Does excessive fining help or hurt?

Interesting question, Larry, which asks: "Do you think levying large fines - or allowing small fines to grow large - is good for an HOA?"

And also--we can see that "good for an HOA" can have more than one meaning. "Good" for marketability is one. But I'm not so sure that the general home-buying public with know about this case. Or if it does, they'll be affected one way or another. (Please Melissa......no!)

"Good" in the sense that big fines can promote general compliance with the HOA's covenants & rules is another, it seems to me. I'll speculate about that one later.

Pardon my poor reading comprehension ability, Larry. It looked to me like your original questions was whether such a huge fine is good for an HOA, not this guy's individual capacity to sell.

If ordinary buyers were really keen about doing their due diligence, some, even ONE, in my 15 y.o. HOA would have noticed that HOW dues are determined is NOT in any of the governing docs. Instead, the truly diligent buyer would need to inspect the original Dept. of RE budgets that the developer filed. But, buyers rely on the realtors' listings for the monthly HOA fees and these amounts are verified during escrow. I'm pretty sure that not all buyers over the years owning these 200+ condos are lazy and/or ignorant.

It has turned out, though, that one of the three groups of Owners here has been paying about 15% more in dues than they should and a second group has benefitted at the former's expense. I hope to get this corrected in our CC&Rs rewrite.

Your next question: "And how does this effect [sic] the values of ..." the other homes? IMO, IF I knew, it wouldn't keep me out of the HOA all other things being equal. If there were plusses that I really wanted, I don't think this individual issue would affect me. I s'pose I'd be really careful about following the rules.

I answered, Larry, by writing above: "IF I knew, it wouldn't keep me out of the HOA all other things being equal. If there were plusses that I really wanted, I don't think this individual issue would affect me. I s'pose I'd be really careful about following the rules."

But that's just me.

Wasn't the Commonwealth Court sort of exceeding its role by guessing, in a footnote no less, about market values? Why should it care? I'm just curious if this kind of judicial behavior is common. I know little about such things.

IF, as a real estate agent, I knew about this case, there would be NO WAY I could recommend a transaction within that community. Agents do talk among themselves. Mortgage companies have notes in their files about communities like this.

I am not a big fan of federal regulations, but this is one I would jump over. Under NO circumstance should an association's governing body be allowed to lien and possibly foreclosure on a individual's property because of fines, given the fact that boards can run amuck without any reasonable oversight. Look what happened in Virginia with the flag issue. We threw away $250K because two people couldn't live next to each other in my former association.

So to answer the question, yes, excessive fining will hurt an association.

The simple answer is that it hurts.

The harder answer is to define excessive.

Obviously $32K is excessive.
But is $100 excessive?
What about $500?
$1,000?
etc.

At what point do you quit fining and simply start legal action to force compliance?

Virginia statutes allow monetary penalties not exceed $50 for a single offense or $10 per day for any offense of a continuing nature (not be assessed for a period exceeding 90 days).

It is unclear and untested if the statute allows a new 90 day period to be created after the first 90 day period ends.

Per statute, all monetary penalties are considered assessments and may be the basis of a lien. However, any lien must be recorded within 12 months from the time the first such assessment became due and payable.

The statutes get a bit complicated with time lines over liens (which I haven't taken the time to go over).

One thing that is a bit unique to Virginia (and it varies from County to County), an Association may not impose monetary penalties for violations unless it is authorized within the CC&Rs. Therefore, in my case, as our CC&Rs do not support fines for violations this question is actually moot for us. However, we have threatened the use of monetary penalties to obtain compliance but have not had our bluff called.

I find fines are no good unless you sue for them. Many states do NOT allow for fines to be converted to liens/foreclosure because that is ONLY for unpaid dues/special assessments. A lawsuit for fines does turn into a "Judgement". A lien is another form of a judgement. The conditions/applications is different. A lien goes against the property and is not returned till debt is paid. (Property in the HOA case it's house/Land). A lawsuit court ordered judgement can force cash to be paid in multiple forms. (Cash, wage garnishments, etc..)Wanted to post the difference before posting more OPINION.

