FINES AND PENALTIES

Schedule of Penalties
 

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 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. 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 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. 

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 in a 1995 case addressed the point. The plaintiff in the case had challenged the association's authority to fine, pointing out that the CC&Rs did not grant the association the power to impose fines. 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 conclusion of the court is 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 in accordance with the authorization for member discipline contained in the governing documents. (Civ. Code § 5850(a).)

Fines Capped at $100. Beginning July 1, 2025, 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).) Associations will need to amend their rules enforcement policy to comply with the statute.

Adverse Impact 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. This poorly drafted legislation confines the adverse impact to property and leaves out an adverse impact on the health or safety of people. 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).)

No Late Charge or Interest. A late charge or interest may not be charged for unpaid monetary penalties. (Civ. Code § 5850(e).)

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

Hearings for Repeat Violations. An example of a repeat violation is where an owner violates a rule by letting his dog off the leash. The board holds a hearing and fines him. The next month, the owner's dog is off the leash again. Boards cannot immediately levy another fine. They must hold another hearing where the person gets an opportunity to contest the alleged violation before imposing a fine.  The following month he does it again--a third hearing and another fine. The rules may allow for escalating fines, $50, $75, $100, but each incident requires a notice, a hearing, presentation of evidence, and a written decision. If the person has three violations within a few weeks, the board can hold one hearing and levy a fine for each of the three violations. 

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. 

Suspending Pivileges
 

Who Can Be Suspended & Why. Common area privileges can be suspended for rules 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 provided the right to suspend is in the association's collection policy and due process is followed. 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 gated communities and highrises), i.e., guests can be turned away and told to contact the owner and have him/her meet the guest 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 in landlord-tenant law as a utility that cannot be suspended. 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 using 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 can no longer 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.)

Collecting Fines

Once fines are levied and go unpaid, there are different methods for collecting them. See "Collecting Unpaid Fines."

Recording a Notice of Violation

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