Before Imposing Fines - Make Sure Your Ducks Are in a Row

Summertime and the living is easy . . . unless you are a community association manager or board member in a homeowners’ association (“HOA”) dealing with violations of covenants, rules and regulations or architectural guidelines. It can be extremely frustrating to receive constant complaints on alleged violations, to send out letters to owners informing them of a violation and requesting their compliance – only to be repeatedly ignored. Sometimes the only option left is to “motivate” these individuals to come into compliance by the imposition of a fine. But before a fine is imposed, make sure that your HOA is compliant with Colorado law. 

The Colorado Common Interest Ownership Act (“CCIOA”), at C.R.S. 38-33.3-209.5(2), addresses the parameters that HOAs must comply with prior to imposing a fine. Here’s what you need to know:

 

●    HOAs in Colorado may not impose a fine unless

(1)    The association has adopted, and follows, a written policy governing the imposition of fines (this is one of the 9 required “SB 100 Policies”); and

(2)    The policy includes a fair and impartial factfinding process to determine: (1) whether the violation actually occurred, and (2) whether the owner of the unit is the individual who should be held responsible for the violation. 

 

● The impartial factfinding process can be informal. However, at a minimum, the owner must be given notice and an opportunity to be heard before an impartial decision maker prior to the fine being imposed. Many HOAs make the mistake of imposing a fine without first providing the alleged violator with notice and an opportunity to be heard. 

 

● CCIOA defines an “impartial decision maker” as “. . . a person or group of persons who have the authority to make a decision regarding the enforcement of the association’s covenants, conditions and restrictions, including its architectural requirements, and the other rules and regulations of the association and do not have any direct personal or financial interest in the outcome. A decision maker shall not be deemed to have a direct personal or financial interest in the outcome if the decision maker will not, as a result of the outcome, receive any greater benefit or detriment than will the general membership of the association.”

 

● A board of directors of an association may act as the impartial decision maker or designate an individual or group of individuals to assume this role. The key is to ensure that the individuals acting as impartial decision makers have no personal stake in the outcome of the hearing that is different than the stake the general membership has in the outcome.

 

● If the hearing is held and the owner is determined to be responsible for the violation, the association may proceed with imposing a fine. If the owner does not show up at the hearing and no other arrangements with the owner have been made, the impartial decision maker should consider the facts before them and make a decision on whether the owner should be held responsible for the violation and fined. It is wise to include in your written policy regulating the imposition of fines, the actions the association may take in the event an owner does not attend a hearing on the alleged violation.

 

If you need assistance with drafting or reviewing your association’s policy regulating the imposition of fines, please call us at 303-863-1870 or email me at mfoley-healy@wlpplaw.com

 

Also, keep an eye out for future blog postings on reasonable fines and other options available to HOAs for covenant enforcement.