HOA boards should be reasonable with fines

Note: This week’s column was written by my law partner, Keith Nichols.

Q. I just learned my association has been assessing fines against me for what it claims to be a violation of my neighborhood’s rules. Although I received a letter informing me of the alleged violation several months ago, I have heard nothing else since and I had no idea that I was being fined. How can this be?

A. Unless your association’s governing documents set forth a unique way of dealing with the imposition of fines, in almost all cases a hearing should have taken place at which you would have had an opportunity to be heard and present evidence before any fines were assessed. You should have received notice of that hearing and should also have received notice of any decision reached by the board at that hearing. Ordinarily, an owner is entitled to due process before the assessment of fines.

A decision of the N.C. Court of Appeals earlier this month reiterates that strict procedural safeguards are typically in place to protect against a situation like this. In Bilodeau v. Hickory Bluffs, a board in Onslow County considered whether to impose fines on boat slip owners for their alleged failure to obtain the board’s approval.

The board e-mailed notice of a hearing to the impacted owners but the e-mail stated that only those owners and members of the board would be allowed to attend the hearing. The hearing took place at a local fire station and the owners intended to present witnesses on their behalf. Evidently, the situation grew tense and the board contended that those witnesses who were “not combative or unruly” were allowed to speak to the board at the hearing.

The owners declined to enter the fire station and a member of the board told them that if they refused to do so the board would impose fines. The board imposed the fines and took the position that adequate notification to the owners that fines were imposed was given orally by the statements made at the fire station. The board also contended that the owners had notice of the fines in other ways, like “public knowledge” or “e-mails from community members.”

A new board was elected and voted to rescind the fines. Several association members (including former board members) took issue with this and filed a lawsuit seeking, among other things, that a court order the board to enforce the fines.

The Court of Appeals found that although state law requires notice of the imposition of fines, the notice does not necessarily have to be in writing. In this instance, however, the association’s own bylaws provided that the board needed to inform the owners in writing of the board’s decision. The Court also found that, assuming that the owners were provided with an opportunity to be heard, fines were not properly imposed because of the board’s failure to provide proper notice of the board’s decision. Finally, the Court of Appeals clarified that nothing prevented the board from revisiting its prior actions and rescinding the fines, especially if they were improperly assessed in the first place.

board members likely don’t take pleasure in assessing fines against their neighbors but oftentimes a message needs to be sent that there will be repercussions for violations, especially repeated ones. The upshot is that boards should be reasonable in their approach to dealing with violations and the imposition of fines.

Consideration should be given to waiving fines when a violation has been cured by the owner, although boards should typically insist on payment of enough money to cover costs, including attorney’s fees.

This column was originally published in the Charlotte Observer on November 23, 2015. © All rights reserved.

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