HOA imposes fines without CC&R or statutory authority

Karen,

I am not an attorney and I do not work within the legal profession.

Without having access to your CC&Rs or the court opinions you reference, I can only base my advice based on the reading of the the TX statute and my research into similar issues in VA. Based on that information, I would say that your argument has merit.
To prove your argument and get an absolute ruling, the issue will have to be brought to the courts.
This, of course, will cost everyone time (years), energy (stress) and money (lots of it).

Karen,

You can't just read that one section. You need to read the whole document and look to see if the document authorizes the Association to adopt rules and regulations and penalties for those rules and regulations. If it does, then an argument can be made that the Board did have the authority.

Again, I agree with you that your argument has merit.
However, even if everyone on this forum agrees that your argument has merit, if your Board (or a future board) disagrees with you, then the only way to prove the argument is through the courts.

As you are aware, the CC&Rs are a contract between all members.
The Association was created to oversee that contract and, perhaps, maintain common areas and provide specific services.
The Board is elected (or appointed) to exercise the authority of the Association.
Contracts work only when everyone involved agrees to abide by the conditions of the contract.
If one party doesn't agree, then the disagreement needs to be resolved.
This is typically done by modifying (amending) the contract or through a third party (mediation or the courts) who both sides agree will settle the disagreement.

John,

I agree. Our CC&Rs also has an "enforce by any proceeding law or in equity" phrasing. However, within the CC&Rs, depending on the restriction or covenant, we are allowed to use additional enforcement methods. For example:

We may tow illegally parked vehicles
We may impound personal property and charge for their return

We don't utilize either of those options. However, the CC&Rs do authorize that method.
This is why I told Karen she needs to look through the whole document and not just that one section.

Ellie,

We have a similar statute in Arizona but I have always interpretted it as procedural, meaning that if the declaration allows the association to levy fines then this is the procedure that must be followed. I do not interpret the AZ statute to alter all declarations to grant associations powers to fine that did not previously exist.

I would find it hard to believe that the Vermont legislature intended to impose a statutory amendment on every declaration but find it pretty easy to believe that they wished to ensure that there is some form of due process when an association does levy a fine.

Our HOA is struggling with a similar situation. Florida Statute 720.305.2 states “The association may levy reasonable fines of up to $100 per violation against any member.....” and then sets up procedures that must be followed.

Our CC&R’s have the standard “in law or equity” enforcement provisions and no authority or power to establish Fines.

Some members feel that although the State gives us the right to Fine we must amend one of the docs in the CC&R’s to make it official. Others feel as the OP stated that the Board can enact a fine policy by a simple Board motion because the State gives us the right.

Our HOA has operated for many decades without Fines and the general consensus is that the members would never approve an amendment to implement Fines.

Larry,

Re Vermont 3-102(a)(11): After I posted, I decided to check Vermont Title 27A, and I found this:

Section 1-204. Preexisting common interest communities

(a)(1) Unless excepted under section 1-203 of this title, the following sections of this title apply to a common interest community created in this state before January 1, 1999: sections 1-103, 1-105, 1-106, 1-107, 2-103, 2-104, 2-121, 3-102(a)(1) through (6) and (11) through (16), 3-111, 3-116, 3-118, 4-109 and 4-117 to the extent necessary to construe the applicable sections. The sections described in this subdivision apply only to events and circumstances occurring after December 31, 1998 and do not invalidate existing provisions of the declarations, bylaws, plats or plans of those common interest communities.

UPDATE: I've just learned that recently, the board heard an opinion on the legality of fines from a top Dallas HOA attorney. The question came up during closed session addressing a different matter.

The attorney said the fine policy was invalid. Texas does not give the HOA statutory authority to fine, nor do our CC&Rs. The covenants would have to be amended by a vote of the homeowners to add authorizing language. He was unequivocal, I am told. I got this info from an ex-board member who was present during the meeting.

Apparently, the board intends to ignore this opinion, believing most people would rather pay their fines rather than go through the effort required to defend themselves with a lawsuit.

In my early 20's I opened up a foreign car repair business. Somehow I managed to keep it afloat for a year before going under. A decade later I returned to college and discovered that many things that I had done in that business did not comply with contract law. I concluded that I had gotten away with the things that I did because my customers were equally as ignorant about the law as I was.

