reminder notice they know owe $6,000 for that broken shutter. Daily fines should be closely monitored, and heavily documented with the owner. Fines are a tool to gain compliance. If the owner missed the first letter, did not understand it, or forgot, he is being fined into the ground without knowing it, which de- feats the purpose.
When to stop Fining?
If the fines are not achieving compli- ance, the Board should change tools of enforcement. At a certain point owners have decided to ignore the fines, or the fines get so high that they become para- lyzed because there is no way they could ever pay $10,000 for their dead lawn, so why bother dealing with it. Te Board should start the fines, but once they start reaching into the thousands, or ex- tend beyond several months, the Board should consider another approach.
Tat could be suspending common area privileges, or inviting the owner to an Internal Dispute Resolution meeting. If those do not work, the Board should commence legal action with counsel, starting with a demand letter, and then moving to a request for Alternative Dis- pute Resolution and eventually a lawsuit. Litigation is a costly and difficult pro- cess, and the goal is to avoid that. How- ever, the Board has a duty to enforce the governing documents, and if the fines are not achieving that, the Board should ei- ther affirmatively decide to not enforce against a violation, which is a compli- cated matter itself with many issues, or move on to the next enforcement tool. Letting fines sit idle, or accrue endlessly, is a form of inaction, and is not moving toward compliance. Additionally, ratch- eting up the enforcement process with
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IDR, demand letters from counsel, and ADR often result in compliance, and even if a lawsuit is commenced, most settle very quickly.
When to Waive the Fines?
Fines are a tool to gain compliance. When compliance is achieved, the Board should consider waiving the fines or a portion thereof.
Tat does not mean
the Board is rolling over or giving in. It means the Board is governing a corpora- tion that is designed to protect property values, and compliance protects property values. Habitual violators are frustrat- ing, and there is a desire to put such neighbors in their place. Tere is a de- terrent value to make habitual violators pay something to disincentivize future violations. On the other hand, there is also value in making it known that for- giveness is available for those who do the right thing and correct their problem.
Community associations already have an unfair reputation as being heavy handed or unfair. A community full of owners who are heavily fined even if they comply won’t be lining up to change that reputation, and will not necessarily want to go beyond minimum mainte- nance standards when keeping up their residences. Garnering a certain level of good will with the members will help with compliance, and reduce the level of animosity towards the Association. Tis will benefit the Board and management, and make their jobs in carrying out other duties easier.
Imagine trying to
schedule an inspection or maintenance project the Association is carrying out with the owner that was just required to pay $3,000 in fines for something that was corrected, versus the owner that was required to pay $500, or less, and had
the rest waived because the violation was corrected.
Finally, once a violation is corrected, holding the line on a large amount of fines puts the association in a difficult position of actually collecting those fines, and that comes with a number of costs and challenges. If the Board is not willing to take those next steps, its attempt of holding a hard line with the owner will be negated, and the fines will appear meaningless.
It is better for the association to be the merciful governing body who waives a fine, versus the disfavored governing body that was called on its bluff.
Take Away
Fines are a tool to gain compliance. Tey are not intended to punish, but instead to deter and to motivate someone to fol- low the rules. When they do not achieve that goal, continuing with them is an ex- ercise in futility and will only delay the goal of compliance. When compliance is achieved, it is the Board’s opportunity to use the carrot of fine-forgiveness, and avoid the risks and consequences of col- lecting on fines, or not, after a violation is corrected.
JOHN D. HANSEN is a
partner at Baydaline & Jacob- sen LLP, which provides gen- eral counsel and litigation ser- vices to over 800 community associations in the Bay Area and Central Valley. Mr. Han-
sen has been practicing community association law for seven years, and handles both general counsel and litigation for community associations. Bayda- line & Jacobsen LLP is located in Sacramento. Mr. Hansen frequently speaks at seminars and confer- ences regarding community associations, and has authored articles on a variety of topics important to community associations.
FINED!
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