HOA was no authority

We have been told by legal counsel that our HOA cannot fine homeowners for deed violations, because in our CC&R it says in short,a homeowner must take another homeowner to court if they have a dispute. In our Bylaws states the board may issue fines for violations. Legal counsel says the CC&R rule over bylaws therefore we cannot issue fines. However, the bylaws are practically a copy and past from Texas Property Code 209 about fines.(sorry I can not quote the exact section in TPC 209) At the same time legal counsel said our governing documents are horribly written and a Judge we talked to basically said the same.

I'm on our board fighting for homeowners and our legal counsel said the court looks heavy on Intent when documents are is such a mess. The HOA is still under developer control and the developer has not conveyed the streets to the HOA but names the HOA to maintain the streets. And he will not meet with the board.

Our HOA wants to be able to fine and enforce deed restrictions. The board thnks it was the intent of the developer that the HOA would be able fine for violations since they basically copied and pasted from TCP 209 and want to set a fine policy, but I'm hesitant.

Only thing we can think of is sending a letter to the developer stating that we feel that it was his intent for the HOA to fine for violation and attach our "violation fees" and note that if he does not make contact with us in 60 days it will be assumed he is agreeing to this fine policy. And send it to his office and last known legal counsel.

We are screwed and stuck. Any constructive comments are welcomed.

Can we ask the developer at add addendum to the CC&R to let the HOA collect fines for deed-restrictions violations? Or send him a letter asking if we can collect fines for violations and give him 60 days to answer if he doesn't answer we would assume he approves?

I do not think we have a Master Plan, for we are phased community. Our HOA attorney said that the court would look at the intent of declarant. And said it would be a good idea for us to write a resolution showing the intent of the developer wanting all sections in the development to be placed into one HOA and not 15.

I have been thinking about the fact that your HOA is still under Declarant control. I think what your HOA would really want is an amendment to the CC&Rs. (Not an "addendum.") Often the CC&Rs state that, if the declarant is still in control, then the declarant can amend anything it wants. Courts have said, "Whoa. If a bunch of folks have bought lots in the HOA relying on the un-amended CC&Rs, and the Declarant wants to make some radical amendment to the HOA scheme via an amendment, then the court prohibits such a radical change."

Is amending the CC&Rs to allow the HOA to impose fines a 'radical change'? Maybe. Maybe not. You ought to ask a HOA attorney this.

Who (the Declarant or the Board) has what powers at this point in the transition is not clear from the limited information you have provided so far. I think you would have to post the governing documents for people here to comment intelligently. I am still not even sure there is a conflict between the CC&Rs and Bylaws on this point. Your attorney says yes, there is, and the CC&Rs trump the Bylaws on the point. I am operating on this premise.

One cannot 'show' intent. One can only guess at intent. Hence I reject what you and your attorney are proposing. Also importantly: When courts interpret statutes, city ordinances and the like, they may look for intent (using various approaches, like context, what other sections of the statute or ordinance say, et cetera). But here, we are talking about interpreting covenants. Covenants are generally treated as a contract. Nationwide, the court-made rules for interpreting contracts are different from the rules of interpreting statutes and ordinances.

Our CC&R do not state when developer conveys anything to the HOA. We can only maintain roads. However the bylaws,gives the HOA power necessary to administer the HOA affairs. It would be extremely hard to get 70% of the vote in each section (15 sections) to admin the CC&Rs

Cocho

If still under developer control than the developer has the power (votes) to amend the Covenants and Bylaws. Ask them to do so.

Concho,

Agree with those who say - get the developer to amend the CCRs - THIS IS IMPORTANT - and timely - if the developer is still in control, GET THIS DONE.

I disagree completely with anyone who says fines are not useful - they are the most basic form of management, and in many cases allow the Board to stay out of court, and if they do go to court, the Board can show an auditable process that supports its case.

We are still under developer control because no where in the governing documents say when the HOA is in full control. He gets 3 votes to our one. We would out vote him in about 9 sections but not all the sections. It seems to me if we can ask for a few changes it would be easier.

Concha

First, the statement that homeowners can enforce the CCRs on their own is standard language in most CCRs in the country. It basically means, iof the governing body, the Board choose not to enforce the CCRs, then a homeowner can on their own. It only means what is in the CCRs, not the Rules and not the Bylaws.

Second, below is a opinion of a California lawyer who specializes in HOA law. The CCRs may not state the association can specifically fine, but it will say it can enforce. T

Enforcing CC&Rs & Rules. The ability of an association to enforce its CC&Rs is well established. CC&Rs are enforceable equitable servitudes and, unless the CC&Rs state otherwise, can be enforced by the association. (Civ. Code §5975(a).) Moreover, associations have a duty to enforce their governing documents. (Nahrstedt v. Lakeside Village.) If a board fails to enforce them, members can go into court to to compel enforcement. (Ekstrom v. Marquesa.)

Enforcement Mechanism. What's missing from the Davis-Stirling Act and case law is any mention of how enforcement occurs. The Act simply states that CC&Rs are enforceable. (Civ. Code §5975(a).) The mechanism for enforcing CC&Rs and Rules is left to associations to decide. Most use three methods: fines, suspension of privileges, and litigation.

