Texas POA plans to issue violation fines without direct authority in the CCR (AI analysis of CCR and situation)

Started by RogerJ1 • 12 replies • 91 views

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RogerJ1 (Texas)
Posts: 549

Posted:

Hi everyone,

I’d love to get the forum’s perspective on a situation in our small (~50 members), self-managed Texas Property Owners Association (POA).

Our Board is planning to start issuing monetary fines for deed restriction and architectural violations based solely on a Board vote and resolution. The catch? Our CC&Rs do not contain an express clause granting the Board or ACC the power to levy administrative fines for deed restriction violations.

Instead, the Board is bootstrapping its authority from two specific references to the word "fine" found in our assessment collections section:

Article Six, Section 6.09(1): "A late fee of $50.00 or fine allowed by this Declaration may be assessed against any past due account."

Article Six, Section 6.09(6): "The Tract Owner will be responsible for all attorney's fees, fines, costs of collection, and interest accrued on the account due to the delinquency."

The Board argues that because the document mentions "fines" here, the CC&Rs "contemplate" fining, giving them implied authority to pass an administrative fine schedule for unapproved construction, setback issues, or maintenance violations.

I ran our CC&Rs through an AI legal analysis to test both sides of the argument and evaluate the risks. Here is a summary of what came back:

1. Does the Board have actual legal authority to fine?

AI Analysis: No. Texas Property Code § 209.0061(a) explicitly states that statutory fining rules apply only to associations "authorized by the association's dedicatory instrument to levy a fine." In Texas, real property restrictions are strictly construed. The exact quote in Section 6.09(1)—"or fine allowed by this Declaration"—is conditional boilerplate. Because no other section of the CC&Rs actually establishes or allows a violation fine, those references create no independent fining power. Remedies are limited to injunctions, self-help, and legal fee recovery unless the CC&Rs are formally amended by an owner vote.

2. What is the strongest "Pro-Board" argument, and what are its chances in court?

AI Analysis: The best argument for the Board relies on contract harmonization—arguing that under Texas contract law, courts must give meaning to every word so that "fine allowed by this Declaration" in Section 6.09(1) and "fines" in Section 6.09(6) aren't rendered meaningless surplusage. Combined with broad language in Article Two, Section 2.01 (allowing the Board to take "whatever action, in good faith... necessary") and Tex. Prop. Code § 204.010, the Board claims broad enforcement discretion.

Estimated Court Success Rate: 10% to 15%. A Texas judge would overwhelmingly view using a past-due assessment collection clause to justify administrative architectural/deed restriction fines as an unsupportable legal leap.

3. What is the personal liability and ultra vires risk to Board members?

AI Analysis: If the Board ignores a formal legal demand letter citing the lack of authority in the CC&Rs and Tex. Prop. Code § 209.0061(a), and persists in levying unauthorized fines, the legal baseline shifts from "mistaken judgment" to a knowing, bad-faith act (ultra vires). This opens the Board to:

Loss of statutory immunity and Business Judgment Rule protection.

Potential denial of D&O insurance coverage due to intentional/willful wrongful act exclusions.

Personal exposure for mandatory attorney fees under Tex. Prop. Code § 5.006 if an owner successfully sues to invalidate the fine policy.

Questions for the Forum:

Do you agree or disagree with this analysis? Has anyone in Texas dealt with a Board trying to bootstrap fining authority out of assessment collection language like Section 6.09?

How much weight do Texas courts typically give to board rulemaking powers under Tex. Prop. Code § 204.010 when the underlying CC&Rs are silent on fines?

If you were a board member in a self-managed POA, would this level of ultra vires risk push you to seek a formal CC&R amendment first, or would you take the chance?

Looking forward to hearing your thoughts and experiences!

TimB4 (Virginia)
Posts: 20,988

Posted:

I offer the following legal case, Samir Farran et al. v. Olde Belhaven Towne Owners' Association

see: https://www.casemine.com/judgement/us/5c22f257342cca657a0dafe8

I would have attached a copy of the 2010 ruling and opinion from the 19th Judicial Court of VA.

