CCR re-write: can HOA add in ability to fine?

Started by AdamL1 • 5 replies • 289 views

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AdamL1 (UnitedStates)
Posts: 559

Posted:

Currently our CCR's have no mention or authority to issue fines and fees. Our dear leaders are wanting to rewrite/amend the CCR's to add the ability to issue fines. Has anyone else seen something like this before?

TimB4 (Tennessee)
Posts: 21,061

Posted:

You can. It's up to the membership to approve.
I would not call them fines. I would call them monetary penalties.

Having such language in your CC&Rs would be beneficial if you imposed monetary penalties and were challenged in court as there was a big issue in Virginia a few years back about an HOA taken to court over fines and the court ruled that because the language wasn't in the CC&Rs, the HOA exceeded their authority by imposing monetary penalties. The court also acknowledged that "fines" could only be imposed by government entities (hence the terminology suggestion).

See:

Subject: VA Associations, Do you still have the authority to use monetary penalties for violations? Thread on this forum. Note: I'm positive that not all of the links work (as it's been almost 10 years since that post)

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Check with your state laws. Some states maynot allow fines. Each HOA is different.

Former HOA President

AugustinD
Posts: 1,027

Posted:

I cannot remember exactly, but I think before July 1, 2022, Idaho had no HOA statute or a very short one, at most?

Regardless, the Idaho legislature recently added this section (and a more comprehensive or entirely new HOA statute?) to its statutes, effective July 1, 2022:

55-3206 (1)
No fine may be imposed for a violation of the covenants and restrictions pursuant to the rules or regulations of a homeowner's association unless the authority to impose a fine is clearly set forth in the covenants and restrictions. A majority vote by the board is required before any fine may be imposed on a member for a violation of any covenants and restrictions pursuant to the rules and regulations of the homeowner's association. Written notice must be provided to the member at least thirty (30) days prior to a meeting at which a vote to impose a fine on the member is to be held. Service of the notice must be by personal service or certified mail.

https://casetext.com/statute/idaho-code/title-55-property-in-general/chapter-32-homeowners-association-act

I do not see any prohibition on amending the covenants such that the amended declaration permits imposing fines.

I imagine the OP may be wondering whether an amendment, passed by a super-majority but without 100% approval, would pass muster in the courts yada. Would a court say such an amendment is "unreasonable" ( a common test for amendments nationwide) and say 100% approval is needed? In my opinion as long as amended consistent with state law and the Declaration, a court would say such an amendment, imposing fines pursuant to a super majority vote but lacking 100% consent, passes muster.

Was someone at this HOA watching the state legislature's moves on this point? Given the timing, it would not surprise me.

The bill (adding the Idaho HOA statute?) passed the Idaho House with a vote of 63-3, and the Senate 34-1.

SheliaH (Indiana)
Posts: 6,964

Posted:

We have case law in Indiana (somewhere) that ruled the same way the court did in Virginia, although I think some HOAs continue to call them fines. Our attorney also suggested calling them monetary penalties.

The board can propose whatever it likes, but if it's going in the CCRs, the homeowners have to sign off on it anyway, so if you object for whatever reason, say so and see how your neighbors think - you've read enough conversations on this website about fines. Regardless of what they're called, if the board proposes an amendment to allow fines, I think the following practices make sense:

1. base the fees on what it costs to fix the violation if the board chooses to do that. They could also throw in the costs of notifying the homeowner, which might also require a nastygram from the association attorney. My point is the fine shouldn't be an amount one pulls out of their behind, because that can become excessive. That said, remember the reason fines exist is to encourage people to behave - don't want to spend money on fines, don't do whatever the fine is for (e.g. not putting trash IN the dumpsters, but instead pile the mess around it).

2. foreclosures will not be done to collect fines only. It's easier to go to court and duke it out, or use alternative dispute resolution.

3. homeowners should receive a fining schedule every year with an effective date (send it with the annual budget). the amounts should only be changed once a year

4. there should be appeal rights - until those are exhausted, the fine can be suspended. Alternative dispute resolution should be the final step before throwing hands in court.

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

TimB4 (Tennessee)
Posts: 21,061

Posted:

I will add that my VA association does not have authority for monetary penalties for violations.
We chose not to tell the membership (if they find out on their own, fine. We weren't publishing the fact).
We doubted that we would have enough support to amend the covenants, especially since we would have to explain why we wanted to amend them (we don't have the authority to issue monetary penalties, please give it to us).

Therefore, we would threaten monetary penalties, even impose them but offered to waive them if the issue was corrected by mm/dd/yyyy. That worked for us when I was on the board.

Every new board would be told that they can not impose monetary penalties for violations.
When I was treasurer, I specifically said that I would not record them in the ledger as it was against statute.
However, I went along with the bluff which, as I pointed out, worked well.

We were also encouraged by another board member who was a business owner to add on the late assessment letters that failure to pay could result in a hit on their credit report. This is what he did but confessed he wouldn't bother to go through the process (too expensive - labor hours, etc.). However, it gave a push to some who were late paying (as his receipts went up after he added that line on the bill).

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