Enforcement of CC&Rs

Condominium and homeowner association CC&Rs are, in many ways, similar to contracts. If one party breaches the terms of the contract, the other party may seek the help of the legal system for damages or to require the breaching party to fulfill their obligations. Most CC&Rs allow the community association to enforce the covenants and promises found in the governing documents. The association does this through its elected board of directors.  But does the association have an obligation to enforce the CC&Rs? In most cases, the answer is yes.

A careful look at the CC&Rs will determine who has enforcement authority and whether enforcement is an obligation or a right. Some governing documents require a vote of the owners prior to taking certain enforcement actions.  Other CC&Rs (where there may not be an association) require individual owners to enforce all of the provisions of the governing documents.

The question of whether or not an association may use legal proceedings to enforce its CC&Rs depends on “standing.”  Standing, in a legal sense, means that the party to the litigation has a stake or interest in the dispute, as well as the capacity to sue.  In Oregon and Washington, state law grants community associations standing and authority to enforce covenants through legal action.

Oregon law specifically authorizes community associations to initiate or intervene in matters relating to the enforcement of governing documents:

[A] homeowners association may…initiate or intervene in litigation or administrative proceedings in its own name and without joining the individual owners in the following:

      (A) Matters relating to the collection of assessments and the enforcement of governing documents[.] (ORS 94.630(e)(A))

In Washington, homeowners associations have similar authority. Unless prohibited by the governing documents, an association may:

Institute, defend, or intervene in litigation or administrative proceedings in its own name on behalf of itself or two or more owners on matters affecting the homeowners' association, but not on behalf of owners involved in disputes that are not the responsibility of the association[.] (RCW 64.38.020)

Before an association takes legal action to enforce its governing documents, ask these questions:

1. Would levying fines against a violating owner be more effective?

2. Does the cost of litigation outweigh enforcement through a lawsuit?

3. Does the association have an affirmative duty to enforce the covenant?

4. Is enforcement of the issue more appropriately handled between individual owners?

5. Is alternative dispute resolution an option to resolve the violation?

Enforcement Problems

All owners within homeowner and condominium associations must comply with the governing documents.  The governing documents include the Declaration (CC&Rs), Bylaws, Articles of Incorporation, and Rules and Regulations.  It’s the obligation of the community association to enforce the governing documents when violations occur. However, there are instances when an association may lose the right to enforce provisions of the governing documents.  Court cases and statutes have evolved over the years to identify circumstances in which an association is prevented from enforcement.  Here are a few ways which  may create enforcement problems:

1. Arbitrary or Selective Enforcement

The association has an obligation to enforce all of the provisions in the governing documents equally, fairly, and consistently.  A restriction in the governing documents is arbitrarily enforced if it does not apply to all members of the association.  For example, an association in New Jersey adopted a policy of charging owners who rented their units a $225 security deposit.  The court held that such a policy was arbitrary because it created a separate class of owners who were subject to a fee above and beyond the normal monthly assessments.  Coventry Square Condo vs. Halpern.

Selective enforcement occurs when an association enforces a restriction against one owner, but not others.  Doing so may cause the association to lose its enforcement rights with respect to a particular restriction.  Each violation must be treated the same, and each owner must be subject to the same enforcement policies and procedures.

2. Waiver & Estoppel

Most states recognize the legal doctrines of waiver, estoppel and laches.  These doctrines are essentially the same, and are defenses to the enforcement of governing documents.  If an owner constructs or does something in violation of the CC&Rs, and the association fails to take enforcement action over a lengthy amount of time, the association “waives” the right to enforce and is “estopped” from taking any enforcement action.

An owner asserting any of these doctrines must show: (1) the association delayed asserting enforcement for an unreasonable length of time; (2) the association had full knowledge of all of the relevant facts; and (3) that the delay resulted in such substantial prejudice to the violating owner that it would be inequitable to allow the association to enforce.

Some guidance as to the length of time is found in a South Carolina case where a condominium association failed to enforce landscape restrictions for a period of 4 years. The court found that the Association was estopped from enforcement of the applicable provisions of the CC&Rs. Janasik v. Fairway Oaks Villas.

