Deterrence Effect. Monetary penalties are intended to deter unwanted behavior. As a result, boards of homeowners and condominium associations should adopt fine schedules that are appropriate to the demographics of their association. For example, a $25 fine that may be significant to owners in one association may be pocket change to owners in another. If the fines are too low, they will be viewed by some as a fee for the right to break the rules.

Reasonable. Fines should not be viewed as a profit center for the association, i.e., a source of revenue to help offset dues. Boards cannot fine owners $10,000 for their dogs being off a leash. To be valid and enforceable, rules must satisfy the requirements of Civil Code §1357.110:

(a) The rule is in writing.

(b) The rule is within the authority of the board of directors of the association conferred by law or by the declaration, articles of incorporation or association, or bylaws of the association.

(c) The rule is not inconsistent with governing law and the declaration, articles of incorporation or association, and bylaws of the association.

(d) The rule is adopted, amended, or repealed in good faith and in substantial compliance with the requirements of this article.

(e) The rule is reasonable.

Flexible. Fines should also be flexible enough to allow for a significant fine on the first violation rather than just a warning letter. Most associations have a fine policy that requires a warning letter on the first violation. This ties the board's hands if the directors need to discipline an owner who commits a serious violation as a first occurrence, such as endangering others. An owner who evacuates a building with a false fire alarm because he is angry at his neighbor's loud party, warrants a significant penalty rather than a simple warning letter.

30-Day Review. Before adopting a fine policy, boards must send a draft to the membership for thirty days of review and comment. Once the policy has been adopted, notice must be given to the membership.