By Jeffrey L. Vollmer

Most governing documents authorize the Board of Directors of an association to levy a fine for violating those documents.  In addition to following the proper procedure for levying fines, it is important for community associations to understand how to collect those fines and when alternative methods should be considered to cure repeated violations.              

Fortunately for Michigan condominium associations, fines are expressly authorized by statute so long as the condominium documents provide for this remedy.  Therefore, every condominium association should ensure that its Bylaws or Rules and Regulations incorporate a procedure for assessing fines against a co-owner.  If those documents lack such authority, including the necessary elements outlined below, no further fines should be levied until the association adopts amendments to the Rules and Regulations, and preferably, the Bylaws.  While the Michigan Condominium Act(“MCA”) allows a fines to be levied through proper Rules and Regulations, we would recommend that the Bylaws also be amended to incorporate that process to enhance an association’s entitlement to those fines.              

Every association should also verify that its process meets the minimum standards established by state law.  The MCA only requires:

1. notice of the intended fine; and
2. a hearing prior to levying a fine.  At first glace, these requirements do not seem particularly daunting.  In practice, however, there are multiple issues that arise which hinder an association’s right to levy and collect fines.              

First and foremost, the initial violation notice sent to a co-owner should not state that a fine has already been assessed.  A co-owner is entitled to a “hearing” before a fine is levied.  No determination of a fine should be made before then.  The initial notice should alert the co-owner of the intention to levy a fine for a specified breach of the condominium documents and advise the co-owner of the right to a hearing.  This notice should be addressed to all co-owners of record, regardless if they live in the unit or not.              

Second, even if the co-owner fails to request a hearing or appear at a requested hearing before the Board, the Board should still review the alleged violation, and any accompanying evidence, and record that in the association’s minutes.  Third, if a co-owner attends a hearing to respond to the violation, the Board should afford that co-owner ample opportunity to respond to the allegations, both verbally and through submission of supporting documents.  Lastly, an association should avoid levying fines for each day a violation continues.  Fines levied on a daily basis do not meet the minimum requirements of notice and hearing as mandated by the MCA.              

Once a fine is levied, how do you collect it?  Yet again, the MCA assists condominium associations in the collection of fines.  The statutory lien an association holds on a unit for unpaid maintenance assessments extends to fines levied in accordance with the condominium documents.  Therefore, if a co-owner fails to pay fines levied against him, the association has the right to collect those fines as it would unpaid assessments by recording notice of its lien against the unit, and even foreclosing upon that lien.  However, before pursuing this remedy, a Board should exercise some degree of caution.  On a couple of occasions, I have been told by a Judge that he or she will not support an association’s right to collect unpaid fines.  Whether such disregard arises from the current economic climate facing homeowners, or general dislike of an association’s ability to foreclose, this position threatens an association’s statutory right to collect fines it believed it duly levied.  Additionally, if reoccurring fines are paid by the co-owner as a license to continue violating the documents, or if an association is reluctant to collect those reoccurring fines, it should strongly consider filing a lawsuit seeking injunctive relief to stop the ongoing violations.              

With respect to subdivision and homeowner associations, no such statutory authority guides the implementation of fines against its owners.  These associations should consult their respective Declarations and Bylaws to initially determine if such a right exists.  If so, the procedure outlined therein controls the manner by which fines may be assessed and collected against owners in default.              

Although levying fines against fellow members of the community may be unpleasant for some directors, it comes with the territory as an authorized, and perhaps necessary, means to correct violations of the governing documents of the community.  In doing so, directors satisfy their fiduciary duties to enforce the governing documents of their community and prevent violations of those documents.