By Deborah Goonan, Independent American Communities deborahgoonan@gmail.com
Most homeowners’ associations in the USA have legal power to fine owner-members for violations to covenants, restrictions, and rules. This post explains why I firmly believe all states should revoke and prohibit HOA authority to fine property owners.
It’s absurd that the HOA is the only private organization that can fine its members (consumers).
Think about it.
Your HOA is the only private organization that has been enabled by statute to unilaterally fine you for violating the terms of its property contract — more commonly known as the covenants, conditions and restrictions (CC&Rs).
By comparison, your lender can impose late fees and interest for non-payment. And, because it has a collateral interest in your property, your mortgage lender can even put a lien on your property and foreclose on your home. But it cannot fine you for conduct unrelated to your repayment as a borrower.
Neither your employer, nor your insurance carrier, nor your business partner, nor any home maintenance or improvement contractor can fine you for breach of contract.
Why are HOAs the only private organization that is legally enabled to fine homeowners as parties to a contract?
In the US, all other contractual disputes involving the terms of a written contract must be settled either in court, or perhaps by out-of-court arbitration. Either way, a neutral third party must hear from both parties of the dispute before rendering a judgment. Only then do the parties document a written agreement to a mutual settlement.
HOA fines are one-sided penalties against homeowners.
HOAs routinely fine owners for things like not keeping their lawn in pristine condition, failure to power wash their exterior siding or concrete driveways and not concealing their trash cans from view from the street.
A condo association might fine an owner for not having white blinds or curtains in their windows or putting unauthorized objects on their porch or balcony.
In almost every case, the HOA fine is for a violation that is a minor aesthetic issue. It’s not a threat to health or safety, and it isn’t causing a disturbance.
Ironically, HOA laws provide no equitable remedy for HOA members to fine their HOA for violating their duties under the CC&Rs, bylaws, or statutes.
Why not?
Why can’t a homeowner fine their HOA for failure to maintain the common property? Or for selectively enforcing the rules? Or failure to provide transparent access to financial records?
Why are owners expected to comply with their contractual obligations, but HOAs are to be obeyed and paid in full and on time, even when they neglect their own obligations and fiduciary duties for homeowners?
Perhaps it’s because legislatures across the US have created the HOA as a confused and onerous hybrid between a private corporation and a local neighborhood government.
FACT: state laws empower HOAs with many authorities comparable to government.
Similar to a city or county government, your HOA can enforce the CC&Rs (code enforcement), create new rules related to their powers under the CC&Rs (enact ordinances), and impose fines.
In contrast to your city, County, or state, your HOA is not structured as a constitutional government. Therefore, your HOA is not required by law to offer real due process. At best, your HOA may offer the appearance of due process, in the form of a hearing before the very same HOA authorities imposing the fines.
This grossly irrational public policy grants HOAs nearly unrestricted authority that real government does not have.
Lawmakers enable your HOA, a private organization, the authority to govern – but without accountability.
State legislatures have instituted HOAs as mini quasi-governments that are not subject to constitutional constraints.
But…Practically speaking, there’s no limit on the types of rules and restrictions that can be written into the declaration of covenants and then enforced by the HOA.
Additionally, there’s no due process to contest a fine, because the same small group of owners that enforces the covenants and restrictions ultimately decides your case in a so-called “opportunity for a hearing.”
Let’s face it. Even if a board of directors appoints a separate group of homeowners to conduct the hearing, it’s all the same clique. There’s no meaningful separation of powers.
Essentially, under HOA-governed regimes, you’re presumed guilty unless you can prove yourself innocent.
If your HOA board is determined to punish you with a fine, there’s nothing you can do to stop them.
HOAs often abuse their power to fine.
And, as the saying goes, “if you give them an arm, they’ll take a leg.” This definitely applies to the HOA industry.
Consider that most HOA fines are imposed for aesthetic violations or minor infractions.
Due to constitutional constraints on its power, government cannot get away with imposing fines for things like painting your front door the wrong color or parking your car in your driveway rather than inside your garage.
HOAs have been known to fine and even foreclose liens on unpaid fines for having brown patches of grass in the lawn. One veteran battled his HOA for years for putting a small US flag in a flower pot on his front steps.