If you would like a pdf copy, email me: [email protected]

It is likely that your board is also exceeding their authority.

I suggest, once you have an understanding of the case, that you give the info to the Board and request that they seek a legal opinion.

You should mention that that case resulted in the Association going bankrupt and into receivership.

The other option is to seek your own legal opinion and, worst case, bring a case against the Association if they do fine you for something.

RogerJ1 (Texas)
Posts: 549

Posted:

Thank you TimB4. That is great. I might email you for the PDF. Thanks for the offer.

TimB4 (Virginia)
Posts: 20,988

Posted:

This is from the Courts opinion and ruling associated with the penalties:

The Farrans claim that Belhaven's enactment of the Penalties Resolution was ultra vires. An ultra vires act is an act "beyond the scope of power allowed or granted by a corporate charter or by law." Black's Law Dictionary (8th ed. 2004). The ultra vires doctrine applies to corporate entities such as property owners associations. See Bennett v. Loudoun Valley Home Owner's AssJn., 73 Va. Cir. 466 (Loudoun Co. Cir. Ct. 2007) (overruling a demurrer to plaintiffs claim that defendant's acts were ultra vires). Furthermore, Va. Code 3 13.1-828 specifically allows a member of a non-stock corporation to challenge an action of the corporation as ultra vires.

Belhaven contends that Va. Code 3 55-513(B) of the Property Owner's Association Act ("POAA") expressly authorizes Belhaven to impose fines such as those included in the Penalties Resolution. Va. Code 3 55-513(B) provides in pertinent part:

The board of directors shall also have the power, to the extent the declaration or rules and regulations duly adopted pursuant thereto expressly so provide, to . . . assess charges against any member for any violation of the declaration or rules and regulations for which the member or his family members, tenants, guests, or other invitees are responsible. The Farrans argue that the POAA does not grant Belhaven the plenary authority it claims.1 Instead, the Farrans contend that this clause limits a board of directors' authority to impose fines; specifically, a board of directors cannot impose fines -unless an association's declaration expressly authorizes such action.

The Farrans point to Article XIII, § 3 of the Declaration and argue that the sole method to enforce the provisions of the Declaration or other rules and regulations is through a lawsuit.

Belhaven claims that the Farrans misconstrue the clause in Va. Code 3 55-513(B) because they ignore the conjunction "or." Belhaven asserts that Va. Code §55-513(B) creates two instances under which an association can impose fines. An association can impose fines (1) to the extent the declaration expressly provides for imposition of fines, or (2) to the extent rules and regulations duly adopted pursuant to the declaration provides for imposition of fines. Belhaven contends that this case falls into the second category because, pursuant to Article IX, § 1 of the Declaration, the Board has the power to formulate, publish, and enforce rules and regulations. According to Belhaven, the Penalties Resolution was enacted pursuant to that power.

Property owners associations and their members must abide by the corporation's governing documents. Virginia High Sch. League v. J. J. Kelly High Sch., 254 Va. 528, 531, 493 S.E.2d 362, 364 (1997). The governing documents constitute a contract collectively entered into by all the owners in the association. White v. Boundary Ass'n, Inc., 271 Va. 50, 55, 624 S.E.2d 5, 8 (2006). As such, effect must be given to the intention of the parties. Foti v. Cook, 220 Va. 800, 805,263 S.E.2d 430, 433 (1980). Importantly, under the principle of expressio unius est exclusio alterius, the omission of a particular covenant or term from a contract reduced to writing shows an intent to exclude it. First Nat'l Bank v. Roy N. Ford Co., 219 Va. 942, 946, 252 S.E.2d 354, 357 (1979).

Although Va. Code § 55-513(B) does grant property owners associations authority to impose fines in certain circumstances, that authority is limited to situations where an association's declaration expressly allows it to impose fines or its declaration expressly allows it to adopt rules or regulations which impose fines. Neither situation applies here. In this case, the omission of a provision allowing Belhaven to impose fines as a method of enforcement shows an intent to exclude.

