Marianne Schaefer in Legal/Financial on September 28, 2017
Most condominium bylaws give boards the power to impose fines on unit-owners who break the house rules. However, a condo board’s power to levy fines is limited, and the courts cannot be relied on to enforce the collection of fines. There’s a fine art to making condo fines stick.
“Condo boards have it much tougher than co-op boards when it comes to enforcing the rules, because they don’t have the power to evict,” says Bruce Cholst, a shareholder at the law firm Anderson Kill. “In order to enforce and collect fines, they have only two ways to go. They can get a court order (an injunction), which is not much more than a fancy piece of paper saying, for instance, ‘Thou shalt not make noise.’ Should the unit-owner not comply, the judge could hold that person in contempt of court, but only in theory. In reality that rarely happens. The other way is to levy the fines, and the build-up might work as a deterrent.”
Cholst recommends amending the bylaws of a condominium to state that “fines shall be considered common charges payable by the unit-owner against whom they are assessed.” Such an amendment would attach fines to the condominium’s lien for unpaid common charges and thus give the board the means to pursue collection through a foreclosure action. Such fines must also be duly enacted by board resolution to be enforceable. “It’s still a flawed remedy,” says Cholst. “But boards should do it right to protect themselves against legal challenges. It’s a viable remedy, even though not a great one.”
Attorney Abbey Goldstein, a partner at Goldstein & Greenlaw, doesn’t discourage boards from simply going ahead and imposing fines. “Even though the courts will usually not enforce these fines,” he says, “they’re still an excellent deterrent to improper conduct. But should the case go to court and the judge is aware of the law, the fine will not be enforced.”
Daniel Neiditch, who runs River2River Realty and is president of the 500-unit luxury Atelier condominium, says that his board imposes fines if the house rules are not obeyed. Depending on the violation, these fines are generally not part of the common charges. “We only fine when we have irrefutable evidence that the rules were broken,” Neiditch says. “Usually people just pay, and we’ve never had a situation where we had to litigate.”
In order to follow Cholst’s advice and make fines part of the common charges, one has to bear in mind that the bylaws can be amended only by the unit-owners – and that can be difficult. “A board cannot just decide to put these fines in the bylaws under common charges,” says Goldstein. “To change the bylaws, two-thirds, sometimes even as much as 80 percent, of the unit-owners will have to vote in favor of something that could hurt at least some of them. Even if some unit-owners think fines are fair, others could be very afraid that boards are going to run amok. Also, anybody who doesn’t vote is voting against it. So, even if 65 percent of all the unit-owners would vote in favor, it still wouldn’t pass.”
Neiditch says his board’s customary fine starts at $500 and can go up to $5,000. Cholst strongly advises boards to adapt a system of progressive fines, beginning with a modest fine and escalating with each breach of the rules. “Courts will be offended by the imposition of a staggering penalty for a seemingly trivial infraction,” he says. “And should the owner not even have had the opportunity to dispute the fine, the court will conclude that the fine is impermissibly confiscatory.” He advises forming a review process that gives unit-owners the chance to dispute the factual basis of the infraction that drew a fine.
In Cholst’s experience, good faith and the “optics” of fairness will go far in fortifying fines against legal challenges – and making sure the fines stick.
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