It is common for homeowners associations to use monetary penalties as a way to enforce the rules. But, can the board increase HOA fines?
What Is the Purpose of HOA Fines?
Part of living in a community managed by a homeowners association is following its rules and regulations. Communities have these rules in place to maintain the appeal of the neighborhood and keep property values high. As such, when a homeowner violates a rule, it’s only right for them to face certain repercussions.
Can an HOA fine you? The short answer is yes. Most homeowners associations do have the express or implied authority to fine residents for violating the rules. This authority is granted to them by either state law or the association’s governing documents (or both).
The purpose of HOA fines is twofold: to enforce the rules of the community and to deter residents from breaking them.
Rule Enforcement Through Fines
Without a fine system, it would prove difficult for an HOA board to enforce the rules effectively. It serves as a way to get residents to comply with the community’s rules beyond sending just a simple warning letter. If an owner continues to violate a rule, without monetary penalties, associations would need to immediately graduate from sending warning letters to taking legal action. Fines act as a middle-ground enforcement method and allow the board to fulfill its fiduciary duty of upholding the governing documents.
HOA Fines as Deterrence
Fines function as a medium of deterrence for homeowners in the community. Sometimes, the monetary obligation is enough to discourage owners from violating the rules. But, for other owners, fines are too small to really make an impact on their finances. In that case, the embarrassment of receiving a fine notice from the board is often enough to stop owners from committing future violations.
Adopting a Fine Schedule
It is important to create and implement a schedule for HOA fines for violations. This schedule sets the standard for the monetary fines in the entire community. In fact, some states even require associations to adopt and distribute a fine schedule before they impose fines. One such example is California, under Civil Code Section 5310.
Here is a sample fine schedule for boards to use as a guide:
- First Violation – a warning letter or fine up to $200
- Second Violation (same offense) – $50 to $200
- Third Violation (same offense) – $100 to $300
- Every Succeeding Violation (same offense) – up to $400
For a truly effective fine schedule, boards should consider fining an owner for every day they fail to remedy the violation. For instance, if an owner fails to park their car in the right spot, the association can fine them $25. And, for each day that the car remains in the same place, the association can fine them an additional $25. While the initial $25 may not seem like much, the fines from the continuing violation can quickly add up.
Can the Board Raise Homeowners Association Fines?
Every now and then, an HOA board may see the need to raise the fines. This may happen if the HOA board observes that the dollar amount is now so small that it no longer serves as an effective deterrent. Boards must remember, though, that fines should never serve as a source of income. In other words, they should not increase the dollar amount of fines to bolster the budget.
As for whether or not an HOA board has the power to increase fines, associations should look at state laws and their governing documents. In theory, increasing HOA fines is something that’s within the power of the board, provided they can impose fines in the first place. But, the HOA’s bylaws or CC&Rs may have certain provisions governing fine increases. For instance, there may be a limit as to how much an HOA can raise fines.
Additionally, there may also be notice requirements. For example, California law requires associations to notify homeowners of any new or revised monetary penalty. If the change requires amending the governing documents, the board will normally need to seek approval from the membership. But, if the change only requires a board resolution, it will not need a majority vote from the homeowners. Still, it is best to inform owners of the impending change and give them an opportunity to voice their opinions on the matter.
There are two factors to take into account when determining how much to increase fines: the community’s economic status and the gravity of the violation.
Community’s Economic Status
Not all fines are made equal. A $50 fine in a subdivision with mostly working-class residents is usually enough to discourage violations. But, if you take the same $50 fine and impose it on a community consisting of wealthy families, it may not have the desired effect. Too small an amount essentially gives rich residents a pass to commit as many violations as they like.
The Gravity of the Violation
Naturally, the more serious a violation, the greater the punishment should be. It wouldn’t make sense to fine an owner upwards of $200, for instance, for simply leaving their gate pass at home. But, a $500 fine seems fitting enough if the violation endangers the residents of the community or destroys HOA property.
Do You Have to Pay HOA Fines?
Membership in a homeowners association is typically mandatory upon the purchase of a house in the community. With this membership comes the obligation to follow the community’s rules.
If an owner breaks a rule, it only seems right to suffer the consequences of their actions. This is why it is important that all homeowners familiarize themselves with the association’s rules. The best homeowner protection from HOA fines is to simply abide by the rules of the community. In parallel, HOA boards should make every effort possible to educate residents about the rules and regulations.
Should an owner fail to settle their fines, the association can take certain actions in an attempt to collect. These include placing a lien on the owner’s property and subsequently foreclosing on that lien. As such, an owner can end up losing their home if they don’t pay the fines.
The Fair Debt Collection Practices Act
The Fair Debt Collection Practices Act (FDCPA) prohibits debt collectors from using unfair, deceptive, or abusive strategies while collecting a debt. It also protects consumers from certain acts such as harassment. Federal law currently does not recognize homeowners associations as debt collectors. However, the Act does apply to third-party agencies that HOAs employ to collect a debt.
It is worth noting, though, that many states have their own laws governing debt collection practices. And some states do consider homeowners associations as debt collectors. In any case, boards should exercise caution and never cross a line when attempting to collect fines. Instead, they should follow the association’s standard procedures.
Word of Caution
Clearly, HOA fines play a significant role in the continued success of an HOA community. Homeowners should understand that fines can increase, though there should be a reasonable cause behind it. Boards must never raise fines as a way to earn more money, as it is an enforcement tool and not a tool used to generate income.
Cedar Management Group provides HOA management services to homeowners associations and condos alike. Call us today at (877) 252-3327 or contact us online to learn more.
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- What Are The HOA Governing Documents You Need As A Homeowner?
- HOA Collections And The Fair Debt Collection Practices Act