Article XIII, 5 3 of the Declaration provides the only methods of enforcement: a proceeding at law or in equity. Nothing in Va. Code § 55-513(B) gives Belhaven authority to exceed the power granted to it in its governing documents. As a result, the Court concludes that the Farrans have sufficiently pled that Belhaven's enactment of the Penalties Resolution was ultra vires.

The demurrer is overruled as to the Penalties Resolution.

ElleN (Idaho)
Posts: 1,394

Posted:

Our Board is planning to start issuing monetary fines for deed restriction and architectural violations based solely on a Board vote and resolution. The catch? Our CC&Rs do not contain an express clause granting the Board or ACC the power to levy administrative fines for deed restriction violations.

Instead, the Board is bootstrapping its authority from two specific references to the word "fine" found in our assessment collections section:

Article Six, Section 6.09(1): "A late fee of $50.00 or fine allowed by this Declaration may be assessed against any past due account."

Article Six, Section 6.09(6): "The Tract Owner will be responsible for all attorney's fees, fines, costs of collection, and interest accrued on the account due to the delinquency."

TPC 209.0061 starts with this sentence:

"This section does not apply to a property owners' association that is not authorized by the association's dedicatory instrument to levy a fine."

IOW, for a Texas HOA fine to be lawful, the dedicatory instrument must give the association the authority to levy fines.

Observations --

-- The board's argument is that "the Declaration 'contemplates' fines. Therefore the Board can impose fines." This has zero merit as a legal argument.

-- What does have merit as a legal argument? As you seem to understand, the reality of how the courts work is what has merit.

-- Are there owners who have the money to lawyer up and fight the board's claim? The Board wants to consider this.

-- Does the Board know their argument is baloney? If the Board consulted a competent HOA attorney, yup.

-- In my opinion, using AI here just piles on more work. For example, the AI response speaks of TPC 204. Oh dear god. AI is implying that TPC 204 might be interpreted to say that boards can create rules that impose fines, even if the Declaration does not give the HOA the authority to impose fines. Do you know what this proves? It proves that AI did not pass the bar.

-- AI is practicing law without a license. Whether this is legal or not is a matter of opinion at present. Anyone making money from selling AI software could be said to be practicing law without a license.

-- Rather than try to separate the nonsense and hallucinations in an AI response from the useful stuff, I think one is better off spending one's time looking up Texas case law regarding when Texas HOAs can impose fines.

-- If I were on this Board, would I vote to create a fine schedule and start imposing fines, waiting until someone challenged the Board and HOA in court? No, I would not vote this way. Why? Because the probability of high attorneys' fees; the insurer getting angry; and owners becoming angry is high. The HOA's time and money would be better spent on checking to see whether an amendment to the Bylaws, allowing fines, would suffice. So far by my reading it would. If an amendment to the bylaws is all that is needed, the board should spend its time getting such an amendment approved.

RogerJ1 (Texas)
Posts: 549

Posted:

Based on another post, Texas might be looking into an Home Owner's Bill of Rights which would give a low cost way to challenge this for anyone receiving a fine.

LisaB21 (Texas)
Posts: 98

Posted:

Texas HOA Ex Board member for 12 years. If the By Laws/CCR’s do not grant the HOA the ability to levy fines for deed restriction violations, , then it can not be done without an amendment to the By Laws. Good luck getting that to pass the required vote of membership. Many HOA’s in Texas have the ability to fine, and many do not. It just depends on how the governing documents are written at the inception of the community. To decide to start issuing fines without the legal standing to do so would be a very wreckless move by the HOA Board of Directors.If challenged in court by membership, it would be probably not well received by a judge. Many judges in Texas seem to be anti HOA and will rule against the HOA with less shenanigans than this. IMO the ability to issue fines does not increase compliance with deed restrictions any more than the process that is already probably written into the governing documents. Notification of the violation, time given for remedy, scheduled escalation via written notification, and finally turning the case over to legal counsel to per-sue a judgement in court is usually just as effective. It can take time, but if the violation is not cured and it can be shown that the HOA BOD has given proper notice and follows the escalation schedule as written and in compliance with both governing documents of the community, as well as Texas Property Code law, chances of it getting to court and a judge seeing things in favor of the HOA are good. Texas property code outlines the process and any protections for both the homeowner or the HOA very well.