Adopting Rules. To adopt rules, an association must have rulemaking authority conferred by law, the CC&Rs, articles of incorporation or bylaws. (Civ. Code §4350(b).) Some older developments are silent on rulemaking authority. Fortunately, governing documents in newer developments all have rulemaking authority since the Department of Real Estate requires it. (Cal. Code Regs, tit. 10, §2792.21(a)(7).) The board can adopt adopts rules once rulemaking authority has been established.

Statutory Authority. Absent rulemaking authority in the governing documents, associations still have statutory authority to adopt rules for specific matters, such as election rules (Civ. Code §5105), architectural rules (Civ. Code §4765), IDR policies (Civ. Code §5905) and collection policies (Civ. Code §5730).

Rule Adoption Procedure. Once authority for adopting rules has been established, boards of directors must follow a specific process for enacting rules.

Authority to Fine. If an association has authority to adopt rules, the ability to enforce those rules using monetary penalties (fines) is implied. The court of appeal in a 1995 case, addressed the point. The plaintiff in the case had challenged the association's authority to fine pointing out the CC&Rs did not grant the association the power to impose fines. The court did not dispute plaintiff's assertion but, instead, noted the governing documents gave the association the authority to enact rules and concluded:

[B]ecause the authorization for the...rules is itself contained in the recorded...CC&Rs, Liebler is incorrect in asserting such fines are unauthorized... (Liebler v. Point Loma.)

The conclusion of the court is that the authority to enact rules necessarily carries with it the authority to enforce those rules, whether by fines or otherwise. Once an association has authority to adopt rules, it can adopt a fine schedule.

Adopting and Imposing Penalties Fines. To impose penalties for rules violations, associations must adopt a fine schedule and give notice to the membership of that schedule. The procedure for adopting fines is the same as adopting rules. Fines must be reasonable and appropriate to the violations. Moreover, penalties can only be imposed after due process has been followed. Once levied, fines are normally collected by filing a small claims action.

This does not apply during the development period. See Texas Property Code section 209.0041 (d) .

Good catch Augustin, I was not aware of that exception. Thanks for the correction.

Mark, there was no practical mechanism for the Association to use. It is one of the reasons we no longer manage that Association, we were being blamed by some for not enforcing the Declaration.
I suppose bringing suit was an option but it was never seriously discussed.

We were able to obtain some help from the City Code Compliance office, they would cite egregious offenders but the lawn had to be 12" high before they would step in. They were particularly helpful regarding the condition of fences and ensuring replacement fences met city requirements--which were the same as the HOA requirements. The City could and did haul owners before a judge for not maintaining the appearance of the property.

Sorry, meant Bill

Mark

The discussion with the attorney went no further than I described. I don't recall if he cited case law, even in generic terms, this was 5 or 6 years ago. He was adamant on the point and went through the Bylaws and Declaration with a fine tooth comb looking for any enabling language. Yes, he was looking specifically for the word "fine", there may have been one or two other words he was looking for as well.

We discussed with him using the language which enabled Special Assessments to develop a Special Assessment for Compliance or something similar, he advised against doing so. I never understood why not, I thought it was a superb idea, especially since it was mine.

The Board was discouraged by legal expenses already incurred and the possibility of significant additional legal fees and other costs and choose not to poke the bear.

We certainly learned our lesson and will not manage a client with no enforcement language, nor will we purchase in an association with no enforcement mechanism.

Our Covenants, Bylaws, and R&R's are 3 different documents. Covenants must be registered as a Deed Restriction. Generally Bylaws and R&R's do not have to be recorded with the Deed, but ours are.

We looked at rewriting our Covenants and Bylaws to remove all references to the Declarant but we were quoted $3K to $5K and we decided not to. So far, we have been able to "read around" references concerning the Declarant but we have never had a legal challenge (threats only that went nowhere) to our interpretations.

From a 2013 thread started by a Texan, where the Texan ultimately presents a Dallas law firm's opinion regarding fines:

"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."

As interested, see https://www.hoatalk.com/Search/ForumSearch/tabid/87/view/topic/postid/149426/Default.aspx

From https://www.hopb.co/texas-hoa-questions-and-answers#:~:text=See%20generally%20Tex.,actions%20against%20non%2Dcompliant%20owners:

"If authorized by the governing documents, an association may levy fines for violations of a community’s declaration, bylaws, or rules. Tex. Prop. Code § 209.006."

But I do not see how TPC 209.006 says what the web site says. The hopb.co/texas site may be outdated crap.

If the OP's Declaration's wording is similar to that given in the 2013 thread, then I think all bets are off with regard to fines (as JohnC46 also observed back in 2013).

I tend to think the statutory last word on this derives from a number of the sub-sections in TPC 204.010 "Powers of Property Owners' Association." I think a fair interpretation of the latter is that, if either (a) fines are not explicitly mentioned in the CC&Rs or Bylaws, or (b) the CC&Rs indicate fines may not be used, then fines are not allowed.