3. Changed Conditions or Abandonment

Over the course of decades, the aesthetics or architectural styles of the community may change.  An association in Utah (created in 1978) required all homes to be built with wood shingles.  During the next decade some owners installed roofs using materials other than wood shingles.  When the association attempted to enforce the wood shingle provision against an owner, the court found that 23 of the 81 homes in the community were not using wood shingles. As a result, that requirement had been “abandoned” and was no longer enforceable.  Fink v. Miller.

4. Statute of Limitations

Statutes of limitations are laws which prevent legal claims after a certain period of time.  There are multiple statutes of limitation for different legal claims that may arise in a community association.  Seek competent legal advice to ensure you do not lose an enforcement claim as a result of waiting too long.

Fines in Community Associations

An association’s authority to fine owners for violations is perhaps the biggest tool in the enforcement toolbox.  Fines are treated like assessments if not paid. The association may file a lawsuit to collect the fines or foreclose on the lien created by the fines. Let’s look at the statutory authority to levy and collect fines.  In Oregon, the law states that the board of directors of a community association may:

(n) Impose charges for late payment of assessments and attorney fees related to the collection of assessments and, after giving written notice and an opportunity to be heard, levy reasonable fines for violations of the declaration, bylaws, rules and regulations of the association, provided that the charge imposed or the fine levied by the association is based:

(A) On a schedule contained in the declaration or bylaws, or an amendment to either that is delivered to each lot, mailed to the mailing address of each lot or mailed to the mailing addresses designated in writing by the owners; or

(B) On a resolution of the association or its board of directors that is delivered to each lot, mailed to the mailing address of each lot or mailed to the mailing addresses designated in writing by the owners[.]

See ORS 94.630 / ORS 100.405

Washington law is very similar, and states that a board of directors may:

(11) Impose and collect charges for late payments of assessments and, after notice and an opportunity to be heard by the board of directors or by the representative designated by the board of directors and in accordance with the procedures as provided in the bylaws or rules and regulations adopted by the board of directors, levy reasonable fines in accordance with a previously established schedule adopted by the board of directors and furnished to the owners for violation of the bylaws, rules, and regulations of the association;

See RCW 64.38.020 / RCW 64.34.304(k)

You may have noticed a critical word in both statutes: “reasonable”.  What’s reasonable in one community may not be reasonable in another. Much of the reasonableness depends on the nature of the violation and whether the amount of the fine is too punitive.  If the violation poses a health, life or safety issue, a large fine is likely warranted.

A Georgia Court of Appeals case provides some guidance on whether a fine is reasonable.  In that case an owner leased her unit in violation of the association’s rental cap.  The association levied a fine of $25 dollars per day.  The Court found that the fine was reasonable for three reasons: 1) the owner’s actions were a clear violation of the associations governing documents; 2) the association provided an opportunity for the owner to cure the violation before levying fines; and 3) the same amount of fines had been applied to other owners who violated the same rental restriction.

Assuming the amount of the fine is reasonable, the association may not actually levy or impose the fine until after notice and an opportunity for a hearing with the board of directors.  When notice of the violation is sent to the owner the association must include a statement that the owner has the right to request a hearing before the fine is imposed.  If the owner fails to request the hearing after the stated deadline, the board may then impose the fine.

If the owner does request a hearing, then the board should allow the owner to present evidence or testimony concerning the violation.  If after the presentation of evidence or testimony the board still determines that a violation exists, fines may be levied at that point.

Lastly, the amount of the fine must be contained in a  "schedule of fines" provided to all owners.  The schedule of fines should list the various types of violations with a corresponding fine.  It's wise to add language to the schedule of fines stating that the fine may be levied daily, weekly, month, or per occurrence.

8 Considerations for Community Rules & Regulations

Rules and regulations are an important part of the association’s governing documents. When properly adopted, rules carry the same weight as provisions in the CC&Rs or Bylaws. Here are some important things to know when adopting rules and regulations:

1) Rules and regulations must be consistent with the association’s other governing documents. You may not adopt a rule which conflicts with the CC&Rs, Bylaws or state law. In addition, an association may not adopt a rule for which it has no authority to do so. For example, if the CC&Rs do not contain any provisions related to the renting of units or lots, the board may not adopt a rule restricting the number of rentals in the community.

