An owner violates the rules. The Board assesses fines to the unit owner. Will the fines hold up in a court of law? In this case, they did—and your Association can take note of what this Court says the HOA did right.
Facts. In a 2017 case, an owner who lived in a subdivision with an HOA planted bamboo in their yard, which then spread and infested a neighboring owner’s yard and some common areas. When the owner failed to remove the offending plants after notice, the HOA Board started to fine the owner, rather than to exercise “self-help” and take care of the bamboo infestation for the owner. The owner sued the HOA and the individual board members, saying that the fines were “unauthorized and excessive,” that the board members breached their fiduciary duties, and that the HOA breached its own documents by failing to keep the common areas free of bamboo.
Court Rulings. The Court found that the correct standard to apply when reviewing actions by a homeowners association is the business judgment rule—meaning the Court looks at (1) whether the action taken by the HOA was authorized (allowed by the documents and the law) and (2) whether the action was taken in good faith and in furtherance of the legitimate interests of the association. Applying this standard, the Court found that the HOA had the authority to fine (rather than remove the bamboo and charge the owner) because the documents supported that action. The Court also noted that the owner showed no evidence of “bad faith” on behalf of the board of directors and no evidence that they operated outside their scope of authority. As such, the Court held that the fines were valid and the claims against the HOA and the Board members should be dismissed.
Lesson. Owners are going to violate the rules sometimes—this is a given—so be prepared and have a good, clear, and easy to follow enforcement policy that includes the right to fine an owner daily for continuing violations. Step two is following the enforcement policy to a tee and doing it every time there is a reported violation. If you take these steps consistently, your Board will stay on the right side of the law.
If you have any questions, please feel free to contact the Husch Blackwell LLP Condominium and HOA Law Team.