Mr. Blight is $1,000 in arrears on his regular association assessments. He also has a Chevy on blocks in his driveway, violating the association’s covenant prohibiting stored vehicles, normally a $100 fine. Mr. Blight’s association refers his account to its law firm and prepares to invest an additional $500 in legal fees and costs litigating to collect. How can the Association assure that it will obtain judgment against Mr. Blight for the entire $1,600?
The Colorado Common Interest Ownership Act, (CCIOA) and many association governing documents allow associations to assess fines for covenant violations. CCIOA and most association documents also require an award of the association’s reasonable attorney’s fees incurred in collecting valid regular assessments and valid fines. “Reasonableness” of fees is within a trial judge’s discretion.
Fines are assessed discretionarily and against less than all association units. CCIOA requires an association to provide notice and an opportunity for a hearing before a determination is made to assess a fine. If this is not done, the fine is invalid.
Often, an association may begin its fine process with a letter to the owner announcing that a violation has been observed, a fine has been assessed and if the owner wishes to contest the fine a hearing will be held. That procedure prejudges “guilt” and is invalid. The association has practiced “frontier justice,” announcing, “We’ve hung ya. Now we’ll give ya a fair trial.” The opportunity for a hearing must come before not after the fine is imposed.
Should Mr. Blight’s association care? It’s only a $100 fine. If it is found invalid, the association will still obtain judgment for $1,600, won’t it?
Maybe not. If a trial results in a “split decision,” a judge may determine that it is “reasonable” that each party bear its own fees and costs. If that happens in this example, the association has at-best paid $500 to secure a judgment for $1,000. At worst, it has also undercut community confidence that future delinquencies and covenant violations can be cost-effectively resolved.
To minimize the risk of a bad fine, associations should implement and follow comprehensive fine policies which include properly drafted notices and properly conducted hearings. Association attorneys can assist in preparing a comprehensive fine policy.
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