Enforcing the governing documents is one of the most important responsibilities of a community association board, but it can also be one of the most challenging. When an owner violates the governing documents, an association may have the ability to pursue legal action or levy fines to enforce compliance. In many cases, fines are one of the few practical tools available to deter repeated violations and encourage compliance.
However, fines are only an effective deterrent if they are properly imposed and can ultimately be collected. If a community association skips required steps or fails to follow the proper procedure, the fine may not be collectible, even when there is clear evidence that a violation occurred. Accordingly, it is important for boards and property managers to understand the requirements for properly levying fines before assessing them to an owner’s account.
Unlike assessments, fines are penalties imposed because an owner violated the governing documents. As a result, an association must have the authority to levy the fine and follow the required procedures before the fine can be collected.
For condominium associations, this includes complying with the notice and hearing requirements in Section 106(c) of the Michigan Condominium Act. Even when a violation is well documented, a condominium association cannot simply place a fine on a co-owner’s account without following the required process.
This article addresses the following issues that community associations should consider when levying and collecting fines:
- Authority to levy fines;
- Notice and hearing requirements;
- Procedures for imposing fines;
- Collection of unpaid fines; and
- Best practices for boards and property managers.
Confirm the Association Has Authority to Levy Fines
Before imposing a fine, a board or property manager should first determine whether the association has the authority to fine owners. A violation of the governing documents does not, by itself, give an association the authority to impose a monetary penalty.
For condominium associations, the Michigan Condominium Act authorizes associations to enforce their condominium documents and levy reasonable fines against co-owners. Homeowners associations are not governed by the Michigan Condominium Act, and their authority to levy fines will generally depend on their declaration, bylaws, rules and regulations, and other governing documents.
Boards and property managers should review the governing documents to determine whether the association has authority to levy fines, the applicable fine schedule or amounts, and any procedures that must be followed. In most condominium associations, the Condominium Bylaws will address the association’s authority to levy fines and may establish the applicable fine schedule and procedures. In other cases, the procedures and fine amounts may be established through the Rules and Regulations.
For condominium associations, Section 106(c) of the Michigan Condominium Act, MCL 559.206(c), provides:
“A default by a co-owner shall entitle the association of co-owners to . . . such other reasonable remedies the condominium documents may provide, including but without limitation the levying of fines against co-owners after notice and hearing thereon and the imposition of late charges for nonpayment of assessments as provided in the condominium bylaws or rules and regulations of the condominium.”
Under MCL 559.206(c), when a condominium association’s Master Deed or Condominium Bylaws provide for fines, a process for levying fines may be established through Rules and Regulations. However, a condominium association must comply with the statutory notice and hearing requirement before levying a fine.
Boards and property managers should therefore review their existing fine policies before beginning enforcement. If a policy is inconsistent with Michigan law or the governing documents, it should be updated before additional fines are levied.
Notice and a Hearing Are Required Before a Michigan Condo Association Levies a Fine
For Michigan condominium associations, MCL 559.206(c) permits fines to be levied against co-owners only “after notice and hearing thereon.” This means that merely giving a co-owner the option to request a hearing is not sufficient. The condominium association should schedule a hearing and notify the co-owner of the date, time, and location. This provides the co-owner with a meaningful opportunity to attend and defend against the alleged violation.
Whether the co-owner chooses to attend does not change this requirement. If the co-owner receives proper notice but does not attend, the board must still hold the hearing and make a determination based on the information available. The co-owner must be given notice and an opportunity to attend, but the co-owner is not required to participate for the board to proceed.
Importantly, evidence of the violation does not replace the required process. Photographs, emails, witness statements, or even an admission by the co-owner may establish that a violation occurred, but the condominium association must still provide notice and hold the hearing before levying the fine.
The Proper Fine and Hearing Procedure for Levying Condo and HOA Fines in Michigan
In addition to the Michigan Condominium Act, a condominium association must follow any additional requirements contained in its Condominium Documents. The Condominium Bylaws, like the Declaration for homeowners associations, may require an initial warning, provide an opportunity to correct a violation, establish a fine schedule, or contain additional notice or hearing requirements. These requirements should be identified before the association begins the fine process.
Generally, an association should use two separate notices when levying a fine.