I think associations operate mostly from a standpoint of ignorance. But if just one irate and well-heeled homeowner mounts a challenge, the HOA almost always goes down with disasterous consequences. Belhaven, for example, filed bankruptcy after losing their fight. A Florida association paid out over two hundred thousand dollars to a homeowner who prevailed in his quest to park his pickup truck in his driveway. A California association's insurance company paid over $400,000 in claims related to a lawsuit over a maintenance contract and now faces a huge hike in premiums.

All of these problems were avoidable by seeking out legal advice before asserting a claim against a homeowner. That raises the question of how do you know good advice from bad? There are a lot of lazy lawyers who shoot from the hip and they are seldom right.

When you ask for advice, you should present your attorney with all your governing documents and even the subdivision plat. A specific written question, such as, "Can we levy a fine against someone who leaves his garbage cans out all the time?" will get a more specific answer than asking, "What are we allowed to do?" Your attorney should respond with a written opinion and his opinion should make reference to statutes and case law he relied on. An opinion that relies on his personal beliefs, common sense, logic, or other guesswork is worthless and nearly always dead wrong. Be prepared to pay the attorney for his work as he should spend hours researching on resources such as Westlaw. Getting an attorney's opinion is expensive but far less costly than allowing a board made up of homeowners from taking matters into their own hands.

Bit of a breakthrough today . . . I've located a book on Texas HOA law that's partially viewable on Google Books. The section on fining authority is virtually complete(!) http://books.google.com/books?id=9ve9k0xMqwIC&q=fines#v=onepage&q&f=false. It looks to be comprehensive and well referenced. It might even help those in other states determine what questions need to be asked.

Per this author, fining authority in a Texas HOA "must be expressly authorized by its Governing Documents". There is no statutory authority.

I've scoured our Governing Docs thoroughly. I find authority to fine for Common Area rules violations only, not for covenant violations.

Now the question is, what to do about it. Our HOA lost an expensive legal fight some years back because they ignored the law.. My concern is that we're going down that road again, possibly in a class action lawsuit numerous defendants seeking punitive and compensatory damages. Maybe I should let my grass grow tall and see what happens. :~)

I also live in Texas and after 40 years our HOA Board has decided to start fining. Our CC&Rs do not give the Board the authority to fine, do not even discuss fines. Also, the CC&Rs state under Enforcement that enforcement must be at law or in equity (through the courts.)

However, the Bylaws state that the Board can impose "penalties" for enforcement covenants on the common areas (we are fee simple, and own our lots.)

My question is can the Bylaws give the Board the authority to fine. Especially since the bylaws seem to contradict the enforcement provision in the CC&Rs.

Does anyone know of any case law specifically covering this issue, especially Texas case law.

Thank you

Karen

An association which we manage was faced two years ago (and still is) with the same scenario you described. At our request, the Board authorized consultation with an attorney who specializes in HOA matters in the Dallas area. Who knows, perhaps it was the same attorney you quoted.

His guidance was the same as you received, that the association cannot implement a fine structure as one is not explicitly authorized in the By Laws and CC&Rs. His further guidance was that the Governing Documents would have to be amended to include enabling language--the By Law amendment has a lower hurdle number and can be amended using the same numbers of property owners who have to be present or provide a proxy for the annual meeting. Amending the CC&Rs is the challenge, an amendment requires the concurrence of 75% of the homeowners. He did state there is clear language regarding "self-help" projects, such as mowing the lawn of a property owner who is out of compliance then rendering a bill for the services provided--following proper notifications, of course.

What he did recommend is that the Association develop a set of Architectural Guidelines to address ambiguities in the CC&Rs, which was at the core of the original issue. There is language in the CC&Rs which (paraphrasing) allows the Architectural Committee to issue bulletins to all property owners from time to time setting forth architectural guidelines to be applied equally to all property owners. While such Guidelines do not enable the Board to fine a property owner for non compliance, they do provide a very clear set of guidelines for homeowners without the necessity of amending the governing documents. Had such Guidelines been in place, and very clear language published, the association could have pursued the matter in civil court--this was a much more serious issue than an lawn not properly cared for. The Guidelines have been filed with the county clerk and are incorporated into the governing documents of the association.

So, good luck.

As others have said, I am not an attorney, nor do I work in the legal profession. .

