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 neighborhood’s appeal and keep property values high.
As such, when a homeowner violates a rule, it’s only right that they face certain repercussions. Not all HOAs are created equal, though. Some associations have light HOA fine policies, while others enforce them more aggressively.
The purpose of HOA fines is twofold: to enforce the community’s rules 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 ensure residents comply with the community’s rules, beyond simply sending a 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 serve as a middle-ground enforcement mechanism and allow the board to fulfill its fiduciary duty to uphold the governing documents.
HOA Fines as Deterrence
While warning letters sometimes get the job done, people are more reluctant to follow rules when there are monetary penalties. This is the second purpose of HOA fines. They discourage homeowners association violations. Although fines may not dissuade residents who have no problem with losing money, the humiliation of getting called out by the board for a violation is sometimes more than enough.
Can a Homeowner Association Fine You?
A lot of homeowners new to association living ask the question: 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).
If your governing documents contain no such provisions, consider amending them to grant the HOA board that power. It is also imperative to have a proper procedure in place for violations. Frequently, HOA boards begin by sending a warning notice to the violator. Only when the resident commits the same violation for the second time will they warrant a fine.
Depending on the state in which your HOA is located, a hearing may be required before imposing the fine. The HOA board may also need to send the alleged violator an advance notice of the hearing with all pertinent details.
Describe your HOA fine policies in detail so that nothing is left open to interpretation. This way, the board has a concrete procedure to follow and can set the proper precedent for future board members.
However, it is not enough to have a procedure for fines and violations. The HOA board also has a duty to educate homeowners on HOA policies. This means keeping residents updated on new policies, procedures, and rules. If a resident breaks a rule that was never made known to them in the first place, the board must not hold the violation against them.
How Much to Fine a Violator
When deciding how much to fine someone, it is important not to set the amount too low or too high. Too small an amount will not deter homeowners from breaking the rules, while a fine too large might be considered extortion. A good range most HOAs follow is somewhere between $25 and $50 per violation.
Of course, you must also keep the community’s economic status in mind. For example, a $25 fine may not be enough to deter residents in a wealthy, upscale HOA community. It is also important to consider the severity of the violation. Smaller violations can rack up smaller fines.
On the other hand, more serious violations may warrant higher fines, especially if they pose risks to the safety of other members or cause economic losses. It would be unreasonable to levy a $200 fine against a homeowner who simply failed to clean up after their dog.
Moreover, it is a good idea to adopt an escalating system for your HOA fine policies. Each repeat offense will incur a larger fine. It is not advisable, though, to continually increase the fine. There should be a maximum limit; otherwise, the fine could balloon to unreasonable levels. Some states even have laws against this. For instance, in North Carolina, a fine must not exceed $100.
Adopting a Fine Schedule
A fine schedule sets the standard for the monetary fines in the entire community. With it, residents can be aware of the consequences of single and repeat offenses. 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.
How do you create a schedule for HOA fines for violations? Here is a sample fine schedule for boards to use as a guide:
- First Violation – a warning letter or a 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, fines for continued violations 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 an HOA board has the power to increase fines, associations should consult state laws and their governing documents. In theory, increasing HOA fines is within the board’s power, 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.
Do You Have to Pay HOA Fines?
Membership in a homeowners association is typically mandatory upon purchasing a home in the community. This membership comes with the obligation to follow the community’s rules.
If an owner breaks a rule, it seems only right that they 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 against HOA fines is to simply abide by the community’s rules. 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 to collect. These include placing a lien on the owner’s property and subsequently foreclosing on that lien. As such, an owner can lose their home if they don’t pay the fines.
How to Collect Unpaid Fines
In an ideal world, all homeowners would settle their fines in a timely manner and come out of the experience as a better person. Unfortunately, the real world is not as forgiving. Should a homeowner fail to pay the fine, the HOA board can turn to one of two ways to ensure collection:
- Small Claims Court. Taking your case to a small claims court is easy and inexpensive. Plus, there is no need for an attorney. The downside to this, though, is that judges can be antagonistic towards HOAs, and there is no way to appeal a decision.
- Superior Court. This process takes more time and effort since it requires filing a lawsuit and hiring an attorney. There is also a chance it could end up in a trial.
The Fair Debt Collection Practices Act
The Fair Debt Collection Practices Act (FDCPA) prohibits debt collectors from using unfair, deceptive, or abusive practices in collecting debts. It also protects consumers from certain acts such as harassment. Federal law currently does not recognize homeowners associations as debt collectors. However, the Act applies to third-party agencies that HOAs employ to collect debts.
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 to earn more money, as fines are an enforcement tool, not a source of 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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- HOA Fine Policies: What’s Reasonable And Legal?
- What Are The HOA Governing Documents You Need As A Homeowner?
- HOA Collections And The Fair Debt Collection Practices Act
