Adopting a Fine Schedule
Purpose of Penalties. Fines should not be viewed as an opportunity to supplement the association's budget. Rather, they are a mechanism to deter unwanted behavior. To deter bad behavior, boards must adopt reasonable fine schedules appropriate to their association's demographics. For example, a $25 fine may be significant to owners in one association but 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. If fines fail to deter bad behavior by an owner, boards must be prepared to take legal action and seek a court order as well as judgment for the fines that continue to accrue until judgment is entered.
Adopting a Fine Schedule. To impose penalties for rule 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 a process that gives members notice of the violation and a hearing with an opportunity to defend themselves against an alleged violation.
Authority to Fine. If an association has the authority to adopt rules, the ability to enforce those rules using monetary penalties (fines) is implied. The Court of Appeal addressed the point in a 1995 case. The plaintiff in the case challenged the association's authority to impose fines, pointing out that the CC&Rs did not grant the association the power to do so. The court did not dispute the plaintiff's assertion but, instead, noted the governing documents gave the association the authority to enact rules and concluded, "because the authorization for the...rules is itself contained in the recorded...CC&Rs, Liebler is incorrect in asserting such fines are unauthorized... (Liebler v. Point Loma) The court concludes that the authority to enact rules necessarily carries with it the authority to enforce those rules, whether by fines or otherwise. Once an association has the authority to adopt rules, it can adopt a fine schedule.
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 consistent with the authorization for member discipline set forth in the governing documents. (Civ. Code § 5850(a))
Most Fines Are Now Capped at $100
Beginning July 1, 2025, poorly drafted legislation (AB 130) capped fines at $100. Fines may not exceed the lesser of the amount stated in the schedule of fines or $100 per violation. (Civ. Code § 5850(c)) Examples include (i) an owner parking his car overnight in guest parking, (ii) refusing to turn down the volume on a loud party, (iii) not picking up a dog's droppings in the common area, etc. If an owner parks illegally four times in a row, the association can impose four separate $100 fines in a single hearing before the board. If a person violates pool rules, such as bringing alcohol or glass containers to the pool, their pool privileges can be suspended for a reasonable period.
Safety Exception. Boards may impose a penalty greater than $100 if the violation would result in an adverse health or safety impact on the common area or another association member’s property. Before imposing a penalty, the board, in a meeting open to the members, must make a written finding specifying the adverse health or safety impact on property. (Civ. Code § 5850(d)) Examples include, but are not limited to:
- smoking in the common areas
- secondhand marijuana smoke is infiltrating another unit
- speeding on association streets
- pulling a fire alarm as a prank
- parking in front of a fire hydrant
- riding e-bikes on equestrian trails
- using unlicensed workers to repair plumbing and electrical lines
- hoarding that leads to insect and rodent infestations
- setting off fireworks
Right to Cure Continuing Violation. For a continuing violation, the amended statute allows members to cure the violation before the hearing. An example would be an architectural violation, such as (i) installing hardwood floors in violation of the CC&Rs, (ii) painting your house the wrong color, (iii) installing a satellite dish on a common area wall, etc. If curing the violation would take longer than the time between the notice of the hearing and the hearing date, the board cannot impose discipline if the person provides a financial commitment to cure the violation. (Civ. Code § 5855(c)) An example of a financial commitment to cure the violation would be a signed agreement with a contractor to correct the violation. For owners who refuse to cure a continuing violation, associations can seek a court order.
IDR. If a fine is levied against an owner and the person does not agree with the board's decision, he/she can request internal dispute resolution. (Civ. Code § 5855(d))
No Late Charge or Interest. Associations cannot impose a late charge or interest for unpaid monetary penalties. (Civ. Code § 5850(e))
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, 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 unit's occupants violate the rules, the trustee can be called in for a hearing and fined.
Updating a Fine Policy. Associations will need to amend their rules enforcement policy to comply with the statute.
Suspending Privileges to Enforce Rules
Who Can Be Suspended & Why. Common area privileges can be suspended for rule violations, provided due process is followed and the right to suspend is part of the association's published policy for rules enforcement. Associations may suspend a member's privileges for unpaid fees, fines, and assessments. If a unit or lot has multiple owners, the suspension of privileges for one owner applies to all owners and residents of that unit/lot. Associations can suspend a renter’s common area privileges if the owner is delinquent. When owners lease their units, they transfer their common area privileges to their tenants. (Liebler v. Point Loma) If the owner's privileges are suspended, the loss flows to the tenant.
Allowable Suspensions
- Cable TV. Those services can be suspended if an association has a bulk contract with the cable company.
- Meeting Facilities. Use of the clubhouse for functions unrelated to association elections can be suspended.
- Committee Membership. A delinquent owner can be removed from committees.