2) Rules and regulations are not recorded with the county recorders office. Because they are not recorded, it’s important that the association ensure that new owners in the community receive copies of all previously adopted rules, regulations and resolutions. If an owner never received a copy of a rule or regulation, it will be impossible to enforce.

3) When drafting rules, always cite to the association’s authority for adopting the rule, and include a statement of why the board is adopting the rule. Avoid legalese and make the rule clear, concise and readable.

4) Consider circulating the proposed rules before the board votes to adopt. Sometimes the board may receive constructive feedback from the owners which may prompt modifications.

5) Be consistent with the enforcement of rules and regulations. Follow the same procedures with all owners. This means applying the same fines for similar violations, allowing owners the opportunity for a hearing prior to levying fines, and equal application of each rule and regulation.

6) In general, boards may rescind rules, regulations and resolutions adopted by previous boards. However, if owners have relied upon a particular rule, the board may not retroactively apply a new, inconsistent rule against those owners. For example, suppose a board adopts a rule allowing white fences in the community and some owners construct white fences in compliance with the rule. If a new board decides only wood colored fences are allowed, the board may not require those owners who constructed white fences to comply with the new rule.

7) Make sure that owners receive due process when enforcing rules and regulations. Washington and Oregon both require that owners receive the opportunity for a hearing in front of the board of directors prior to levying a fine. Notice and the opportunity for a hearing should be built into all rules and regulations which include a financial penalty.

8) Don’t adopt needless rules or regulations. Always ask “why are we adopting this?” Rules and regulations should be adopted to address specific issues that arise in the community or to resolve ambiguities in the CC&Rs or Bylaws.

Enforcing Parking Restrictions on Public Streets

Many association CC&Rs prohibit owners from parking on the streets within the community. But what if those streets are public streets? Can the association still regulate parking? The short answer is “yes.” When owners purchase property in a community association, they do so subject to the restrictions in the governing documents. In a sense, it’s a contractual relationship between the owner and the association. The owner is agreeing to do (or not do) certain things on their property or within the community. With that in mind, ownership of the streets (whether public or private) doesn’t matter. The owner agreed, via the CC&Rs, not to park in a certain place.

Keep in mind that state law may control an association’s authority to tow a vehicle from public streets. Nevertheless, in most communities the association may still levy fines against an owner for parking violations occurring on public streets.

Several court cases address this issue. Let’s take a look at a few of them.

1. Verna v. Links at Valleybrook, 852 A.2d 202 (NJ Super 2004)

The owner in the association owned a small business. Occasionally, he would park his work vehicle on the street in front of his townhome. The association’s CC&Rs contained the following language:

No trailers or commercial vehicles shall be permitted to remain on any Lot or street in The Links without the written consent of the Board....

The owner claimed that because the streets were public, the association had no authority to regulate parking on those streets. The court rejected the owner's position, stating that the regulation of parking through the CC&Rs is “a matter of contract” which may impose greater limits on an owner’s use of property than governmental restrictions.

2. Maryland Estates Homeowners’ Association v. Puckett, 936 SW2d 218 (Mo. App. E.D. 1996)

In this case an owner within the community conceded that the CC&Rs prohibited him from parking his vehicle in the driveway on his lot. However, he argued, the association could not prevent him from parking on the public street adjacent to his lot. The court held that the CC&Rs are “a contract to which each homeowner becomes a party when acquiring property in the subdivision.” The court ruled in favor of the association and granted an injunction prohibiting the owner from parking on the public streets within the community.

3. Sui v. Price (Cal. App. 2011)

While not directly dealing with parking on public streets, this California case answered the question of whether an association may tow a vehicle which is in violation of the CC&Rs. The owner in this case stored a disabled vehicle on his lot. The CC&Rs prohibited the parking or storing of disabled vehicles anywhere in the community. Further, the association had the authority to enforce rules “by appropriate means.” The owner argued that towing his vehicle was outside the scope of the association’s authority. The court responded by stating “One wonders — how else would the prohibition on parking disabled vehicles be enforced against a recalcitrant homeowner?” Ultimately, the association prevailed in the lawsuit.