Ability to Fine

JasonM13 (Tennessee)
Posts: 4

Posted:

We are getting expert legal advice on this question, but I welcome the views from the members of this forum. Do you think the language below gives the Board sufficient authority to impose fines on our residents for covenant violations, or does the poorly drafted language in the by-laws limit (by error or by intent) the ability to assess fines only to behaviors on the Common Areas? The language below is the only language in the covenants and the by-laws with regards to fines. My personal view is the by-laws are flawed and only allow the Board to assess fines on the Common Areas because the covenants stipulate that the imposition for fining will be provided for in the by-laws and the by-laws only allow fines to be assess for actions on the common areas the way the clause was enacted. Let me know if you agree or disagree with my interpretation.

Covenants:
Article IX, Section 3. Rules and Regulations. The Association, through its Board of
Directors, may make and enforce reasonable rules and regulation governing the use of the
Properties, which rules and regulation shall be consistent with the rights and duties
established by this Declaration. Sanctions may include reasonable monetary fines and
suspension of the right to vote and the right to use the recreation facilities. The Board
shall in addition, have the power to seek relief in any court for violation or to abate
nuisances. Imposition of sanctions shall be provided in the By-Laws of the Association.

By-Laws:
Section 1. Powers
The Board of Directors shall have the power to:
(a) adopt and publish rules and regulation governing the use of the Common Area
and facilities, and the personal conduct of the members and their guests thereon, and to
establish penalties for the infraction thereof;

SheliaH (Indiana)
Posts: 6,964

Posted:

It may depend on what's covered in the declaration, but I'd wait to see what your attorney says. In fact, ask him or her your question and go on from there (we aren't attorneys after all.) I'm sure he/she will also check if state law allows you to assess fines (in Indiana, HOAs really aren't allowed to do that because of case law the legislature hasn't yet gotten around to fixing).

For what it's worth, I'm wondering if the type of community comes into play. For example if it's a townhouse community, the building structure of the units could be considered common areas (they are in our community) and therefore, the Board would be able to assess fines.

The documents probably are badly written because most developers use a type of boilerplate language when drawing up these things. Usually the language favors them until they turn the community over to the homeowners, who then have to sort everything out. If your documents are this ambiguous, I hope you're going through all of it to see what other weirdness is in there - better to address it now.

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

TimB4 (Tennessee)
Posts: 21,062

Posted:

Quote:

Posted By JasonM13 on 06/22/2015 12:37 PM
Covenants:
Article IX, Section 3. Rules and Regulations. The Association, through its Board of
Directors, may make and enforce reasonable rules and regulation governing the use of the
Properties, which rules and regulation shall be consistent with the rights and duties
established by this Declaration. Sanctions may include reasonable monetary fines and
suspension of the right to vote and the right to use the recreation facilities. The Board
shall in addition, have the power to seek relief in any court for violation or to abate
nuisances. Imposition of sanctions shall be provided in the By-Laws of the Association.

In my opinion, an argument could be made that the authority to impose monetary penalties is only on the adopted rules and regulations and does not apply to violations of the covenants.

The reason I believe an argument can be made for this is because the language isn't clear enough.

The language specifies that the Board may make rules/regs, then specifies that the Board may impose moneteary penalties as a sanction [for violating those rules or regs]. It then specifies that the Board shall in addition have authority to seek relief in the courts for violations (of the covenants) or to abate nuisances.

It needs to be clearer that the sanctions can also be imposed for violations of the Covenants in addition to violation of any rules/regs adopted by the board.

KerryL1 (California)
Posts: 14,550

Posted:

I'm not in any legal fields. Since your CC&Rs or Covenants give the board the power to make rules, etc. re; the "Properties." I take this to include Owner's separate interests, i.e., their homes. Covenants supersede bylaws.

The bylaws are then subordinate to the covenants. Your HOA, it appears to me, then, may make rules and establish fines.

Since revising your bylaws to be clearer might need a formal vote by owners via ballots or whatever your docs & TN require, it would be easier to clarify this matter in your rules and regulations, which your covenant permit the Board to make.

Is your HOA detached homes? What rules did you or others have in mind that would apply to private property (vs HOA common areas)? We're high rise condos and have, for example, rules against constantly barking dogs and forbidding dogs or cats form being locked outside on balconies. We have the rules in our Rules & Regs, but they re bolstered by our covenants which forbid "nuisances" of any kind.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

My layman's read is the HOA might could fine in both cited references (Covenants and Bylaws) and as mentioned, I think it could depend on the type HOA (condos, townhomes, private homes, etc.).

