RULES ENFORCEMENT & FINES

Delegating Enforcement. Boards can delegate to a Rules Committeed the task of issuing violation notices, holding hearings, and imposing fines. Architectural violations can be allocated to the Architectural Committee or they can be assigned to a Rules Committee to handle all violations. The board can then hear appeals. Members do not have a right to Rules Committee minutes regarding disciplinary hearings. Associations may withhold or redact information if the records contain records of disciplinary actions, collection activities, or payment plans of members other than the member requesting the records. (Civ. Code § 5215.) Even though the Committee has decision-making authority, member disciplinary hearings fall into the executive session protections afforded by the Open Meeting Act. However, the decisions of the Committee should be generally noted in the minutes of the subsequent open meeting of the board. (Civ. Code § 4935(e).)

Due Process. To impose penalties for rules violations, associations must adopt a fine schedule and give notice to the membership of that schedule. The procedure for adopting fines is the same as adopting rules. Fines must be reasonable and appropriate to the violations. A fine policy must include due process, i.e., giving members notice of the rules and individuals notice of violations and a hearing before the board with an opportunity to defend themselves against an alleged violation. A fine policy cannot include the following:

• No Automatic Fines. If an owner is fined for a violation one month, then repeats the violation the following month, boards cannot immediately levy another fine. Another hearing must be held for the new violation. The person gets an opportunity to contest each alleged violation. The exception is continuing violations where continuing fines are levied until the violation is cured. 
   
• No Group Fines. If the board cannot determine which dog owner is not cleaning up after their dog, the board cannot levy a fine against all dog owners until someone confesses. Other steps must be taken to determine the identity of the violator.

Deterrence Effect. Monetary penalties are intended to deter unwanted behavior. As a result, to be enforceable, boards must adopt reasonable 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.

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. Unless an association's CC&Rs or bylaws require a warning on the first offense, boards of directors can adopt a fine policy similar to the following:

Daily Fines. For continuing violations, boards need the ability to impose daily fines so as to encourage compliance with the association's rules. For example, if the CC&Rs limit owners to one dog and an owner has 3 dogs, the board (after proper written notice and a hearing) may impose a daily fine until such time as the violation is cured. Or, an owner who paints his house blue when the color scheme for the development is earth tones may receive a daily fine until the house is painted with an approved color.

Waiver of Fines. The fines should not be viewed as an opportunity to supplement the association's budget. Rather, they are a mechanism to induce compliance. Accordingly, the board should be willing to waive the fines if the owner complies within 30 days of the imposition of the fines. The board's willingness to waive the fines should be included in the letter to the owner.

Refusal to Comply. If the owner refuses to comply, the board must then take legal action and seek a court order as well as judgment for the fines which continue to accrue until judgment is entered.

Fining a Family Trust. When property is held in a family trust and the resident violates rules, associations cannot go after the trust itself because a family trust is neither an entity nor a legal person such as corporations are. A trust is a mechanism for transferring assets to a beneficiary without going through probate. As such, it cannot own property or be sued. Because a trust cannot own property, a condominium in a living trust must be owned by a trustee on behalf of the trust. That person's name appears on a recorded deed similar to the following: "John D. Smith as Trustee of the John D. Smith Family Trust dated 1/1/15." Or, "Mary Jones as Trustee of the John D. Smith Family Trust dated 1/1/15." If the occupants of the unit violate the rules, the trustee can be called in for a hearing and fined. 

Collecting Fines. Once a fine is levied and goes unpaid, the following are methods for collecting fines.

1. Suspend Privileges. Sometimes the best option is to suspend a person's privileges until the fines are paid.
2. Small Claims Court. Associations can sue for fines in small claims court. The benefit is that there is very little expense involved and an abstract of judgment can be recorded against the owner's property.
3. Superior Court. If the fines are over small claims limits, associations can file an action in superior court. If the association is awarded a judgment for the fines, an abstract of judgment can be recorded against the owner's property.
4. Judicial Foreclosure. Because the prohibition on fines in liens only applies to trustee sales, associations may include monetary penalties (fines) in actions for judicial foreclosures.
5. Nonjudicial Foreclosure. Fines cannot be collected through nonjudicial foreclosures (trustee sales) despite any authorizing language that might be contained in an association's governing documents. (Civ. Code § 5725(b).) Monetary penalties cannot be treated as assessments and cannot be included in delinquent assessment liens that are foreclosed nonjudicially. Fines can be included in liens that are foreclosed judicially.
6. Late Charges & Interest. Associations cannot levy late charges and interest on unpaid fines.

Annual Notice of Disciplinary Policy. If an association adopts or has adopted a policy imposing any monetary penalty, including any fee, on any association member for a violation of the governing documents, including any monetary penalty relating to the activities of a guest or tenant of the member, the board must adopt and distribute to each member, in the annual policy statement describing the association’s discipline policy, if any, including any schedule of penalties for violations of the governing documents. (Civ. Code § 5310(a)(8).) The schedule of penalties must be in accordance with authorization for member discipline contained in the governing documents. (Civ. Code § 5850(a).)

No Notice of Noncompliance. At one time associations could record a notice with the county recorders office whenever an owner was in violation of the CC&Rs. Such recordings are no longer allowed. (Ward v. Superior Court.)

Enforcement Menu. For more information see Rules Enforcement Menu.

ASSISTANCE: Associations needing legal assistance can contact us. To stay current with issues affecting community associations, subscribe to the Davis-Stirling Newsletter.