Enforcing
use restrictions contained in Community Documents can cause
destructive emotional conflicts in HOAs. Two legal
undercurrents collide: 1) it is my land, and nobody can tell
me how I can use it; and 2) the use of one’s land affects the
neighbor’s rights, and the rights of subsequent purchasers.
The violator can become emotional about the enforcement action
taken. A neighbor can become emotional about a lack of
enforcement action taken. In a recent case, a homeowner
successfully sued an association for not enforcing the
covenants against a neighbor. Johnson v. The Pointe
Community Association, Inc., 1 CA-CV 02-0160 (Court of
Appeals, 07/31/03).
Effective
covenant enforcement preserves property values. The first step
is to identify the violation, and communicate the violation to
the homeowner. Under Arizona law, a homeowner must receive
notice and an opportunity for a hearing, before a HOA can fine
the homeowner for a violation. However, proceeding directly to
a fine letter will fuel the emotional content of the
enforcement action. In order to cure the violation, the HOA
must diminish the emotional content of the action.
The first
communication should be a neighborly, friendly communication.
It should use words such as “home”, “community”, “pleasing”
and “neighbor”. It should avoid words such as “dwelling unit”
and “penalty”. The first letter should invite the recipient to
agree that preserving property values by maintaining the
appearance of the homes is a goal shared in the community.
Violators
can be lumped into three categories: 1) procrastinators; 2)
hardship cases; and 3) defiant homeowners. Enforcing the
covenants against the defiant homeowners is the most
challenging. A threatening initial communication to a defiant
homeowner will cause that homeowner to become defensive and
aggressive. Only the neighborly initial communication has a
hope of obtaining compliance by the defiant homeowner.
The
neighborly initial communication has little chance of
obtaining compliance by the procrastinator. It may open up
communication with the hardship cases, and the defiant
homeowners. If communications open, the HOA should obviously
work with the homeowners to solve the problem. If not,
continued enforcement is required.
I
recommend that the second notice should not threaten a fine,
unless the violation is egregious, or poses a danger to the
community. The second notice should again be neighborly. It
should assure the homeowner that the oversight was not
intentional. These communications can become trial exhibits
for a judge and jury to evaluate. The tone of the violation
letters can sway the opinions of a judge or jury.
The third
letter should threaten a fine, and invite the homeowner to a
hearing before the Board. The term “hearing” is contained in
ARS sections 33-1242(11) for condominiums, and 33-1803(B) for
planned communities. “Hearing” was an unfortunate choice of
words. The Board should try to negotiate a resolution at the
hearing. HOAs should approach a hearing as an opportunity for
a discussion to obtain compliance, rather than only a
procedure for weighing testimony and evidence.
Arizona
law only provides that the amount of a fine must be
“reasonable”. The HOA should calculate the amount as a
sufficient incentive to obtain compliance. Fines should never
be used as revenue enhancers. Factors to consider are: 1) the
seriousness of the violation; 2) whether it is a first
violation or a continuing violation; 2) whether the violation
is a danger to person or property; and 4) whether the Board
believes the homeowner will fulfill a promise to comply. In a
recent case where a homeowner was operating a business from a
home, the Board properly considered the amount of the profit,
and calculated the fine in an amount sufficient to render the
business unprofitable.
Boards
should always consider waiving the fines, if the homeowner
cures the violations. Boards may decide to waive the fines
only after a period of compliance. For example, if a homeowner
has repeated trashcan violations, the Board may consider
waiving the fines, but only after six months or one year of
compliance. Resales are also an opportunity to obtain
compliance. Under ARS sections 33-1260(A)(3)(e) for
condominiums and 33-1806(A)(3)(e) for planned communities, a
HOA must provide a statement to the buyer a statement whether
the records of the HOA reflect any violations. Again, HOAs
should use the resale as an opportunity to waive fines, in
exchange for compliance. Waiving the fines in exchange for
compliance will inform the buyer that compliance is required
in the community, and that the HOA uses fines for compliance,
rather than for revenue enhancement.
The
opinion in the Johnson v. The Pointe case has been
interpreted as exposing a HOA to liability if it does not
enforce the covenants. Now is an opportune moment for HOAs to
review their covenant enforcement policies, to ensure the
process is aimed at compliance
