Using Fines and Penalties Fairly in a Community
Rules and regulations are part of community association living, and as everyone knows, Rules and Regulations are useful only if enforced. Back in the early days of community association law, enforcement proceedings typically did not include the right to issue fines. Enforcement was by way of injunction. That turned out to be unreasonably expensive and impractical. To have to bring a matter to the Court over someone parking in the wrong place, for example, was unhelpful in the extreme. Fortunately, the industry learned from its mistakes and began to include the right to issue fines, as an alternative to litigation. It may be hard to explain to some people that the ability to issue fines is a money-saving mechanism that inures to the benefit of both the Unit Owner and the Association, but it’s true.
The right to impose fines and/or penalties for a violations of community association rules and regulations is typically laid out in the By-Laws. In fact, it is required. The New Jersey Condominium Act, specifically N.J.S.A. 46:8B-13(d) provides that “the By-Laws may also provide a method for the adoption, amendment and enforcement of reasonable administrative rules and regulations, including the imposition of fines which may be enforced as a lien…” Notice the use of the word, “may”. If there is no By-Law provision allowing for the imposition of fines, then fines may not be imposed.
We recommend, and many Associations do, implement a system of fines in order to provide consistency in fining, but also to allow the Association to account for aggravating and mitigating factors. A unit owner who has lived in the community without a violation for 30-years and has never been guilty of a violation, should not be treated the same as a new member who violates the rules, is told about his violation and curses out the messenger.
The maximum fine for a single event/failure, is $500.00, pursuant to the Hotel and Multiple Dwelling Law (Section 19). The maximum fine for a continuing violation is $5,000.00. Thus, it is apparent that Boards have a great deal of discretion in setting fine schedules, within these limits. Typically, associations will issue one or more warnings before issuing a fine, but we do not recommend that a warning be required in all cases. For example, one Unit Owner held a party for his daughter, and without prior notice to the Association, hired a valet parking service. The valet service, knowing nothing about community associations, disrupted parking everywhere in the community and on nearby roadways. That behavior should result in a fine. There would be no use in sending a warning. The damage has already been done. Warning letters should be part of the policy (with exceptions for one-time occurrences), not part of the rule.
The Association is obligated by law to provide a fair and efficient procedure to resolve disputes, either between homeowners or between homeowners and their association. Pursuant to the New Jersey Condominium Act, N.J. Stat. § 46:8B-14(k), all disputes are subject to alternative dispute resolution (“ADR”), so as to maximize the chances of reaching a solution prior to escalating the issue to litigation. Even if an owner was only issued a warning, that owner has the right to have any response heard through ADR, unless the association withdraws the warning letter. Fines may be issued in advance of a hearing, provided the fine doesn’t attach to the Unit Owner’s account until the right to be heard is provided.
Again, a history lesson is in order. Early on, governing documents were written so that a fine could not be issued until an actual hearing occurred. The Association would assemble a covenants committee to hear a parking fine issue, for example, and the committee would sit there for a half hour, only to have the offending Unit Owner fail to appear. This would happen on a regular basis with respect to fines. It was hard to keep committees functioning in this type of environment.
An adjustment was made in the Condominium Act, so that fines could be issued first, with the right to contest the fine by way of a hearing occurring afterward, and if there was no response by a certain time, the fine could be confirmed and attached to the Unit Owner’s account. This prevented having the covenants committee constantly assemble and constantly have no one appear.
While the Board may use its discretion in implementing rules and regulations and assessing fines, it is important to also be fair. The court cases interpreting association action have consistently ruled that Board (or committee) action must be “reasonable”. Thus, the amounts of the fines issued must be reasonable as well.
Some rules or fines that appear to be fair to one person (or the Association) may not seem fair to other people. Especially when initiating a new rule or regulation, it is important not only to publish the text of the rule itself, but also why it is important to have the rule, and what would happen if the rule did not exist. As with so many things, a Board’s communication with the Unit Owners is so important to obtaining compliance. Nobody likes to be told what to do. It softens the blow tremendously to explain in adult fashion, supported by logic, and sometimes expert testimony, why it is important that the rule be implemented.
For any questions about this blog, or to schedule a consultation with an attorney, contact Griffin Alexander, P.C. at 973-366-1188 or through our website here!
The information in this Client Alert is provided solely for information purposes. It should not be construed as legal advice on any specific matter and is not intended to create an attorney-client relationship. The information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based upon particular circumstances. Each legal matter is unique, and prior results do not guarantee a similar outcome.
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