In my last HOA (all single family homes on owner lots), we did have Covenants that said no commercial vehicles could be parked in the driveway overnight. Even those owner owned. Though the vehicle was on one's own property and properly parked as in the driveway, we could fine for the "commercial vehicle" violation. In the OP's case, I think this type violation is what the Covenants cover. We had some heated discussion on what qualified as a commercial vehicle but another subject.

The Bylaws seem to cover Common Areas such as our Bylaws said no vehicles could be parked overnight in the clubhouse parking lot whereas the Covenants never addressed parking in the clubhouse parking lot.

The Covenants are what I consider general (like saying a BOD of 3 to 7) whereas the Bylaws try to clarify like say the BOD can decide on the BOD size but without saying so, it still must be 3 to 7 members.

Opinions are like noses. We all have one......LOL

BobD4 (up north)
Posts: 1,002

Posted:

( JasonM13(TENN): "We are getting expert legal advice on this question, but I welcome the views from the members of this forum.")

So what can you safely do with the views of unpaid internet strangers ?

( JasonM13(TENN): "Do you think the language below gives the Board sufficient authority to impose fines on our residents for covenant violations, or does the poorly drafted language in the by-laws limit (by error or by intent) the ability to assess fines only to behaviors on the Common Areas ? The language below is the only language in the covenants and the by-laws with regards to fines. . . )

Cherry picking from small portions of governance documents, is dubious. You state that the excerpts are the sole references, but respectfully without reviewing the whole package of governance documents, who knows ? It risks ignoring that your state law & body of jurisprudence have a different view of potentially voodoo site-specific stuff.

As you said the Covenant qualifies the full scope of bylaw-platformed rules & regs /fines thereunder as being potentially as wide as "of the properties" including unshared end-user units, as opposed to the narrower "Common Area and facilities". Yes, if valid & complete this would support how far you think the umbrella'd bylaws seem to go. But what else is in the bylaws ? And for violations on the 'unshared' end-user units, there must be other enforcement remedies /routes almost as unpleasant as mere fines.

Presume you have already tracked down Tennesssee condo act 2008, proposed HOA act and/or whatever else applicable to your community.

NpS (Pennsylvania)
Posts: 4,216

Posted:

In your covenants, the word Properties is capitalized. This usually means that the word Property or Properties is defined somewhere. Can you provide the particulars?

Sikubali jukumu. Read all posts at your own risk.

KerryL1 (California)
Posts: 14,550

Posted:

Good point, NpS. Perhaps many covenants are like ours, which have a very intricate section that defines virtually every word used in our lengthy CC&Rs. Maybe yours do too, Jason.

RichardP13 (California)
Posts: 3,868

Posted:

Jason

IMO, you have been given the right to fine for infractions. The important part is that when Rules and Regulations are created, they are derived primarily from citations within the CCRs and then more are added, as long as the spirit has been followed, "Fair and Reasonable".

What also must be considered is does your CCRs or state laws have due process clauses for the offending party.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Jason

When one has the right to fine it is imperative they set up a schedule and follow it. The trouble comes when one can be accused of being capricious versus being fair. Firm, but fair works. Willy nilly does not.

BobD4 (up north)
Posts: 1,002

Posted:

( JasonM13(TENN): "We are getting expert legal advice on this question, but . . "

What may be missing from the Covenants, may somewhat address whether your view is correct or not.

1 - As to end user private units/properties (NOT common lands), AFTER initial construction, do the higher Covenants directly or indirectly refer to ongoing use, maintenance, legal ownership activity etc that purport to restrict those end-user private units /properties ?

Do they then cite some sort of other non-fine remedy directly against those end user properties for such usage or maintenance etc ? something beyond enforcement of unpaid common lands contributions ?

Consistent with your opinion, would be that the overall higher COVENANTS themselves DO NOT show any wording for any ongoing HOA nor condo nor whatever body's restricting the use or maintenance nor whatever of those end user private properties.

Or that the wording limits involvement to actioning unpaid common contributions.

If the entire scope for such within the Covenants lacks anything beyond eg construction limited to a single family, Code-compliant residence and no visible commercial signage, then such would upfront support your view of the limits on By-law powers.