- Laundry Facilities. The service can be suspended if laundry machines are paid through owners' dues. However, if they are coin-operated, the service cannot be suspended.
- Miscellaneous. Receiving and sending calls through the association's switchboard (mostly highrise associations) can be suspended, as can signing for packages and deliveries (mostly associations with on-site staffing). The announcement of guests can be suspended (mostly in gated communities and highrises), i.e., guests can be turned away and told to contact the owner, who will meet them at the front gate or building entrance.
- Parking. Associations providing valet parking (mostly highrise associations) can suspend those privileges to delinquent owners, their families, and guests. Guest parking can also be suspended, so guests must find parking outside the development.
- Recreational Facilities. Use of the association's recreational facilities, such as the pool, gym, tennis courts, etc., may be suspended.
Disallowed Suspensions
- Elevators. Associations cannot suspend elevator service, as elevators are classified under landlord-tenant law as a utility. Moreover, if an elderly or medically challenged owner or guest is forced to walk up stairwells and has a heart attack, the association will likely be sued.
- Ingress/Egress. Associations cannot bar owners and guests from walking through the lobby. Owners have the right of ingress/egress.
- Meeting Attendance. The right to attend meetings is different from the right to use the swimming pool. Meeting attendance is a right conferred by the Davis-Stirling Act: "Any member may attend board meetings, except when the board adjourns to or meets solely in executive session." (Civ. Code § 4925(a))
- Meeting Facilities. Facilities during association elections cannot be suspended.
- Utilities. California's Supreme Court has determined that associations are, "for all practical purposes," a landlord. (Francis T v. Village Green) Under landlord-tenant law, landlords may not willfully cause, "directly or indirectly," the interruption or termination of utility service to a tenant's residence. Utilities covered include, but are not limited to, water, heat, light, electricity, telephone, gas, elevators, and refrigeration. (Civ. Code § 789.3) A judge could decide that trash collection qualifies as a "utility" and could not be withheld by the association.
- Voting Rights. As of January 1, 2020, a member's voting rights cannot be suspended. (Civ. Code § 5105(h)(1); a ballot cannot be denied to a member for any reason other than not being a member at the time when ballots are distributed.)
How to Collect Unpaid Fines
After holding a rules enforcement hearing and levying fines that go unpaid, the following methods can be used to collect fines.
- Suspend Privileges. Sometimes it may be appropriate to suspend a person's privileges until the fines are paid.
- 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.
- Superior Court. If the fines are over the small claims court limits, associations can file an action in the superior court. If the association is awarded a judgment for the fines, an abstract of judgment can be recorded against the owner's property.
- 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.
- Nonjudicial Foreclosure. Fines cannot be collected through nonjudicial foreclosures (trustee sales), despite any authorizing language 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 judicially foreclosed liens.
No Interest on Fines. Associations cannot charge interest on unpaid fines. Civil Code § 5725 prohibits an association from characterizing or treating a monetary penalty “imposed by the association as a disciplinary measure for the failure of a member to comply with the governing instruments, except for the late payments” as an assessment. As provided for in Civil Code § 5650(b)(3), "Interest on all sums imposed by this section, including the delinquent assessments, reasonable fees and costs of collection, and reasonable attorney's fees, at an annual interest rate not to exceed 12 percent ..." Since a monetary penalty does not fall into any of the categories described above, associations cannot charge interest on fines.
No Late Charges on Unpaid Fines. When delinquent, homeowners sometimes pay the delinquent assessment but refuse to pay late charges. If they received fines for rule violations, they may refuse to pay those as well. When that occurs, associations cannot charge late fees and interest on unpaid late fees and fines. The Davis-Stirling Act provides for a late fee of 10% or ten dollars, whichever is greater (unless the CC&Rs specify a lesser amount), on delinquent assessments. (Civ. Code § 5650) That means late charges cannot be charged against unpaid late charges or fines.
Fines in Foreclosure Actions. Fines cannot be collected through nonjudicial foreclosures (trustee sales) despite any authorizing language contained in an association's governing documents. (Civ. Code § 5725(b)) Monetary penalties cannot be treated as assessments or included in delinquent assessment liens that are foreclosed nonjudicially. Fines can be included in judicially foreclosed liens. Because the prohibition on fines in liens only applies to trustee sales, associations may include monetary penalties (fines) in actions for judicial foreclosures.
Fines Are Not Subject to FDCPA. Fines are nonconsensual and not consumer-related, as they arise from violations of the association's internal rules. Accordingly, fines are not debt for purposes of the FDCPA. (Nabatmama v. Ross Morgan)
Recording a Notice of Violation is Not Allowed
At one time, associations could record a notice with the county recorder's office whenever an owner violated the CC&Rs. Such recordings are no longer allowed. (Ward v. Superior Court)