I am not nor do I play a lawyer.

Far be it from me to know VA Laws as does Tim but the more I read, the more it seems to me that VA says an association cannot "fine" but they can have "monetary penalties". Call it what you want but if it looks like a duck, walks like a duck, smells like a duck, quacks like a duck, it is still a duck even if you call it a fowl friend.

I do agree that the Covenants must allow for fines/penalties no matter what called.

I also believe if no "penalty/fining" terminology exists that most HOA owners would vote modify the docs to allow such in a NYC minute. Getting 90% to agree to such a change seems like a no brainer. I know I would vote to do so.

Most owners would vote to publically crucify anyone behind in their dues......LOL

From the description, I believe I may have been a member of the Texas POA board of directors which passed a resolution creating the fine policy being discussed here. I opposed the policy due to the weak legal foundation.

My experience with POA attorneys is that they will bend over backwards to create legal justification for BOD policies. The attorney wins either way. If the policy isn't challenged, he'll make money through enforcement. If the policy is challenged in court, he'll reap a bonanza of legal fees, even if he loses.

We were given two legal rationales. One was that the BOD may fine for covenant violations on the homeowner's lot, because our CC&Rs explicitly allow fines for common area rules violations, but don't forbid fines for violations on lots. This argument could be used to justify any POA intrusion onto private lots unless there is an explicit prohibition against BOD action.

Second, the attorneys interpreted this Texas statute as empowering the POA to fine:

Sec. 204.010(21) "[A Texas POA may] exercise other powers necessary and proper for the governance and operation of the property owners' association."

This general empowerment language is used throughout Texas corporate law, including private businesses (presumably justifying any business creating a fine policy, if you believe this BOD's interpretation).

Our fine policy was shot down some years later by a different attorney from the same firm that wrote the original pro-fine opinion. He is author of the book "Texas Homeowners Association Law - The Essential Legal Guide for Texas Homeowners Associations and Homeowners". In it, he is clear that Texas POAs may not fine unless explicitly empowered to do so by the CC&Rs. A board resolution is not sufficient.

It's noteworthy that Texas condo associations are explicitly empowered by the state to fine. Since their empowerment language is otherwise similar to POAs, one wonders why the state would pass a redundant statute, if, as our POA argues, the authority to fine exists without it.

Heck Terry that information is required by statute for Ohio COA's.

5311.09 Unit owners association records.

(2) Within thirty days after a unit owner obtains a condominium ownership interest, the unit owner shall provide the following information in writing to the unit owners association through the board of directors:

(a) The home address, home and business mailing addresses, and the home and business telephone numbers of the unit owner and all occupants of the unit;

(b) The name, business address, and business telephone number of any person who manages the owner's unit as an agent of that owner.

(3) Within thirty days after a change in any information that division (A)(2) of this section requires, a unit owner shall notify the association, through the board of directors, in writing of the change. When the board of directors requests, a unit owner shall verify or update the information.

After trying to get a few amendments changed recently, nothing is a no brainer, you have the people who can't vote because they haven't paid their fines as well as the few people who ignore HOA, but pay their dues. So if you have an HOA that requires 90%, you would most likely be SOL because of the very people who aren't paying. Which is what happened to us.

So here's a question stemming from that, if you require 90% to change, is it 90% of current payees?

If a quorum of five BOD members can, by an unannounced 3-2 vote, enact policies that have no explicit statutory nor CC&R basis, but which claim a right to members' money and private information, then that BOD possesses almost unlimited authority over lot owners.

Courts have not been kind to POAs that claim this sort of implied powers. With the BOD's own legal advice now turned against implied powers, mounting damages may eventually attract a class action attorney. That would the worst of possible positive outcomes.

Despite my opposition, I realize the people who enacted the fine policy had what they believed to be the best interests of the neighborhood heart. But now, with the weight of court and attorney opinion consistently against BODs creating powers for themselves, the fine resolution has become a ticking time bomb, one that becomes more likely to explode as more fines are levied.

I am very interested in your statement "with the weight of court and attorney opinion consistently against BODs creating powers for themselves...."

