Governing Documents. Adopting a fine schedule does not require a vote of the membership. The board can adopt adopts rules and set fines once rulemaking authority has been established. Such authority must be conferred by law or an association's CC&Rs, articles of incorporation or bylaws. (Civ. Code §4350(b).) Newer developments all have rulemaking authority in their governing documents since the Department of Real Estate requires it. (Cal. Code Regs, tit. 10, §2792.21(a)(7).)
Enforcing CC&Rs. The ability of an association to enforce its CC&Rs is well established. CC&Rs are enforceable equitable servitudes and, unless the CC&Rs state otherwise, can be enforced by the association. (Civ. Code §5975(a).) Moreover, associations have a duty to enforce their governing documents. (Nahrstedt v. Lakeside Village.) If a board fails to enforce them, members can go into court to to compel enforcement. (Ekstrom v. Marquesa.)
Enforcement Mechanism. What's missing from the Davis-Stirling Act and case law is any mention of how enforcement occurs. The Act simply states that CC&Rs are enforceable. (Civ. Code §5975(a).) The enforcement mechanism is left to associations to decide. Most use three methods: fines, suspension of privileges, and litigation. The same applies to enforcing rules.
Adopting Rules. To adopt rules, an association must have rulemaking authority conferred by law, the CC&Rs, articles of incorporation or bylaws. (Civ. Code §4350(b).) Some older developments are silent on rulemaking authority. Fortunately, governing documents in newer developments all have rulemaking authority since the Department of Real Estate requires it. (Cal. Code Regs, tit. 10, §2792.21(a)(7).)
Statutory Authority. Absent rulemaking authority in the governing documents, associations still have statutory authority to adopt rules for specific matters, such as election rules (Civ. Code §5105), architectural rules (Civ. Code §4765), IDR policies (Civ. Code §5905.) and collection policies (Civ. Code §5730).
Rule Adoption Procedure. Once authority for adopting rules has been established, boards of directors must follow a specific process for enacting rules.
Authority to Fine. If an association has 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 the CC&Rs did not grant the association the power to impose fines. The court did not dispute plaintiff's assertion but, instead, noted the governing documents gave the association the authority to enact rules:
The right of the Corporation to establish uniform rules and regulations pertaining to the use of the Common Area... (Liebler v. Point Loma.)
The conclusion by the court is that the authority to enact rules necessarily carries with it the authority to enforce those rules, whether by fines or otherwise. In other words, the authority to adopt rules carries with it the authority to include enforcement procedures. Once an association has authority to adopt fines, whether express or implied, the Davis-Stirling Act sets conditions on their use.
Imposing Fines. To impose penalties for rules violations, an association must adopt a fine schedule and give notice to the membership of that schedule. Fines must be reasonable and appropriate to the violations. Moreover, they can only be imposed after due process has been followed. Once levied, fines are normally collected by filing a small claims action.
Recommendation: Older documents that lack authority to enact rules should be amended to include authorizing language.