Fines in HOA we never put into place in our HOA. Never needed them but had a right to use. However, as everyone knows the HOA may have the right to fine but lack the DEFINITION. That is when a HOA needs to develop a "FINING SCHEDULE". Basically, your HOA can't randomly fine someone for something they just don't like. It actually has to be DEFINED and listed so ALL the members know what qualifies. Otherwise, because you don't like "Plastic flowers" in the front yard doesn't mean it can be fined/removed. Where is it written that Plastic flowers are in violation? (Believe me I have seen plastic flowers planted in a front yard before.)The Fining schedule would have to have "Fine of $20 a day NOT to exceed $300 for each occurrence of said violation". Each state has their own fine limitations and maxes. So excessive fines in this case most likely would be tossed out because the state does have limits on such issues. It's a form of "Loan sharking" laws.

For us, we had a much better and stronger system for clearing up violations. It was already in our CC&R's. If the owner did not fix the issue, then we the HOA could fix it. We then sent the owner the bill. If the owner did not pay it, then we could LIEN for that money owed. Which the lien included interest, legal expenses, amount owed, and other procedural costs. This is the simplified process. We the HOA could fix/clean any violation up and get our money back.

I find the problems with lawsuit court ordered judgements and fines are they aren't that strong to see the money. If you live in a state a fine can't be converted to lien/foreclosure, you simply walk away laughing. The cases of lawsuit is very similar. Even if the HOA wins, the owner can simply sell their property leaving it all behind. Good luck in ever trying to find them to collect. The HOA most likely is NOT going to have their social security number to do wage garnishment. The person has up to 7 years to pay up before has to be refiled. Considering a HOA board changes every year or 2, who is going to volunteer to chase down an ex-owner or remember when to refile?

In the end, excessive fines are most likely a violation of STATE laws. The judge will most likely toss the case out or limit the fines to ACTUAL damage expense. A court will ONLY make one "WHOLE". They will NOT grant a "Profit". Which fines are considered profit NOT income. They are PUNITIVE in nature which most small claims courts do not issue Punitive damages. A larger fine would take a different court to pursue than your local small claims.

Large fines, threat of, or rumors of them do more damage than good. It benefits the HOA little. My opinion is not to use fines or lawsuits in a HOA. It's not a cost effective method and hurts everyone.

34.9k in fines over an unauthorized fence and a front entry appearance? No thank you. You couldn't pay me to buy there.

It almost feels that at some point, this turned personal with the board. So in turn, they kept upping the fines.

Jon makes a lot of sense and what he says matches the experiences in our urban high rise HOA, where several violations have nothing to do with ARC-type issues.

Jon: "We have had a handful of cases where fine amounts grew to what most might consider abnormally high. I will avoid using the term excessive because that suggests improper or unnecessary. In each case these fines were made necessary by the continued behavior of the resident."

We too had renters in a condo who often partied too loud, too late on their balcony generating many complaints & witnesses. Our written policy was followed: 1. courtesy letter, violation continued. 2. Owner called to hearing and fined $100. Failed to comply-our policy states fines may double. 3. Called to 2nd hearing & fined $200 + removed common area privileges; 4. 3rd & fined $400; 5. 4th, fined $800. 6. 5th, fined $1,600. Owner sent us a letter saying his tenants had decided that condo life wasn't for them & gave notice they were moving back to the 'burbs.

Point: fines did eventually work. And the condo has been in compliance ever since.

Coming up: as in most high rises we have strict CC&Rs about window covering color that's visible on the exterior--only white, off white or beige. Suddenly we have a windows on a very large condo covered in dark brown shades. We're just starting the process whereby the Owner's been notified to remove them --first noncompliance about this in 15 years!! I think our PM gave them 2 weeks. If they don't comply, they'll be called to hearing and fines will commence. But will we, if non-compliance continues, actually go into the unit and take down these electronic shades??? Would you?

Jon: "I would doubt many potential buyers would research the filing and or outcome of civil cases within any given HOA."
I totally agree as in my way above. With all of the required disclosures we have in CA before a buyer closes escrow, whether there are unpaid fines against other units is not among them. I really doubt the rumor mill is as strong as some simply speculate. I doubt that most realtors would know about the case and lose a sale because of (apparently) one incident.

I have no idea why a lender would know about this unless widely seen on TV, in the papers, etc.

As a prospective buyer, on the off chance I DID hear about it, I think my only concern would be if this Board fined "excessively" frequently.

