Fines for HOA violations – the Association’s “stick”

More often than not, every Association deals with HOA CC&R violations from those owners who habitually violate
provisions of the Association’s CC&Rs or Rules and Regulations resulting in HOA fines. This leaves Associations and Boards contemplating HOA enforcement and asking – what can we do? Letter after letter has been sent to these owners, requesting they come into compliance for these HOA violations, with no success.

One tool associations have at their disposal is to fine the owners for the violations. Often,
issuing monetary penalties onto the owners’ ledger gets their attention in a way that a simple
letter does not. A reasonable fine imposed against a violating owner may be just the kick the
owners need to cure an HOA CC&R violation.

Make sure your HOA meets the requirements – Recent Arizona case law

Before imposing HOA fines for violations against owners, you should make sure you have the necessary
requirements in place. The first place to start is the CC&Rs – make sure there is a provision in
the CC&Rs that gives the Association the ability to issue fines or monetary penalties.

Next, a recent case in Arizona, Turtle Rock III v. Fisher, requires associations to also have a
separate monetary penalty schedule in place before imposing fines against owners. Although
the court, in that case, made it clear that this was now a requirement, it was not clear on how
detailed the fine schedule must be. For example, does the schedule have to break down each possible violation and the corresponding fine amount (i.e., $25 for trash cans left out, $50 for unapproved construction, $100 for parking in the street, etc.), or if a schedule stating that after the first Notice, a $25 penalty will be assessed, after the second Notice, a $50 penalty will be assessed, and so on, would be sufficient. While this remains unclear, either policy would be sufficient. Note also that this case is currently being appealed, so there may be some clarity on
these issues within the next year.

Second, Arizona law requires Owners to have noticed and an opportunity to be heard before a
fine is assessed. (See A.R.S. 33-1803/A.R.S. 33-1242). Therefore, make sure your Notice of
Violation letters include information about how an Owner may contest the violation and
request a hearing before the Board, and give notice that if the Owner does not cure the
violation, a fine may be imposed.

Collecting on HOA Fines

Often times after an Association imposes HOA fines for violations, the owner cures the HOA violations,
but never pays the fines. Generally, it is difficult to collect on fines, as they are not part of the
Association’s lien (unlike assessments or other enforcement tools, such as self-help costs). This
means that fines cannot be foreclosed upon for the Association to recover them.

Usually, the best way to think about HOA fines, then, is as a “stick” to compel compliance. The
purpose of fines should be to get an Owner’s attention enough that they will cure their ongoing
HOA violations, whether they are paid or not. Generally speaking, fines are “soft costs” for the
Association, and do not represent actual expenses incurred. It can be helpful when fines are
imposed to use them as a negotiating tool – if the fine amounts can be waived (as a soft cost),
the Owners may be more cooperative to cure or reach an amicable solution in order to avoid these HOA CC&R violations.

Contact an Arizona HOA Lawyer for Further Help

At Goodman Holmgren, our sole focus is on meeting the legal needs of HOAs, including creating and
implementing policies for Arizona HOA laws and responding to homeowner concerns. Contact us today to discuss
any legal challenge your HOA is facing.