Again cherry-picking from small portions of governance documents, is dubious.

2 - There may be other indicators. But it may be very shaky to draw conclusions from (disputed) actual practices and potentially voodoo beliefs & pronouncements of Board members and /or Declarant.

At the date of By-law 1 Powers being enacted, was your issue addressed even indirectly by publicized statements by Declarant/developer (or the Minutes of any later Meeting if not enacted upfront ) ?

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Keep in mind that most states do not allow fines to be used as the basis for liens or foreclosure. It is only for unpaid dues or special assessments. There are some states/HOA that do what I call "tricky" bookkeeping that makes fines look like unpaid dues. Whatever fines are owed, the apply the assessments toward that. I am not a fan of that approach.

In our HOA we never used fines. If we did, we would need a fining schedule for all the members to know. A CC&R violation is $25 a day to XX max allowed by law. That way people knew what they would pay in fines.

We used a different approach than fines. We had the right to fix the violation at our cost and charge the owner. If the owner did not pay, then we could place a lien on the property. We did warn them to fix the issue or we would take such action. Plus at our cost/contractor. It was much stronger than issuing fines considering you can't sell the house until the lien was paid.

Former HOA President

RichardP13 (California)
Posts: 3,868

Posted:

Quote:

Posted By MelissaP1 on 06/23/2015 8:17 AM
Keep in mind that most states do not allow fines to be used as the basis for liens or foreclosure. It is only for unpaid dues or special assessments. There are some states/HOA that do what I call "tricky" bookkeeping that makes fines look like unpaid dues. Whatever fines are owed, the apply the assessments toward that. I am not a fan of that approach.

In our HOA we never used fines. If we did, we would need a fining schedule for all the members to know. A CC&R violation is $25 a day to XX max allowed by law. That way people knew what they would pay in fines.

We used a different approach than fines. We had the right to fix the violation at our cost and charge the owner. If the owner did not pay, then we could place a lien on the property. We did warn them to fix the issue or we would take such action. Plus at our cost/contractor. It was much stronger than issuing fines considering you can't sell the house until the lien was paid.

Melissa

Can you name a state that does allow this type of bookkeeping?

TimB4 (Tennessee)
Posts: 21,062

Posted:

Quote:

Posted By RichardP13 on 06/23/2015 8:26 AM

Posted By MelissaP1 on 06/23/2015 8:17 AM
Keep in mind that most states do not allow fines to be used as the basis for liens or foreclosure. It is only for unpaid dues or special assessments. There are some states/HOA that do what I call "tricky" bookkeeping that makes fines look like unpaid dues. Whatever fines are owed, the apply the assessments toward that. I am not a fan of that approach.

In our HOA we never used fines. If we did, we would need a fining schedule for all the members to know. A CC&R violation is $25 a day to XX max allowed by law. That way people knew what they would pay in fines.

We used a different approach than fines. We had the right to fix the violation at our cost and charge the owner. If the owner did not pay, then we could place a lien on the property. We did warn them to fix the issue or we would take such action. Plus at our cost/contractor. It was much stronger than issuing fines considering you can't sell the house until the lien was paid.

Melissa

Can you name a state that does allow this type of bookkeeping?

I disagree with Melissa. I believe that most States would allow monetary penalties to be a basis for foreclosure. Virginia is one example that allows this to happen.
Per Statute, any monetary penalties are treated as an assessment.

RichardP13 (California)
Posts: 3,868

Posted:

Tim

California does not allow fines to be used for the basis of liens and/or foreclosures. I totally agree with that position.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Quote:

Posted By TimB4 on 06/23/2015 8:49 AM

Posted By RichardP13 on 06/23/2015 8:26 AM

Posted By MelissaP1 on 06/23/2015 8:17 AM
Keep in mind that most states do not allow fines to be used as the basis for liens or foreclosure. It is only for unpaid dues or special assessments. There are some states/HOA that do what I call "tricky" bookkeeping that makes fines look like unpaid dues. Whatever fines are owed, the apply the assessments toward that. I am not a fan of that approach.

In our HOA we never used fines. If we did, we would need a fining schedule for all the members to know. A CC&R violation is $25 a day to XX max allowed by law. That way people knew what they would pay in fines.