My spouse & I have owned in homes many parts of the US. Our "due diligence" beyond reading carefully the documents we needed to read, was driving the neighborhood in the early evening and chatting with neighbors. If an arbitrary weird board was in power, we'd hear about it that way.

Jon: "We have a fine structure in place which continues issuing fines should the violations continue." We do too; see above.

Jon: "In my view fines are not issued to generate income but rather obtain compliance." I agree.

I also agree that "excessive" is too vague and, similarly "good for an HOA" is too vague in the O.P.

Well John the fines were for repeated violations of multiple rules and regulations. This residents mind set was he simply would NEVER pay them.
Problem is they are placed on the account of the unit and any sale in the future would be held up till such time that payment was made.

We have an increasing file schedule with late fees added each and every month. In our case the court decided there was a clear and deliberate pattern of willful violation of rules that the resident was repeatedly made aware of and continued to violate.

To make a long story short he is a ding-dong who thought he would impose his will not only on the board but also the court. In the end he was proven wrong to the tune of $30,000+ plus two years of his own legal fees. Arrogance and ignorance are a self destructive combination.

If you simply decide it is not possible or to much effort than what purpose are you serving as a board member? I was told to,was a fight not worth fighting.
I was told my decisions were not in the best interest of the property. In the end we won completely and collected $30,000 to add to our assets. If that is bad I can't figure out how....

The court also noted that the owner claimed he made a written application for the changes to the door, that the ARB took no action within the time frame for them to act, and that under the rules of that association the application should have been deemed to be approved. (That was an unproven allegation at the time the opinion was written.)

The court also noted that the homeowner asserted that the "fence" in the front yard was a rose arbor and that landscaping is exclusively under the control of the homeowner. Again, an as-then unproven allegation.

I wish I knew how this all turned out in the end.

I was answering the the questions, does excessive fining help or hurt.

In my opinion, this particular instance hurt.

If I were looking for a condo/townhouse and heard about this, I would definitely pass. The communication issue wouldn't be a consideration for me.
The facts, as presented in the attached file would. And what they tell me is the HOA was acting irresponsibly by allowing something so trivial, to get this far.

I mean there's a ton of properties out there, why bother with one who has an HOA imposes 35k worth of fines over a rose arbor and door?

I also believe my view would be pretty common among prospective buyers.

There was a news article here 10-11 years ago that I have since lost the link to, where a homeowner in CA racked up close to $250,000.00 in fines for non-compliance and when it finally got to court the judge ruled that the fine wasn't "excessive" as the H/O had the power to stop the fines at any time by simply complying with the CC&Rs.

It seems the same here where the H/O could have stopped the fine at any time by either curing the violation, or litigating the matter. Instead he chose to allow the fine to accumulate, talk about cutting off your nose to spite your face.

As to whether the fine was "excessive" or not, what was the daily amount and how long did the violation go on? Even at $25.00 a day you can rack up $34,900 in less than four years not counting any interest or legal fees.

And yes Larry the burden of proof is on the H/O in this case, he agreed in writing, remember that darn pesky promise to comply with the CC&Rs when you buy, or show that the Board acted in bad faith, by not replying to his ARB request in a timely manor. The dog ate my homework defense.

Strictly my own opinion, you had a bullheaded owner vs. an implacable Board and both were at fault.

The PUD form does reflect outstanding debts in it. That includes things like the number of non-payers, lawsuits, liens, and foreclosures the HOA has. It also asks the number of renters. Which can effect the type of loan package offerings and refinance interest rates. No one ever really sees this form except the mortgage company and the President/HOA designee who signs the form. It's part of the closing process that not many know or sees. It is usually FHA type loans that uses the PUD.

So can't say that the fines issue does not have an effect on owners and potential buyers. That PUD form if filled out correctly may indeed include this information. Which can then effect everyone involved behind the scenes beside just reputation.

A fine in the amount of $34,000 is an abuse of power. If a government agency did that and it hit the news, we would be screaming "bloody murder".

CCRs are a boilerplate document that developers placed on the communities they were building. Most CCRs are one size fits all. There are a few that are actually specific to the community they are in place for. But the vast majority are not. 95% of the CCRs in place today, are the very same ones from the original date of being recorded. Nobody voted for them.

