Fines: Authority and Procedures

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One of the fastest, least expensive and therefore most popular methods to enforce deed restrictions is through a system of fines. However, this enforcement tool also contains a number of potential pitfalls and hidden dangers for unwary board members and managers. All condominium associations are granted the right to adopt a system of fines pursuant to the Texas Uniform Condominium Act, unless otherwise provided by the condominium’s governing documents. Associations for planned unit developments only have the right to fine if the governing documents authorize fining.
For those associations which have the right to fine, the board’s threshold inquiry should be whether the questioned action, condition or thing constitutes a violation of the governing documents. It is not sufficient that the conduct or item is unsavory or even illegal—it must actually violate a covenant, restriction or rule. Associations should only take action for violations of express provisions and not violations of the spirit or intent of the restrictive covenants.
Once the association has made the decision that a condition constitutes a violation, and it decides to impose a fine, associations must follow statutory fining procedures (in addition to any fining procedures contained within the association’s governing documents). For condominiums for which the declaration was recorded prior to 1994, the association need only provide the owner with notice and an opportunity to request a hearing.
For post-1994 condominiums, the association must provide the owner with notice of the violation, notice that the owner has 30 days to request a hearing to contest the fine, and notice that the owner has a reasonable opportunity to cure the violation (which may be less than 30 days depending upon the action necessary to cure the violation), and the demand must state the amount of the proposed fine.
Associations for planned unit developments have a slightly more rigorous process to follow pursuant to Section 209 of the Texas Property Code. The association must send written notice by certified mail to the owner that describes the violation and states the amount of the fine to be imposed. It must also notify the owner that he or she is entitled to a reasonable period to cure the violation (unless a similar violation has occurred in the preceding six month period), and may request a hearing on or before the 30th day after receipt of the notice. The association can charge the owner for its legal fees only if the owner is given written notice that attorney’s fees will be charged if the violation continues beyond a certain date. However, the owner is not liable for attorney’s fees incurred before the conclusion of the hearing, or if no hearing is requested, before the date to request a hearing.
Hearings conducted pursuant to Section 209 must be conducted before the board, or a committee appointed by the board. If the hearing is held before a committee, the notice letter to the owner must also state that the owner has the right to appeal the committee’s decision to the board. The hearing must be held not later than the 30th day after the association receives the request for a hearing, and the association must provide the owner with at least 10 days’ notice of the hearing. The board or the owner may request one postponement of the hearing of not more than 10 days, with additional postponements granted by agreement only. Pursuant to the Texas Property Code, the owner need not be present at the hearing, and the owner has a right to make an audio recording of the hearing.
As noted above, there are potential traps associated with fining that associations must be careful to avoid. The first is where the association lacks authority to fine or to promulgate rules, and then attempts to fine for those violations.
Similarly, associations sometimes only have authority to make rules and impose fines for conduct on the common areas and not owners’ lots. There is also a risk that an association’s written fining policy may not be identical to the statutory requirements for fining, and the association fails to follow both the fining policy and the statute when imposing a fine. If there is a conflict between an association’s fining policy and the statutory requirements, the association should follow the standards imposed by statute.
Hopefully this summary article has helped to identify some of the basic concepts and larger issues associated with fining. If anassociation has questions about whether a particular matter constitutes a violation, the association should either utilize a strict interpretation of its governing documents, or seek the advice of legal counsel.
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