Step 1: Send the Violation and Hearing Notice
The first notice should identify the alleged violation, the specific provision of the governing documents at issue, and the date or circumstances of the violation. If the governing documents provide an opportunity to correct the violation, the notice should also provide the applicable period to cure.
If a condominium association, the first notice should also provide the date, time, and location of the hearing and advise the co-owner that they may attend and present evidence or information in response to the alleged violation.
Step 2: Hold the Hearing
The Board should then hold the hearing on the scheduled date and consider the evidence relating to the violation and any information presented by the owner. If the owner does not attend after receiving proper notice, the Board can proceed without them. The Board should determine whether a violation occurred and, if so, whether a fine should be levied in accordance with the Association’s fine schedule.
Step 3: Send Notice of the Board’s Decision
After the hearing, the association should send a second notice advising the owner of the Board’s decision. If a fine is levied, the notice should state the amount of the fine and when it is due.
Step 4: Maintain the Record
The association should maintain the documents supporting each step of the process, including the violation notice, evidence of the violation, hearing notice, applicable fine schedule, documentation that the hearing occurred, and notice of the Board’s decision. These records will be important if the fine is disputed or later referred for collection.
Associations should also review their standard violation notices and fine policies periodically. In particular, a policy that only allows a co-owner to request a hearing should be updated so that the hearing is scheduled and the co-owner receives notice of when it will occur.
How to Collect Unpaid Fines in a Michigan Community Association
Once a fine has been properly levied and remains unpaid, the association should follow its normal delinquency procedures, including sending any required delinquency notices before referring the account to legal counsel.
When the account is referred for collection, the association should provide legal counsel with the documents establishing that the fine was properly levied, including the violation and hearing notices, documentation that the hearing occurred, applicable fine schedule, and notice of the Board’s decision.
If the required process was not followed, the fine cannot be collected and should be removed from the owner’s account. If the fine was properly levied, the unpaid balance can proceed through the association’s normal collection process, subject to the remedies available under the governing documents and applicable law.
Fines Are Not the Only Amount That Can Be Charged Back to an Owner
Fines are penalties for violating the governing documents, but they are only one category of charge an association may be able to assess against an individual owner. Collection costs, attorney fees incurred in enforcement, the cost of repairing damage an owner caused to the common elements, and insurance deductibles can each be charged back to the responsible owner when the Michigan Condominium Act and the governing documents authorize it. Each chargeback has its own authority requirements, and the same rule applies: if the documents do not support the charge, it will not be collectible. Depending on the applicable authority, a board vote, resolution, and notice of assessment may be required before an association can charge back the amounts and proceed with collection. For a full discussion, see our article on when a Michigan condominium association can charge costs back to a co-owner.
Best Practices for Levying and Collecting Fines in Michigan Condos and HOAs
Fines can be an effective tool to enforce the governing documents, but only if they are properly levied and collected. Boards and property managers should consider the following best practices:
- Confirm the Authority to Fine. Review the governing documents to determine the association’s authority to levy fines, the applicable fine schedule, and any procedures that must be followed.
- Review the Fine Policy and Notices. Make sure the association’s existing fine policy and standard violation notices comply with applicable law and the governing documents.
- Provide Notice of the Hearing. For condominium associations, provide the co-owner with the date, time, and location of the hearing rather than requiring the co-owner to request one.
- Hold the Hearing. The hearing should be held even if the co-owner chooses not to attend. If proper notice was provided, the Board can proceed based on the information available.
- Document the Decision. After the hearing, notify the co-owner of the Board’s decision and, if a fine is levied, the amount and payment due date.
- Maintain the Record. Keep the notices, evidence, fine schedule, hearing documentation, and Board decision so they are available if the fine is disputed or referred for collection.
- Follow the Condominium Association’s Delinquency Procedures. If a properly levied fine remains unpaid, send the required delinquency notices and follow the association’s normal collection procedures before referring the account to legal counsel.
Contact a Michigan Community Association Attorney
Fines are only an effective enforcement tool if the association can ultimately collect them. Following the proper procedure from the initial violation notice through collection helps ensure that fines serve their intended purpose of deterring violations and encouraging compliance with the governing documents.
If your condominium association needs assistance reviewing its fine policy, updating its violation notices, enforcing its governing documents, or collecting unpaid fines, the experienced Michigan community association attorneys at Hirzel Law, PLC are available to help. Contact us to discuss your association’s enforcement and collection options.