There are many states where not all the documents are available to a prospective buyer. California has those requirements. Most states only require CCRs and the Bylaws, but, in this instance, the problem was with the Rules and Regulations which would have the fining schedule. CCRs give the Boards the authority to create the Rules and Regulation, but they MUST be "fair and reasonable". When other association fine $25.00 for an offense, how in the hell can $34,000 for the same thing not be considered "EXCESSIVE".

In my former association, we had two instances of either excessive fines, or no action whatsoever.

One instance, our CCRs stated homeowners had to landscape their backyard within 6 months of escrow closing. A Board member trespassed on one owners property and proceeded to fine them over a period of six month $6000.00.

Another instance, as most CCRs prohibit commercial vehicles, a Board member ignored the commercial vehicle in the driveway of his next door neighbor for three years.

FYI, ALL loans that have a mortgage attached to them and are in a homeowner association have a lender questionnaire that MUST be filled out. The only time it won't be required is if it's a cash sale and then a lot then falls through the cracks. I have done about 200 escrows and each required a questionnaire. At least 20 times I have had to reach out to an attorney when litigation was ongoing in an association.

An underwriter will question rental ratios, delinquency ratios, reserves, budgets and LITIGATION the association may be involved. If there is litigation the underwriter generally will be requiring a letter from the association attorney to comment.

Maybe its time for legislators to step in and put caps on their kind of abuse. If legislators can tell me the limit of rounds in my magazine to 10, then maybe they can tell HOA's what the limits on their fines should be.

Good morning John

It took them close to 3.5 years to sue. They did nothing the entire time- just waited for the fines to add up and more violations (for the fences that didn't exist) to add on.
Waiting that long, then suing for 35k just sounds irresponsible to me, plus vindictive since they didn't even file until he requested a declaratory judgment.

So how much longer would have let it go on? How many more years until they acted?
This entire incident doesn't show me they're an effective board.

But we're coming at it from different angles. I'm not on my BOD, just looking at it for a potential buyers viewpoint.

1- LarryB13(Arizona) has invited comments about what was an "obiter dictum" or off-the-cuff comment by the Pennsylvania appeal tribunal above as Footnote 18. Turning from murders & family tragedies elsewhere, the judicial panel focusses centrally on a narrow technical issue, only one of owner Karr's beefs : whether a duplicative, "locally customary" (!) fee-generating parallel process should be struck down after being challenged by the target homeowner.

The #18 footnote is part of a bigger picture they could not miss, including counsel fees being stated as included in the $35K ( and arguably possibly churned /generated ie like an outsourcing or share-cropping of profit concurrent with squashing someone's alleged misdeeds ).

If expensive shenanigans are everywhere, do buyers expect to suck it up ? Would they even know ?

2 Estoppelling -type certificates - varying widely by jurisdiction but rigidly included in condo law mine - may require association substantial ( ? ) legal disputes to be disclosed on every certificate issued , not merely the target unit's. $50 fines who cares. $ 35 K disputes a decade ago without a large number of units to share the risk ?

Numerically small communities : A year ago a visitor parking/vexatious litigation dispute in a mid-priced, condo type jurisdiction elsewhere had already exposed each of the 34 other sets of owners to costs of $7,500 with no end in sight.

600 + units to share the burden ? In my own jurisdiction, over a mere illegal attic trespass an 18 year dispute had generated an estimated $2 M in legals costs. ( The buckshee attic is still there too )

Successfully keeping this much would be next to impossible.

3 - One interesting aspect is the tribunal's interpretation of Hearing powers under the wording of the registered covenants.

Specifically it interprets the Declaration wording to totally invalidate the original "Judicial Committee" decisions in whole or part ie that the Declaration's literal wording does not support any disposition/fine merely because the alleged violator totally ignored the process.

( quote : "There has never been a factual determination made by the Association or by a court as to whether the structure in Karr's front yard is a rose trellis or more akin to the Great Wall of China.16   The Association has acted as if the complaining party had no burden to fulfill;  however, the failure of an non-burdened party to appear at a hearing does not divest the moving party of its evidentiary burden.

Article IX of the Declaration provides:
The [Judicial] Committee, after hearing all such testimony, shall if such violation has been factually verified, levy a special assessment upon the owner who violated ․ the condition, rule or regulation of the Association.
R.R. 62a (emphasis added).17  

The Association did not hear testimony and factually verify a covenant violation.   Indeed, the scope of the Association's authority to regulate the appearance of a unit;  a finding as to what Karr has done to his yard and door;  and a conclusion on whether Karr's actions violated the covenants have not been determined.  

