Mountain Law: The requirements for imposing fines in Colorado HOAs (column)
April 15, 2015
A homeowners association in a condominium or neighborhood is charged with enforcing the recorded declaration as well as its own rules and regulations. If an owner violates a provision of one of those documents, the HOA could file a lawsuit asking the court to enjoin the owner from continuing the violation. Another option is for the HOA to fine the owner for the violation. This article discusses the fine points in the process under Colorado law.
Colorado law specifically authorizes HOAs to fine owners for violating the governing documents, such as the declaration and rules and regulations. This is significant because, without specific statutory authority, the courts have traditionally viewed the power to impose fines unfavorably. Colorado law imposes specific procedural requirements for imposing fines, which supersede any provision in an HOA's governing documents to the contrary.
The main requirement is that each HOA must adopt, and follow, a written policy governing the imposition of fines. The policy must include a "fair and impartial fact-finding process concerning whether the alleged violation actually occurred and whether the owner is the one who should be held responsible for the violation." The fact-finding process may be informal, but it must, at a minimum, guarantee the owner notice and opportunity to be heard before an "impartial decision maker."
The term "impartial decision maker" means a person or group of people who have the authority to make a decision concerning enforcement of the governing documents and do not have a direct personal or financial interest in the outcome. An impartial decision maker is not disqualified if he or she will not receive a greater benefit or detriment as a result of the outcome than will the general membership of the HOA. The impartial decision maker is often the HOA's executive board or a committee appointed to hear enforcement issues.
If the impartial decision maker decides that the owner is responsible for a violation, then the HOA may seek reimbursement for reasonable attorney fees and costs incurred as a result of the violation. However, the owner is not deemed to have consented to pay the costs and attorney fees merely from having participated in the process.
In contrast, if the impartial decision maker decides that the owner is not responsible for a violation, then the HOA may not allocate to the owner's account any costs or attorney fees incurred in asserting or hearing the claim. To the extent that the impartial decision maker is the HOA's executive board, or reports to the executive board, one could imagine a bias toward finding a violation in order to charge the owner for the HOA's costs and attorney fees. However, Colorado law does not appear troubled by any such bias.
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HOAs are required to adopt a schedule of fines. The schedule often provides for escalating fines for each successive violation by an owner. There is little legal guidance concerning what amount of fines are acceptable. If fines are too modest, then they might not get an owner's attention. If fines are too onerous, then they might not be enforceable. These considerations will vary, of course, based on the financial means of the owners in a particular HOA.
Once an owner is fined, the fines become the owner's personal obligation and also a lien against the unit that can be foreclosed. It then becomes a collection matter for the HOA if the owner does not willingly pay the fines. There are many tricky details that go into drafting and enforcing an effective fine policy. HOAs should discuss these finer points with a knowledgeable attorney.
Noah Klug is owner of The Klug Law Firm, LLC, in Summit County, Colorado. He may be reached at (970) 468-4953 or Noah@TheKlugLawFirm.com.
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