We are involved in a prolonged lawsuit with out HOA. The legal fees are near 200K and rising. (we are the plaintiffs) The defendants (HOA) attorney, after 2.5 years just asked for a continuance, to redepose us, to depose our expert/engineer witnesses, and entered a MSJ to dismiss the entire case. Just to drag this out and change more to the HOA's insurance company and break us financially and break our health. It is all about breaking us----we are retired, getting older, and this is eating into our retirement accounts. (Still working at 75 just to pay attorneys.)

I really thought that right would win, then when we went to mediation last month, the mediator, a retired judge, pushed us to settle stating this could be as good as it gets, they will ask (and probably get) continuance after continuance, they will break you, etc.

We started braketing in the mediation, and my husband was so upset from the pressure (after 8 hours)that he was going to agree to 80K for attorney fees (100K short of what we had paid to date) and NOTHING but a promise for damages---when they get around to it in the next five years. But then, at 4:00 pm (time to leave)---they quit braketing and just offered 45K. My husband threw up his hands, said an obscenity, and finally said no. The way I see it, the attorneys (who were running the show)never had any intention of settling. (the law firm representing the HOA is known for this---the largest HOA/CAI law firms in Texas---founding member is on the Board of the lobbying arm of the CAI.)

Anyway, it is so obvious that this is financial warfare and a hope that they can kill off 75 years olds, that this is horrendous. But they keep getting away with it and I am getting scared---especially after the mediator/judge gave us his lectures.

So, any information you might give me on your statement (especially specific cases)would be most appreciated.

Thank you

I have another question. Why don't HOA insurance companies put more pressure to settle and lower costs on the attorneys they pay to represent the HOA in lawsuits.

In our case, we are the plaintiffs against our HOA. (I have been told by many impartial observers that we have a very good case.)

This case is being drug out for years by the HOA/insurance company's law firm---costing the law firm probably thousands and thousands of dollars (even though there is a negotiated and lower fee for the insurance company---I think under 100.00 per hour.)

Instead of settling for very little at the beginning of the case, the HOA/insurance law firm keeps dragging the case out. We are now at the 2.5 year. And the HOA/insurance law firm has just asked for a continuance from the Oct 2014 trial date we are coming up on. The HOA/insurnace law firm is also asking for additional useless (but expensive) depositions on us plus on our expert engineers, etc. (Cachink! Cachink!)

I can see why the HOA/insurance company's law firm would want to keep this going-----MONEY! However, why doesn't the insurance company, which is writing the checks to the HOA/insurance company's law firm wise up and put an end to the waste of their money?

What am I missing here?

Actually, in our lawsuit against our HOA, the insurance carriers who are picking up the legal defense costs have an agreement/contract with the largest CAI/HOA law firm in Texas to handle the defense of their clients/insured who are sued.

This agreement/contract includes a reduced hourly rate (much less than what we have to pay our attorney---about 65% less than what we pay our attorney.

I believe this is common practice throughout the industry.

The 2 insurance carriers in our case are larger insurance carriers, Travelers and Scottsdale. One handles the commercial liability policy and the other handles the D&O insurance.

Our attorney has stated that, possibly, the law firm has to increase their billable hours because they have negotiated for such a low hourly rate.

Teddie,

Our POA defeated a Fortune 500 company famous for senseless environmental destruction around the world. They wanted to do the same thing next door to our neighborhood. They were represented by an international law firm, one of the oldest in the nation. Besides our board, we had a highly competent but small environmental law firm and a respected water quality engineering firm. In the beginning, the big corp refused all our demands. In the end, they gave in to them all, and paid for our attorneys and engineers fees.

The key to the win was to find something important to them, and to devise a strategy to put that at risk. In their case, we made them believe we were willing to empty the POA coffers to take them to civil court. We made them believe we were radicals, willing to spend ourselves into a hole to get our way. We passed a resolution authorizing a massive legal budget for the fight. But we agreed among ourselves, under the table, that we would never spend this money. It was a bluff. It worked. They foresaw a threat to their development timetable that might cost them hundreds of millions. So they settled.

I the end, the delay we caused pushed their project start date into the global drecession, which forced them to put their plans on hold anyway. They're now 7 years behind schedule. If they do restart their plans, it will be with the strongest environmental controls of their type in Texas.