We used a different approach than fines. We had the right to fix the violation at our cost and charge the owner. If the owner did not pay, then we could place a lien on the property. We did warn them to fix the issue or we would take such action. Plus at our cost/contractor. It was much stronger than issuing fines considering you can't sell the house until the lien was paid.

Melissa

Can you name a state that does allow this type of bookkeeping?

I disagree with Melissa. I believe that most States would allow monetary penalties to be a basis for foreclosure. Virginia is one example that allows this to happen.
Per Statute, any monetary penalties are treated as an assessment.

We can in SC. It is not easy but it can be done. I do not ever see our HOA doing so. We are quick to waive fines if the violation goes away. We consider fines just a tool to make violations go away, not as a money maker.

KerryL1 (California)
Posts: 14,550

Posted:

Well, back to the OP...we haven't heard from Jason again, so perhaps BobD is close to the truth--Jason cherry-picked wording from his convents?

But I'd really like to see the opinion Jason's HOA gets from the attorney!

JasonM13 (Tennessee)
Posts: 4

Posted:

And the verdict is in: We cannot fine! In order to fine, we have to publish a set of rules and regullations first. If we want to fine for covenant violations, we have to reference the covenants in the published rules and regulations. The attorney did not see an issue with the by-laws, but our lack of published rules, regulations incorporating the covenants precludes us from fining in his opinion. There was no cherry picking, this was the only language applicable to the ability to fine.

JasonM13 (Tennessee)
Posts: 4

Posted:

You had it correct!

JasonM13 (Tennessee)
Posts: 4

Posted:

Sorry, should have said it was TimB that had it correct.

RichardP13 (California)
Posts: 3,868

Posted:

Quote:

Posted By JohnC46 on 06/23/2015 12:51 PM

Posted By TimB4 on 06/23/2015 8:49 AM

Posted By RichardP13 on 06/23/2015 8:26 AM

Posted By MelissaP1 on 06/23/2015 8:17 AM
Keep in mind that most states do not allow fines to be used as the basis for liens or foreclosure. It is only for unpaid dues or special assessments. There are some states/HOA that do what I call "tricky" bookkeeping that makes fines look like unpaid dues. Whatever fines are owed, the apply the assessments toward that. I am not a fan of that approach.

In our HOA we never used fines. If we did, we would need a fining schedule for all the members to know. A CC&R violation is $25 a day to XX max allowed by law. That way people knew what they would pay in fines.

We used a different approach than fines. We had the right to fix the violation at our cost and charge the owner. If the owner did not pay, then we could place a lien on the property. We did warn them to fix the issue or we would take such action. Plus at our cost/contractor. It was much stronger than issuing fines considering you can't sell the house until the lien was paid.

Melissa

Can you name a state that does allow this type of bookkeeping?

I disagree with Melissa. I believe that most States would allow monetary penalties to be a basis for foreclosure. Virginia is one example that allows this to happen.
Per Statute, any monetary penalties are treated as an assessment.

John

My question was, what state allows for "tricky" bookkeeping?

We can in SC. It is not easy but it can be done. I do not ever see our HOA doing so. We are quick to waive fines if the violation goes away. We consider fines just a tool to make violations go away, not as a money maker.

BobD4 (up north)
Posts: 1,002

Posted:

1- Hope OP did not see the 'cherry picking' reference as even obliquely criticizing him, but rather to describe how shaky it is to try to construe from merely part of documents ( & especially where possibly cut & paste from multiple sources).

2 - If the due process/procedurals DO get filled in as to By-law powers, what the OP originally noticed hopefully will also get addressed or will lie in wait. ( Can Rules & Regs target only uses & conduct involving the "Common areas & facilities" ? )

KerryL1 (California)
Posts: 14,550

Posted:

So.... Jason, go ahead and make your rules and fining schedules. Your board has that authority. That's what this HOA did some years ago and referenced the covenants in each case.

And your original question, which BobD repeats, was not answered?

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Quote:

Posted By JasonM13 on 06/23/2015 4:59 PM
And the verdict is in: We cannot fine! In order to fine, we have to publish a set of rules and regullations first. If we want to fine for covenant violations, we have to reference the covenants in the published rules and regulations. The attorney did not see an issue with the by-laws, but our lack of published rules, regulations incorporating the covenants precludes us from fining in his opinion. There was no cherry picking, this was the only language applicable to the ability to fine.

The verdict is not that you cannot fine. The verdict is you can fine if done properly.