerful enough to make people comply, or you have to provide enough encouragement or added value that people want to comply. For example, maybe too many owners aren't trimming their bushes as required in the CC&Rs. Rather than enforcing fines, you could have a neighborhood cleanup. That creates value for the community in a way that includes compliance."
"Unfortunately enforcing the rules is the most difficult part of association management," says Park. "You're not a police agency, and you have very limited enforcement powers. The best way to enforce fees is to have consistent, regular, and transparent enforcement. Everybody has to see other people get fined and that those people are paying their fines. And board members have to make sure they're also in compliance."