RogerJ1 (Texas)
Posts: 549

Posted:

Published minutes from the meeting:

a. Currently the governance documents for XXXXXX allow the

Board to levy fines for fiduciary and ACC non-compliances (edit - my notes * below is the only place the word fine is mentioned in the CCRs and that is in the collection section)

However, the process to levy fines and the size of those fines is

very loosely defined.

b. The implicit authority without explicit process may be in

contradiction with Texas property law.

c. The Board will evolve an explicit policy for the levying of fines,

and to address repeated or intentional violations in particular.

d. The Board has no intent to create draconian measures and will

focus on establishing clear, fair, and consistent policy and

process.

e. The Board will present the policy / process and fine schedule at

a future Board meeting for review and comment by the

membership

*
Article Six, Section 6.09(1): "A late fee of $50.00 or fine allowed by this Declaration may be assessed against any past due account."

Article Six, Section 6.09(6): "The Tract Owner will be responsible for all attorney's fees, fines, costs of collection, and interest accrued on the account due to the delinquency."

ElleN (Idaho)
Posts: 1,394

Posted:

Sounds like progress to me. At the future board meeting --

-- Nail the Board for the gross lie about the Declaration allowing fines for ACC violations.

-- Make the Board cite where the Declaration says "fiduciary non-compliance" is fine-able. Get them admit that phraseology ("fiduciary non-compliance") is something they made up.

-- Give your input that there is no question in your mind that the Board's interpretation of the Declaration as it pertains to fines, if implemented, violates TPC 209.0061 and is going to cost owners a fortune in attorney fees and higher insurance premiums.

-- Tell the board what it wants will require an owners' vote on an amendment to the Declaration or maybe, the Bylaws.

PondF1 (Texas)
Posts: 3

Posted:

A small HOA in Texas, less than 30 members actually took the time to rewrite their bylaws, review it by a lawyer, vote on it, authorize and notarized then submitted it to the county. That is the correct way to do it. It explicitly states with transparency language on when, how, fees, and liens that can be placed upon the property. Before they had nothing. They covered their butts legally so that they can start putting liens on properties. They had one vacant house that was a problem, no one living it in - started to fall into disrepair. To make a long story short - the courts decided that the owners were fraudsters. After 7 years, the courts finally opened it up where the HOA could get the filed liens implemented and try to recoup some years of non-payment.

Texas has tightened up their laws a little - especially with the news story in Lancaster, TX. Half of this story is in the investigation documentary from the ID network titled "Fear They Neighbor" - 2014. (for clarification this is not the case described above.)

BillH10 (Texas)
Posts: 1,216

Posted:

Quote:

Posted By RogerJ1 on 09/05/2026, 4:24 PM

Hi everyone,

I’d love to get the forum’s perspective on a situation in our small (~50 members), self-managed Texas Property Owners Association (POA).

Our Board is planning to start issuing monetary fines for deed restriction and architectural violations based solely on a Board vote and resolution. The catch? Our CC&Rs do not contain an express clause granting the Board or ACC the power to levy administrative fines for deed restriction violations.

Instead, the Board is bootstrapping its authority from two specific references to the word "fine" found in our assessment collections section:

Article Six, Section 6.09(1): "A late fee of $50.00 or fine allowed by this Declaration may be assessed against any past due account."

Article Six, Section 6.09(6): "The Tract Owner will be responsible for all attorney's fees, fines, costs of collection, and interest accrued on the account due to the delinquency."

The Board argues that because the document mentions "fines" here, the CC&Rs "contemplate" fining, giving them implied authority to pass an administrative fine schedule for unapproved construction, setback issues, or maintenance violations.

