Court Says Association’s Daily Fines for Refusal to Remove Unauthorized Fence Were “Null and Void”

This case involved a dispute between a community owners association (“Association”) and homeowners (“Owners”) over Owner’s right to install a 6’ high aluminum fence around the backyard their property that Association had not approved. Owners contended that Association had unreasonably denied approval of the fence and that fines assessed against them by Association for retention of the fence are null and void.

The trial court ruled that Association’s actions in denying approval of the fence requested by Owners were within the scope of its authority and taken in good faith, and that fines imposed by Association against Owners of $20 per day for the retention of the fence were valid and directed Owners to remove the fence. The trial court further awarded Association a monetary judgment against Owners in the amount of $35,059.96, and following a subsequent hearing, the trial court granted a motion by Association to hold Owners in civil contempt for non-compliance. Owners appealed the decision by the lower court.

The appellate court said that, in reviewing the actions of a homeowners association, the court should apply the business judgment rule and limit its inquiry to: (i) a determination of whether the action was authorized; and (ii) whether it was taken in good faith and in furtherance of the legitimate interests of the association.

The appellate court found that Association’s actions in denying approval of the fence were protected by the business judgment rule because its actions in denying the fence requested by Owners were within the scope of its authority and taken in good faith. The appellate court also found that the fines of $20.00 per day imposed on Owners were null and void because they were not properly authorized. The evidence showed that the amendment to Association’s bylaws pursuant to which the daily fines were assessed was passed as a resolution that was never incorporated into an amendment to Association’s declaration which was thereafter recorded in compliance with the provisions of a state statute. The evidence further showed that under the “pre-amendment bylaws,” Association was only authorized to impose a one-time fine of $50.00 for any violation of a rule or regulation adopted by Association’s Board of Directors, or the breach of any bylaw. Accordingly, the appellate court found that the fines of $20.00 per day were null and void.

Supreme Court of New York, Second Department decision (September 22, 2021).

See Case Decision: Ives_v._Fieldpoint_Cmty._Assn

But why?

- Posted By MaxB4 on 09/27/2021 5:45 PM

Not legal advice. The text of the recent N.Y. appeal decision can be seen at :

Ives v Fieldpoint C.A. Inc. issued Sep 22/21 https://casetext.com/case/ives-v-fieldpoint-cmty-assn

1 - That appeal text indicates the trial or first instance judge had wrongly upheld a fining formula other than what the legislation apparently requires shown appendixed to the Declaration on title. The appeal text specifically cites the requirement of New York's Real Property Law 339-u ( " . . . No ( by-law )modification shall be valid unless set forth in an amendment to the declaration and such amendment is duly recorded" -unquote

2 - But if the issue is whether SMALL DAILY FINES or LARGE LUMP SUMS, the text arguably kicks that down the road.

Respectfully once a litigant is hit by a single huge fine, perhaps there is less compulsion to just "stop the clock" or settle. "Might just as well litigate" ?

3 - One issue in the N.Y. fence litigation might be that the lower in the judicial rung, the less sophisticated the analysis from the bench. Or the less sympathy for what might be junior counsel or even self-represented / pro se scofflaws. Not uncommon . . .

Yep. This is something VA went through in 2013 over a couple of things. A change to the property and a political sign.

See:

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

See opinion letter:

pages 1-3
pages 4-6 and court order

Note: The Association had to declare bankruptcy because of this case:

How A Homeowners Association Went Bankrupt Because Of One Obama Yard Sign from The Consumerist

Fairfax homeowners group humbled by court battle with residents The Washington Post

Due Process Changes in Virginia

It will most likely change how daily fines are incorporated into the Rules and Regulation, if there is no authority through the CCRs. I know one firm will most likely change their legal opinion based on this ruling.

TimB4, perfect response. Thank you for setting the record straight.

Note I am asking in the situation where another State's case law is argued (e.g. New York case law argued in Texas.)

Max

So what happened to the fence?

The trial court and appeals court both agreed the Board was within its authority to deny approval of the fence. Which means the fence comes down.

1 - Faced with the universe apparently being notified of a by-lawed, specific small lump sum fine weapon im the land registry, how could the appeal panel support a voodoo specific formula to the contrary ( day by day fines ).

( One would hope the panel made sure that New York law supports & requires fines to be legitimized by properly registered by-laws. )

2 - This argument MUST have been raised earlier at trial by the scofflaw fence-builders.

So gotta wonder then why such appears to have been blissfully ignored by the owners association. And next by the trial or first instance judge . . .

3 - But a similar thing happened to an urban lawyer-homeowner in my jurisdiction when an 1880's owners association ( lacking jurisdiction ) had its its voodoo fees upheld in 3 out of 4 judicial outings.

But fortunately in 2016 our Court of Appeal wiped the floor with the voodoo association ( and also castigated an intermediate judge who had outrageously overturned the correct decision at first instance ) . . . .

Backing up the tractor : there can be justifiable concern when a ( private ) civil litigant pulls out a weapon - like fines - without being some level of government .

Or if the weapon is vague or contradictory. Is this what a buyer consents to ?

Aside from whether or not that's the appeal panel's thinking, there's also one more cautionary note for anyone who is thinking about challenging an owners association :

At the lower judicial levels there may - may - be less sophistication. Or degrees of hostility to anyone appearing to rock the boat . . .

What you concluded about generalizing fines appears to be exactly right on the button ( where a legislature thinks owners associations should dare be trusted with fining power )

You have to keep in mind what Fines are for like John said. They are PUNITIVE charges for correcting. They are NOT for profit or income for the HOA. That means there are going to laws and limitations on fining. It falls more under "Loan sharking" type of laws in your state.

Daily fines typically are a time period of 5 - 7 days. (Depending if count weekends/holidays). After that, then it becomes more of a weekly/monthly/flat rate arena. It also means looking more into your state laws on limitations of what can fine. Can get in big trouble for charging more.

So not surprised by the nulling and voiding of the daily fines ruling. It would be expected more than shocking.

Ben

It would actually be an attorney arguing a case that would include that case in their brief in front of the court.