Monday, July 15, 2013

How and When to Levy a Fine and Suspend Rights of Owners

Associations often face situations when owners violate the governing rules of the association. These violations literally span the scope of imagination. Boards seem well aware that fining and suspending certain rights are mechanisms available to enforce rules, but there are often misunderstandings on the process to properly implement and enforce them. Click though for a guide on suspending owners right and for levying and collecting condominium fines...





Suspending use of Common Elements and Voting

The easier of the two process is suspending an owners rights to use certain common elements.  The entire procedure for doing this can be found in F.S. 718.303(4) and (5) (condos) and F.S. 720.305(3) and (4) (HOA).  To summarize, if a unit owner is more than 90 days delinquent in paying money due the association, the association may 1) suspend the right of the unit owner or the unit’s occupant to use common elements, common facilities, or any other association property and 2) suspend voting rights until the money is paid. This means the association can suspend a delinquent owners right to use the pool, fitness facilities, valet, and any other non-essential common elements of the community. The association cannot suspend the rights to limited common elements intended to be used only by that unit (balcony, dedicated storage rooms, etc.) and common elements needed to access the unit, utility services provided to the unit, parking spaces, or elevators. So it boils down to the association cannot suspend those rights reasonably necessary to access the unit and enjoy the unit itself, but the right to use most other amenities of the community can be suspended.



Important - these suspensions can only be imposed after such policy is approved at a properly noticed board meeting. F.S. 718.303(6) and F.S. 720.305(5). 
  • Practical tip - If the association board wants to implement this policy of suspending delinquent owners' access to common elements and right to vote, first, notice the meeting where such matter is going to be discussed. The board can then adopt a standing policy where owners that are 90 days delinquent (or more if it chooses) are automatically suspended from using the common elements (as listed) and from voting. Since there is a standing policy in place there is no need for another board meeting to suspend rights, however, if a given delinquent owners rights are suspended as a result of this policy notice must be sent to the owner. Therefore, each time another owner becomes 90 day delinquent,  the association should have a form letter that goes out to that owner saying that their rights to use the common elements and vote have been suspended until the money is paid. 
  • Another quick tip...put a deadline on when payment must be made prior to the annual meeting to vote. For example, if the annual meeting is October 15, make it the rule that any owner 90 days delinquent as of October 10 cannot vote. This make the annual meeting rule much more efficiently and remove the worry and administrative hassle of people paying at the meeting, partially paying at the meeting, etc.
Implementing Fines



Associations have the ability to levy fines against owners that violate the association's declaration, by-laws, and other reasonable rules of the association. A fine is limited to $100 per day of the violation up to a total of $1000. Non-payment of a fine cannot become a lien on a unit.  Some declarations include the term "fine" as an assessment and therefore lien-able, however, for a variety of policy reasons I still think the statute is going to trump the association rules and a fine cannot create a lien on a unit.

 Before a fine is levied against an owner, the owner must be given 14 days notice and have the opportunity to be heard and dispute the fine. Therefore, when the board determines that violation occurred and it wishes to fine the owner for such violation notice of same must be sent to the owner. Include in the notice  the nature of the violation, what needs to be cured, and that the owner has the ability to dispute the fine within 14 days, and if not disputed or cured within that time a fine of $100/day up to $1000 will be implemented without further notice. If disputed, the association must hold a hearing on the matter before a "committee" not composed of board members or persons residing in board members residence. That statute does not provide how many people must be on this "committee." In my opinion a "committee" is three people, although for a smaller association an argument could be made the two is a committee. To uphold the fine it requires unanimous approval by the committee.  Because of this language I think it's clear that it cannot be a "committee" of one.  Also, as a practice tip, due to the fine having to be approved unanimously, having a committee of more than 3 is going to make unanimous agreement increasingly more difficult
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Florida Department of Business Regulation also has some guidance on the topic. See Questions 12-14

There are all sorts of nuances to this procedure like deadlines for notice, specific language, etc., so I highly encourage associations that are contemplating implementing a fining procedure to contact their attorney for guidance.  

6 comments:

  1. Must the membership vote on institution of fines before the Board can institute a fine process?

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    1. No, fining is done by a committee appointed by the board. Then the owner can basically appeal the fine to the board. The membership as a whole doesn't vote on fines.

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  2. How many notices of a violation must be given to a homeowner prior to setting a hearing for the violation?

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  3. check the Association's governing docs. There might be special rules. Generally though, there's only the need for one formal notice with the opportunity for hearing.

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  4. It seems FS 720.305(2) and (2)(b) are saying the board levies a fine first, for example $100/day beginning on a specified day. Then when the violation is corrected or the $1,000 max is reached, the board then notifies the homeowner of opportunity for a committee hearing. The committee must then approve the actual fine for the board to impose it, i.e. make it collectable. If the hearing is before the fine is levied, they are approving a fine rate. They won't know if they are approving fine of $100 or $1,000. Do I understand this incorrectly?

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    Replies
    1. The statute is worded poorly, but that's not the exact procedure. I believe you have to notify them of the fine when it is imposed.

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