Thursday, March 21, 2013

Condo Police: Exercising an Association's Power to Fine

In my experience, even well-meaning unit owners may occasionally incur fines.  With about two-dozen new condominium projects having come to market in and around downtown Seattle in the past five years, and many more around Puget Sound, condominium life is becoming more common and associations are becoming more sophisticated in their approach to things like implementing rules and assessing fines for rule violations.

Accordingly, the question arises more often: what are the rules regarding fines?  RCW 64.34.304(1)(k) consists of the following elements that must be satisfied to impose fines on owners:
  1. The fines must be imposed after notice and an opportunity to be heard by the board of directors or by such representative designated by the board of directors;
  2. The fines must be in accordance with such procedures as provided in the declaration or bylaws or rules and regulations adopted by the board of directors;
  3. The fines must be reasonable;
  4. The fines must be in accordance with a previously established schedule thereof adopted by the board of directors and furnished to the owners.
Consider further what these elements mean in practice.  The first element requires that, before a fine is made final, the owner being assessed must first be able to present their case to the board.  The board's decision, in turn, ought to be based on reasonable standards, uniformly applied.  The board should never impose fines in an arbitrary or capricious manner.

To the greatest extent possible, all fining decisions should be made based on written criteria, to address the second element.  A board should go through proper procedures in adopting rules, regulations and policies related to fines.  Most importantly, the board must not create rules or impose fines in a manner that would conflict with the recorded condominium declaration.  The declaration, in concert with Chapter 64.34 RCW, is the condominium equivalent of the Constitution; it supersedes any conflicting rule in the condominium's governing documents.  If an association desires to stray from the provisions in the declaration, the declaration must be amended, usually by a vote of the members.  If a unit owner must take legal action to enforce the declaration or the statute, the association may be liable for the owner's attorneys' fees.

The third element, reasonableness, necessarily relates to the perception and expectations of an average unit owner.  So, if one of the association's rules or its application is generally viewed by members as draconian, the board should review the rule and consider revising it.

The fourth element is critical, because it is so explicit.  Owners must have notice of the fines that may be imposed, including dollar amounts and to what specific violations those dollar amounts may apply.  This requirement ought to be interpreted broadly, because the amounts in, and the adoption and furnishing of, the schedule implicate the other elements, as well.

Note that the above rules are not applicable to assessments for common expenses in a condominium, which are governed by another section of Chapter 64.34 RCW.

Fines are a necessary tool for governing an association, but the board, as manager of the association, must be careful and consider its duties in using that tool; if you are holding a hammer, everything can start to look like a nail.  Fines should be an exceptional event and if they cease to be the exception, or if there are persistent violators, those circumstances may be indicative of problems that require a different strategy and the board should consult an attorney experienced in resolving association conflicts.

- Ryan D. White