A few owners have even landed in jail for failure to keep their lawn completely weed free and mowed. (see references)
HOAs often abuse their power to fine. In many states, liens for unpaid HOA fines can lead to foreclosure. HOAs tend to target the most vulnerable homeowners who are least able to fight back. In general, though, most homeowners pay the fines in hopes of getting the HOA to leave them alone. In other words, HOA fines are often a money grab.
How can this kind of HOA abuse happen in the USA, the Land of the Free?
HOAs claim the legal right to penalize their members under the guise of enforcing the CC&Rs contract. HOA attorneys argue all day long that the US and state Constitutions apply only to government, not to private HOA organizations.
The HOA industry has succeeded thus far in carving out an exception for itself. HOA boards and management, they insist, need not operate under Constitutional constraints.
But yet, the HOA industry also insists it is entitled to powers of government, including its legal right to fine members.
It’s a double standard — one that should be permanently eliminated.
Some HOA rules and restrictions curtail behavior and lifestyle choices.
In the early phase of mandatory membership HOAs, CC&Rs were relatively short and simple. A few pages of restrictions on unkempt paint and lawns, vegetable gardens, RVs, clotheslines visible to neighbors, and perhaps prohibiting storage sheds or limiting their size and placement.
These restrictions were annoying enough and written to exclude people of a lower socioeconomic class. Some (but not all) of these old-fashioned covenants have been revoked in recent state legislation.
Ironically, however, the HOA industry has added many more covenants and restrictions to “modernize” common interest ownership communities.
Over the years, real estate developers and HOA attorneys colluded to write long, complicated, and more onerously restrictive contracts known as “Declarations” of CC&Rs.
Some of these HOA governing documents can be 100 pages or more.
Your HOA might dictate the type, size, and number of pets you can own. It might severely limit your rights to install play structures for your children. It can prevent you from installing an above ground pool or any swimming pool at all. It can prohibit privacy fences, or at least dictate the height and acceptable materials for your fence.
Some HOAs, especially condo associations, restrict your right to have an unrelated roommate. They might also claim the right to approve residency for your new spouse or partner. (see references) There could be rules against children making noise while playing outdoors, or failing to store their bikes and toys out of sight.
Did you willingly sign up for that level of interference in your life? Probably not.
And it gets even more complicated.
Each state has different laws governing HOA fines.
Here’s the kicker. There is no federal law that either limits or prohibits an HOA’s authority to impose fines.
With the exception of fair housing laws – and a national law that narrowly prohibits HOA from allowing display of a United States flag – all other HOA law exists at the state level.
As a result, there is wide variation among state laws governing planned communities, condominiums, and housing cooperatives.
By way of illustration, I provide you with excerpts of California and Pennsylvania statutes with regard to HOA fines.
California vs. Pennsylvania HOA law regarding fines
California’s governor recently signed a law to limit an HOA fine to $100 per violation. However, the law carves out an exception. If the HOA deems the violation a threat to health or safety, then a larger fine can be imposed.
California HOAs must annually publish a schedule of fines and distribute individually to each member of the association.
By contrast, in my home state of Pennsylvania, there is no limitation on the amount of a fine and HOAs are not required to distribute a schedule of fines.
California law regards HOAs as quasi-governmental bodies. Pennsylvania law does not.
See reference links at the end of this post to read the statutes.
California law
SEC. 3. Section 5850 *
(a) If an association adopts or has adopted a policy imposing any monetary penalty, including any fee, on any association member for a violation of the governing documents, including any monetary penalty relating to the activities of a guest or tenant of the member, the board shall adopt and distribute to each member, in the annual policy statement prepared pursuant to Section 5310, a schedule of the monetary penalties that may be assessed for those violations, which shall be in accordance with authorization for member discipline contained in the governing documents. Monetary penalties shall be reasonable.
(b) Any new or revised monetary penalty that is adopted after complying with subdivision (a) may be included in a supplement that is delivered to the members individually, pursuant to Section 4040.
(c) A monetary penalty for a violation of the governing documents shall not exceed the lesser of the following:
(1) The monetary penalty stated in the schedule of monetary penalties or supplement that is in effect at the time of the violation.
(2) One hundred dollars ($100) per violation.
