Where should we include the fines?

Gregg,

One thing you need to understand is that the Association's authority to do things comes from the CC&Rs and applicable laws. A Board must ensure that they do not exceed the authority given to them.

In Virginia, there have been court cases where Boards exceeded their authority an imposed monetary penalties for violations of the covenants when the CC&Rs did not provide for monetary penalties. In one case, this actually resulted in the Association declaring bankruptcy.

See:

Farran, et al. v. Olde Belhaven Towne Owners Association

Fairfax homeowners group humbled by court battle with residents a Washington Post article

I had even started a thread on the topic:

Subject: VA Associations, Do you still have the authority to use monetary penalties for violations?

As you can see Gregg, there are differing opinions on the issue.

It's best and more likely to withstand any legal challenge if the language is within your CC&Rs.

Until challenged, having the language in the Bylaws may suffice. However, once challenged (which may happen the first time you fine or not until a decade from now), the issue will boil down to what does the CC&Rs say, what do the applicable laws say and is there a conflict between the language for monetary damages in the Bylaws and the CC&Rs or applicable laws.

Since you had someone already mention to you that the language needs to be in the CC&Rs, you might what to ask them what is their basis for that statement.

Just want to ask, if the language is in the Articles, which typically trump CCR's, allows for fines etc why would they need to be in the CCR's? If I were to guess an answer it would be because the Articles are regarding the corporation aspect and CCR is for the association itself?

And thanks Tim for the shortcut help!

Keep in mind that it takes a MAJORITY vote of MEMBERS to make changes to your documents and NOT major vote of BOARD members. Read your documents on what that percentage is required and if a special meeting is required. You may be able to skip the special meeting requirement if it is better to go door to door. It will take an extra document to do that for members to sign giving up their right to cast a vote at a special meeting.

Also keep in mind that Fines can NOT be used for the basis of liens/foreclosures. ONLY Dues or unpaid special assessments. You can charge late fees, legal costs, and allowable interest on back dues in your lien/foreclosure. Each state varies so read your documents on interest charges allowed.

Some states allow you to fine and then when they pay dues apply it to the fines. So it will make it seem like there are dues owed. Which to me is a bit crooked. However, to each their own. We never issued fines for violations. We had the ability to fix the issue and then charge the owner for it. If they did not pay, then we could lien for that amount. A better option for us. Otherwise, we would need a "Fining schedule" detailing what price you pay for each violation. Which then makes fines able to be enforced.

Ok...I'm a little more confused now than before LOL because when I thought we'd make the changes to the bylaws, it sounds like some feel it should be in the CC&R's. Can we put the same wording in both?

I checked with the Kansas Secretary of State's office just now. They said we do not file HOA documents with them but rather they are kept internally with ourselves. Here is what I the board is trying to add. Our bylaws state that the a majority vote of the BoD is all that is needed to amend the governing docs:

The board has adopted the following rules and procedures regarding the enforcement of dues and fines collections:

a) Invoices of dues are to be mailed by US Mail no later than December 30th of the year prior to the new calendar year by the treasurer.
b) Dues not received by, or postmarked after January 31st are considered past due and will accrue a ten percent (10%) late fee. A subsequent letter of past due status will be mailed to the home owner that is past due during the first week of February. This will be a final notice letter, notifying the home owner that a lien will be place on the property if the dues are not made current by the last day of February.
c) If the account is still in a past due status by March 1st, a lien will be filed by the treasurer and notice to the home owner will be mailed notifying them of the lien and a one hundred and fifty dollars ($150.00) assessment to their balance for the process of placing the lien on the property. Additionally, the treasurer will file a civil action against the home owner, to include all dues, late fees, lien expenses, legal costs, etc. with a minimum assessment of one hundred and fifty dollars ($150.00) for the civil filing itself.
d) If, after a lien and/or civil action has been filed, the home owner brings the account current. the home owner will be accessed an additional $150.00 to be provided with a lien release. This release will only be provided after the account, with lien release fees, are paid in full.
e) Fines, in the amount of no less than fifty dollars ($50.00) per month, will be assessed against a home owner after two (2) notifications have been mailed informing the home owner of the violation. These special assessments will be levied in such cases where a home owner is found to be in violation of the Bylaws and/or CC&R’s and the home owner has failed and/or refused to comply with such notifications. Any home owner who accrues two hundred dollars ($200.00) or more in special assessments will have a lien and civil action filed against them and their property, in conjunction with all applicable fees and fines levied as stated above in Article V (c)(d).

Now, clearly all we are trying to do is explain, in further detail, what can happen if someone is late on their dues and what can happen if someone refuses to comply with the CC&R's. At this time, no one is late or failing to comply...we just want to be prepared for if and when it happens.

Gregg what people are saying is "do you have the authority to update the CCR/Bylaws?" and if yes, what are the requirements? it should be spelled out in your CCR/Bylaws.

If you cant legally update them, all this work is for nothing.

In some imaginary universe where Articles of Incorporation could trump CCRs on title, why would those stop at merely trumping just the CCRs ? Why not go further to purport to trump state or federal laws ?

9 buddies and I go into a large commercial mall & sit down at the foodcourt. Then we online purchase (from the jurisdiction) Articles that say - for example - that we own the whole mall ( without purchasing it ). Or that we own the moon or whatever ?

How easy to see that well - intentioned folks start believing they can magically create their own buckshee fining powers.

Respectfully, private group realty powers have to be found explicitly in state ( and possibly Federal) laws and subsequent lawful title-affecting registered documents ie the legisature and land registry. Trouble down the road otherwise. Time to look for a competent professional.