These determinations are required before the proper amount of the Association's assessment lien, if any, can be established let alone a foreclosure instituted. " unquote )

How applicable may be this interpretation anywhere else - or to any other document - would have to be established elsewhere)

Whatever might happened later to Karr, this appears to badly damage the HOA's claims. Who knows if it started the process all over again or if Karr sold out asap ? What might have happened in the London Towne HOA after this tribunal decision appears to cripple the HOA's case ?

4 Aside from property & civil rights issues, I would avoid buying into a bottomless pit. Litigation costs have an incredibly high ceiling if it can even be guessed. Respectfully, legal systems that allow totally blameless victims to be made 100 % whole again, get congested pretty quickly.

Haven't read the entire thread. Just going to add a few comments relating to PA.

Prothonotary is the clerk of court. So the dual filings was one filing at the Registry of Deeds (Declaration) and one at the Common Pleas Court (Lien). In Karr, the court found the second filing redundant because the original filing of the Declaration established the lien priority. What the HOA should have done instead of filing a Lien was filing for a Foreclosure in the Common Pleas Court (The Foreclosure would reference the Declaration that had been filed with the Recorder of Deeds.) So ultimately, a filing in both locations would have been required anyway.

PA does allow foreclosure on non-assessment liens. If I'm not mistaken, other states only allow foreclosure on assessment liens.

Any buyer in PA is a fool if they don't request a 5407/3407 Resale Certificate. The Resale Certificate requires the HOA to answer 17 questions with sub-parts. One of the questions requires the HOA to disclose any judgments against it and any pending lawsuits to which the HOA is a party. IMO, this may be the only place where a prospective buyer of different unit might see documentation of the Karr problems.

I don't live anywhere near Pittsburgh where the Karr case took place. But if a HOA case hits the news around here, it makes news for a couple of weeks and then it's dead. So I'm not sure about the impact.

Sounds like a lot of money involved for small infractions, but I'm not sure that we got a complete picture of what was going on.

Sorry I was responding to Larry's question.

In Arizona one may record almost anything he wishes. Whether it has any legal weight is another matter.

If you wish to record a lien for a fine, ARS 33-1803 and 1807 set forth the requirements, although not as clearly as one could wish for.

ARS 33-1803 permits fines for violations but is silent about continuing fines. It sets no limit on the amount of a fine but it does establish and limit late fees if the fine is not paid within 15 days. The statute also requires that the association provide certain information to the owner, including the identity of the complaining party and the procedures for contesting the violation.

I am of the opinion that continuing fines, such as $100 per day, are not supported by 33-1803. The statute implies that there must a date on which payment of the fine is due and that a single late fee may be imposed. The legal principle of expressio unius est exclusio alterius (The expression of one thing is the exclusion of another) may apply here. The fact that the legislature included one scenario for fining excludes all other options. I am, however, unaware of any Arizona case law on the subject of continuing fines.

ARS 33-1807 sets out the procedure you must follow if you wish to record a lien arising from fines. The association must sue the offending owner in a court of competent jurisdiction and obtain a judgment, which then may be recorded to establish a lien. The association then must wait for the property to be sold in order to collect as they cannot foreclose on fines.

Fines aside, we have one owner wHo has not paid dues for 4 years. She owes $2,400.00 in pas dues. The last bill to her I saw from our lawyer was for $6,200.00 what with late and legal fees.

Are you saying that you are spending money for an attorney to do something that does not involve going to court? Something your association could do at no cost, like write letters? It's bad enough that you are not receiving the income but paying a lawyer hundreds of dollars of hard-earned cash to do things that have no weight is insane.

As Jon asked, why are you not foreclosing?

All

The Declarant turned control over to we owners on 01/15 and we had our lawyer go after the delinquent person. The Declarant had let it slide as he did not like confrontation. The lawyer was preparing foreclosure as of 04/15, my last time on the BOD. I have not followed up. I threw the story out to show how charges can rise.

The reality is in some states you cannot file a lien for monies owed due to fines.

In such a case the fines would simply build up if and when the violator were to continue their behavior.

Not a sign of inactivity on the board's part.

Our experience says many will pay little attention to a demand from the BOD. Escalate it with a threat of lien/foreclosure in a letter from an attorney and more will come forward and pay.