In your case, your HOA law firm is targeting your time and bank account. You need to look at your board members and see what you can do to put at risk either HOA programs they want or use, or possibly even threaten their statutory immunity. Does your BOD have any age or familial discriminatory policies that might make them vulnerable to a fair housing action (the govt will usually provide fair housing attorney free of charge). Make your BOD members 'waste" all their volunteer time dealing with you, and make a fair settlement your price for disappearing

Get your neighbors on your side. Hand out flyers at you board and annual meetings.

You also need to consider carefully the words of the arbiter. But don't let the BOD know this.

Our Petition covers: 1. Breach of Contract; 2. Tortious Interference with Property Rights; 3. Breach of Fiduciary Duty; 4. Contort for Negligence & Gross Negligence; 5. Abuse of Process; 6. Malicious Civil Prosecution and a few other things.

That being said,
Breach of Contract is for breaching the declaration and exceeding the scope of their authority (fining when not in CC&Rs, etc.)

Tortious interference is for not taking care of property and demanding that we not take care of property either. We could not sell our property because roofs and walls were not repaired (pay 400.00 per month plus special assessments for these services), and other things.

Breach of Fiduciary Duty was for HOA holding themselves as a condominium and imposing condominium rules when, in fact, these are fee simple properties---but when the HOA was asked to do something--their response---oh we are fee simple and we don't owe you anything. Financials were ridiculous. Financials handed out at yearly meetings were materially different from the audited financials. FY2012 audited financials made the statement "there is no known litigation or pending litigation---even though lawsuit was filed and there was an MSJ stating that HOA had a fiduciary responsibility (audit firm is now under Texas AICPA peer review for making this statement in the 2012 audit report) HOA has not had a FY2013 audit even though this is listed as one of the treasurer's duties in the bylaws. and many other reasons.

Contort for negligence and gross negligence

Abuse or process: sued us for installing a satellite dish.

Malicious civil prosecution. tried to have me arrested for asking for sprinkler system to be repaired. (everything i asked for sprinkler system to be repaired, the board president would call the police. the police would come out and tell the board president to stop calling them. Then the president called in a police report, where the police did not come out. Then the president went down to the police station and got a copy of the police report and walked the report over to the DAs office and had me charged with a class C misdemeanor. I received a notice in the mail to show up at court. When I showed up at court, with my lawyer, the president did not show up. Case was dismissed.

and much much much much more---like our walls literally falling in because roofs had not been replaced----but board members roofs were replaced. we had a hole, 2 by 4 feet, to the outside in our master bedroom wall for nearly a year because the walls studs and siding were literally eaten away by termites and carpenter ants because of rain that had leaked in---between the walls---for over 12 years that I know of because flashing was not installed when the roofs were redone. when this was pointed out the the board, there answer was, which was their standard answer was this is a neighbor to neighbor responsibility.

Anyway, yesterday was the court hearing for the request for continuance. A 3 week continuance was granted because opposing council (he) is having his first baby. But, I am very happy with 3 weeks.
Also, yesterday a deposition was granted on myself and Bill on 2 subject areas----property damage and my statement to a neighbor that the HOA insurance company had issued an ROR (which they had). Opposing council is stating that this was discussed in mediation and this is privileged info. Discussing this issue with a neighbor is neither privileged nor was it even discussed in mediation. (but they asked to re-depose on 4 issues for 4 hours and only got 2 for 2 hours.) So I am happy with this, plus I am anxious to discuss damage assessments since I recently discovered that the HOA has not cleaned out the storm drains on the common area ever---which caused the flooding in the garage which caused all the walls and studs to rot, which caused the walls to compress, which caused structural issues to the roof.

There is a lot more, but your eyes are probably getting tired by now.

Please let me know if you have any further comments or questions. Very appreciated.

I loved your terms logically vacuous and logically flaccid & unprofessional. I looked up 2 of this law firms cites in the their Petition for Traditional and No Evidence Motions for Interlocutory Summary Judgment. The cites had nothing to do with the points of law the law firm was claiming. It was a joke. I wonder when does a lawyer step over the line into incompetence.

Thank you for the tips on case law regarding ACC limits. My next Flying Fickle Finger of Fate Newsletter to residents is going to be on this topic.

Recently, one resident was told she could not put a cover on her interior patio. However, the HOA president, not only has a cover on her interior patio, but has also converted her interior patio into a totally enclosed structure with AC and heating. (what is fair for the goose is not necessarily fair for the gander?)