(d) (1) Notwithstanding subdivision (c), the board may impose a penalty stated in the schedule of monetary penalties or supplement that is in effect at the time of the violation that is greater than one hundred dollars ($100) per violation, if the violation may result in an adverse health or safety impact on the common area or another association member’s property.
(2) Before imposing a penalty on a violation pursuant to this subdivision, the board shall make a written finding specifying the adverse health or safety impact in a board meeting open to the members.
(e) A late charge or interest shall not be charged to a member for a monetary penalty.
(f) An association shall provide a copy of the most recently distributed schedule of monetary penalties, along with any applicable supplements to that schedule, to any member upon request.
Pennsylvania law
§ 3302. / 5302. Powers of unit owners’ association.**
(a) General rule.–Subject to the provisions of the declaration, the association, even if unincorporated, may:
(11) Impose charges for late payment of assessments and, after notice and an opportunity to be heard:
(i) Levy reasonable fines for violations of the declaration, bylaws and rules and regulations of the association.
(ii) For any period during which assessments are delinquent or violations of the declaration, bylaws and rules and regulations remain uncured, suspend unit owners’ rights, including, without limitation, the right to vote, the right to serve on the board or committees and the right of access to common elements, recreational facilities or amenities.
As you can see by just comparing two states, there is no standard practice for imposing HOA fines. Each state’s laws vary with regard to HOA fines, but in all cases, safeguards against abuse of HOA fining authority are limited.
Despite all the statutory variations, no state in the US can point to significant documented benefits derived from using fines to enforce HOA covenants and restrictions.
But there is plenty of evidence that HOA fines do more harm than good.
A homeowner’s only recourse against a disputed fine is to take the HOA to court.
But this is expensive and wholly inappropriate.
Remember, a homeowner cannot unilaterally fine their HOA for even egregious violations of its duties. The owner has to sue the HOA, while the HOA is free to bully an owner into compliance with fines, and possibly even a threat of foreclosure. (Some states don’t allow HOAs to foreclose on liens for unpaid fines.)
The HOA industry bets on the odds of a lawsuit being low. They know most people cannot afford legal fees, and cannot endure years of HOA attorneys filing motions, injunctions, and appeals. The HOA holds a significant financial advantage: the pursestrings of mandatory HOA fees, combined with HOA insurance attorneys.
Even affluent property owners who “win” their legal battle often lose in the end. They are rarely made whole by the courts, even when the HOA is ordered to pay legal costs.
What if HOAs were not legally permitted to fine its members?
Simple: each contract dispute would have to follow constitutionally legal due process using the US court system. It’s not a radical concept. That’s how all other private contract disputes are handled in the US.
If homeowners and HOA boards can’t easily resolve their differences, the dispute over the CC&Rs contract should be argued in court first.
Monetary damages would be payable by a homeowner only if and when the court awards the HOA. And the court gets to decide the amount of any award based upon real damages.
Each HOA seeking to recover damages should have to prove its case before a judge.
Alternatively, the parties might be encouraged to mutually agree to arbitration or even mediation. But, to avoid wasting time and money, neither option should be mandatory for either party.
Eliminating HOA fines won’t harm HOAs — it will avoid unnecessary division and long, bitter lawsuits over fines.
The HOA industry may insist that fines prevent the court docket from being clogged with HOA disputes.
I highly doubt that. More likely, HOA disagreements would be settled more amicably among neighbors. Most people want to avoid a costly and divisive legal battle.
Homeowners only consider litigation when they feel backed into a corner with no other options. To be certain, HOA fines often drive a homeowner to sue their HOA in order to defend their rights.
What the HOA industry really wants is to circumvent legal due process. These industry pros merely want to avoid submitting HOA boards to legal limitations on their authority to penalize owners at will.
HOA fines intentionally put the burden on the homeowner to fight back against their HOA.
When a homeowner initiates an HOA lawsuit involving a dispute over unpaid fines, the association’s insurance kicks in. The HOA is provided with well-paid HOA attorneys to make their case against the homeowner.
And it’s important to recognize that HOA attorneys get paid no matter who “wins” the lawsuit.
More fines = more HOA lawsuits.
In the end, homeowners lose, because HOA fines lead to more HOA lawsuits. That, in turn, results in higher insurance premiums to be paid through higher fees from homeowners.