I ran our CC&Rs through an AI legal analysis to test both sides of the argument and evaluate the risks. Here is a summary of what came back:

1. Does the Board have actual legal authority to fine?

AI Analysis: No. Texas Property Code § 209.0061(a) explicitly states that statutory fining rules apply only to associations "authorized by the association's dedicatory instrument to levy a fine." In Texas, real property restrictions are strictly construed. The exact quote in Section 6.09(1)—"or fine allowed by this Declaration"—is conditional boilerplate. Because no other section of the CC&Rs actually establishes or allows a violation fine, those references create no independent fining power. Remedies are limited to injunctions, self-help, and legal fee recovery unless the CC&Rs are formally amended by an owner vote.

2. What is the strongest "Pro-Board" argument, and what are its chances in court?

AI Analysis: The best argument for the Board relies on contract harmonization—arguing that under Texas contract law, courts must give meaning to every word so that "fine allowed by this Declaration" in Section 6.09(1) and "fines" in Section 6.09(6) aren't rendered meaningless surplusage. Combined with broad language in Article Two, Section 2.01 (allowing the Board to take "whatever action, in good faith... necessary") and Tex. Prop. Code § 204.010, the Board claims broad enforcement discretion.

Estimated Court Success Rate: 10% to 15%. A Texas judge would overwhelmingly view using a past-due assessment collection clause to justify administrative architectural/deed restriction fines as an unsupportable legal leap.

3. What is the personal liability and ultra vires risk to Board members?

AI Analysis: If the Board ignores a formal legal demand letter citing the lack of authority in the CC&Rs and Tex. Prop. Code § 209.0061(a), and persists in levying unauthorized fines, the legal baseline shifts from "mistaken judgment" to a knowing, bad-faith act (ultra vires). This opens the Board to:

Loss of statutory immunity and Business Judgment Rule protection.

Potential denial of D&O insurance coverage due to intentional/willful wrongful act exclusions.

Personal exposure for mandatory attorney fees under Tex. Prop. Code § 5.006 if an owner successfully sues to invalidate the fine policy.

Questions for the Forum:

Do you agree or disagree with this analysis? Has anyone in Texas dealt with a Board trying to bootstrap fining authority out of assessment collection language like Section 6.09?

How much weight do Texas courts typically give to board rulemaking powers under Tex. Prop. Code § 204.010 when the underlying CC&Rs are silent on fines?

If you were a board member in a self-managed POA, would this level of ultra vires risk push you to seek a formal CC&R amendment first, or would you take the chance?

Looking forward to hearing your thoughts and experiences!

We encountered this precise same situation, including almost the same verbatim language, in a HOA in which we resided in Plano some years ago.

The Board consulted with counsel. His response was as follows:

1. No, the Association may not issues fines for those violations as the specific enabling language is not present in the Governing Documents.

2. If the Board chooses to issue fines I (the attorney) will terminate the agreement between the parties for legal counsel and representation.

He also observed the D&O insurance most likely would not represent the Board if fines were issued and the recipient brought suit and the members of the Board would be on their own for legal expenses.

The Governing Documents may be amended of course, following the process(es) described therein. From a personal perspective, good luck with that.

RogerJ1 (Texas)
Posts: 549

Posted:

So it reads as though the law is so one sided against such an action, that as soon as they run it by the association's attorney, their plan will end.

The problem with that is that after several years of running everything by the association's attorney, and running factors above budgeted legal cost and hearing from members about it, they have not been consulting with attorneys on anything - no legal costs the last two years. So while I would think they would consult with the association attorney on this, there is a real chance they do not.

PondF1 (Texas)
Posts: 3

Posted:

Quote:

Posted By RogerJ1 on 09/16/2026, 6:34 PM

So it reads as though the law is so one sided against such an action, that as soon as they run it by the association's attorney, their plan will end.

The problem with that is that after several years of running everything by the association's attorney, and running factors above budgeted legal cost and hearing from members about it, they have not been consulting with attorneys on anything - no legal costs the last two years. So while I would think they would consult with the association attorney on this, there is a real chance they do not.

Yes, this is common in Texas. Having a lawyer on retainer is expensive.

Our small HOA had a problem with city contractors who caused an environmental small crisis just before COVID, the HOA was hesitant to get the "normal lawyers"

opinion and advice due to price. A little bit later, the Director position changed and consultation was sought with a different lawyer.

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