My community association practice is split between North Carolina and South Carolina. One of the primary differences between the law in these two states is the fact that North Carolina has a comprehensive HOA statute while South Carolina does not. I’ve written more than once about the need for a comprehensive HOA statue in South Carolina. While there are many nuances that make the laws in each state unique, one that I deal with frequently is the enforcement method for covenant violations.
Most covenants authorize “an action at law or in equity” as a method for the association to enforce the covenants—basically, if there’s a violation of the covenants the association can sue a homeowner. While this might sound fine, and in some cases is necessary, it doesn’t make sense in the vast majority of cases.
Instead, most HOAs use their fining authority to get their community members to comply with the covenants. In North Carolina, the authority to fine and the procedure for levying fines is established by statute. In South Carolina, the enforcement procedure is established primarily by the specific governing documents, and authority to fine may not exist at all.
In those South Carolina communities that have considered adding fining authority, a couple of questions are typical:
- Why is fining the preferred method to enforce the covenants?
- How does a fining system generally work?
Why Fining is the Preferred Method to Enforce the Covenants
Authority to assess fines is the norm in South Carolina and across the nation. Many newer HOAs and condos have this authority as a basic starting point for enforcing the rules because there has to be some effective mechanism to hold everyone responsible without the time and cost of litigation. Simply put, fining is more efficient, saves the community money, and produces better results, than any other type of enforcement option.
To begin with, fining is preferable to going to court for every little violation. It doesn’t make sense to sue someone every time that a neighbor leaves their trash cans out or needs to paint their shutters. Fining is a faster resolution to a covenant violation than taking a homeowner to court. And, court cases involving HOA matters could take at least 6 months for simple cases and could last several years in others. In addition, fining is a far less adversarial procedure than suing someone. Remember, everyone is a neighbor and nobody wants to generate the type of animosity that suing someone creates. Everyone would rather receive a letter in the mail about a possible fine than have the sheriff at the door delivering a summons. A fining system also allows the homeowners to retain control over the process. Neighbors are answerable to those they live with—not to some judge or jury that isn’t familiar with the community.
Second, fining would generally cost the Association—and by extension, all homeowners—less than any other covenant enforcement option. If the only option for the Association is to take someone to court, it will almost always have to hire an attorney to represent it and have to pay attorney’s fees and other costs associated with being in court. Depending on the case, these could run several thousand dollars each time and be much more for some cases. So, a system of fining saves the community money.
Finally, the result of having no fining authority (and litigation as the only option) is that many communities end up not enforcing the covenants at all. Instead, the violations are ignored in a way that detracts from the community. Properties are less well-maintained, and home values are negatively impacted. What starts as a single violation turns into a community-wide neglect for properties. In these communities, the neighborhood suffers the consequences of the lack of good enforcement options and decreased home values are usually the result.
How a Fining System Generally Works
Usually one of the first thing folks want to know about is how a fining system is supposed to work. To begin with, the standard process across the nation is to provide (1) notice and (2) opportunity to be heard. Providing notice means that before any fines are assessed, the association will have to provide written notice of exactly what the covenant violation is.
Most communities establish a procedure that provides multiple points of contact prior to actual fines being assessed. So, several letters may go out before getting to a hearing. In many communities hearings are held before the board of directors while others use a panel or committee. “Hearings” are not formal court proceedings, but they are the homeowner’s chance to “be heard.” Hearings can also be held via telephone or homeowners can opt to share written explanations if they don’t want an in-person meeting. With the current concerns about coronavirus (COVID-19) many communities have begun holding video conferences as well. See these articles on how other communities are coping with the effects of this epidemic. Once the homeowner has had this opportunity, the board should make a decision in writing, and if fines are going to be assessed, provide a minimum time period to cure the violation before fines begin.
In addition to the procedures above, fines can only be assessed for a violation of the covenants or rules of the community. This seems like an obvious thing to say, but it limits the board’s ability to fine to only those items specifically in the covenants and other rules. Finally, once the underlying violation has been cured boards may consider waiving fines (remembering that the point is to get compliance with the covenants). Overall, fining is designed to be as fair as possible while also making sure that the covenants are followed by everyone.
The ultimate goal of pretty much all HOAs is to protect home values and create a nice place to live—a community. Establishing a system to allow fining fosters each of these goals and allows the board of directors to enforce the rules that everyone agreed to when they bought into the neighborhood.
I’ve helped many communities draft amendments to their documents to authorize fining and drafted many fining policies to implement that authority. If you have questions about what authority your community has to fine, or what other methods of covenant enforcement may be available for your community, or are looking for a change to your covenants, talk to a community association attorney, preferably one with experience reviewing and drafting these types of covenants.
The attorneys at Law Firm Carolinas are available to assist by phone, video-conference, or email with any issues related to your community association. Please contact any one of the attorneys in our Charlotte, Greensboro, Triangle or Coastal offices.