HOA fines also make money for certain HOA management companies who enforce the rules by actively seeking out violators.
When a community gets a reputation for being too strict on enforcement, imposing onerous fines, or causing divisive litigation, Realtors avoid showing homes for sale in that community.
That decreases home values.
Fines fuel the HOA board member power trip
I also know some so-called leaders in the HOA industry want to make an example out of HOA aesthetic rule violation scofflaws with punitive fines. For some HOA board members, the power to fine feeds their power trip.
However, just to emphasize my point, let’s assume the HOA industry’s claim is correct.
Suppose local courts were inundated with petty HOA lawsuits over lawn maintenance, paint colors, and children’s play structures. Then what?
Well, you can bet that state legislatures would be much more willing to curtail unconstitutional CC&Rs and onerous HOA control over homeowner rights.
Because these exceedingly common and petty HOA disputes would finally be out in the open rather than hidden within private communities.
Concluding Thoughts…It’s time to end HOA fines
Let’s recap the reasons for ending HOA fines:
- HOAs are the only private organizations that can legally fine their own members.
- Fines are one-sided penalties that mimic governmental authority, even though HOAs are not real government. Put another way, the hierarchy of HOAs makes it impossible for homeowners to fine their HOA board leaders for violating their duties under the CC&Rs contract.
- Because HOAs are a quasi-government hybrid between private corporations and hyper local government, they are not subject to constitutional constraints. This makes HOAs unaccountable to their members.
- HOAs often abuse their power to fine. In many states, liens for unpaid HOA fines can lead to foreclosure. HOAs tend to target the most vulnerable homeowners who are least able to fight back. In general, though, most homeowners pay the fines in hopes of getting the HOA to leave them alone. In other words, HOA fines are often a money grab.
- The vast majority of HOAs fine members for violations of aesthetic standards. But HOAs also fine homeowners for breaking rules that unreasonably curtail personal behavior and lifestyle choices.
- Each state has different laws that enable HOAs with the authority to impose fines, with different procedures to follow to make the fines enforceable. Despite all the variations, no state in the US can point to any documented benefits derived from using fines to enforce HOA covenants and restrictions.
- There’s no meaningful due process for homeowners to contest a fine. There is no separation of powers in HOAs, and an owner is presumed guilty, unless they can prove their innocence. In order to dispute unreasonable or unjust fines, a homeowner’s only recourse is to defensively sue the HOA, at great personal expense.
- Disputes over HOA fines lead to more litigation, not less. HOA lawsuits are expensive and divisive. Insurance companies raise premiums for litigious HOAs (or drop the association entirely).
- The only sure winners in HOA lawsuits involving fines are the HOA attorneys working on behalf of the HOA board. All homeowners ultimately bear the costs of collection and litigation.
- When HOA leaders become arrogant about their fining authority, owners tend to get vocal. The community gets a bad reputation. Real estate agents avoid listing and showing homes in that community. HOA liens and foreclosures serve to reduce comparable values for appraisals. All in all, there will be less demand for homes in communities under HOA regimes that eagerly wield their power to fine. All of these factors result in lower property values.
As explained in this article, the evidence suggests that eliminating HOA fines won’t harm HOAs, as the HOA industry contends. It’s far more likely that a national ban on HOA fines will avoid unnecessary division as well as expensive, drawn out and bitter lawsuits over disputed fines.
For all of the above reasons, HOA fines hurt homeowners. It’s becoming more and more evident that HOA fines don’t protect property values. On the contrary, HOA fines often do more harm than good. Therefore, state and federal lawmakers in the US should completely eliminate and prohibit HOA fines.
References:
Florida man seeking damages for 9-year fight with HOA over American flag – WSOC TV
9 Common HOA Violations And How To Avoid Them | Bankrate
Can HOA Limit Number of Occupants?
HOA statute references:
Center for California Homeowner Association Law bulletins:
New Law Caps HOA Fines at $100
Los Angeles HOA Fines Owner $500 Day Over Unapproved Interior Door
Community Associations Institute Statistical Review 2024
**PA Title 68, Chapter 33 (Condominiums) and Ch 53. (Uniform Planned Community Act UPCA)
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