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Recommended Procedures For Fines

Man #1 -- I can't believe I got a parking ticket.
Man #2 -- Well, isn't there a sign?
Man #1 -- Yeah, it says "FINE FOR PARKING" so I parked there.

What does a board of directors do when an owner violates the rules? The infraction is not serious enough to warrant legal action and the owner has ignored the standard warning letter.

Section 18.4(l) of the Illinois Condominium Property Act requires: "(l)...after notice and an opportunity to be heard [the Board may], levy reasonable fines for violation of the declaration, by-laws and rules and regulations of the association. (sic)

In considering the adoption of a policy for punitive fines, a board of directors is required to establish certain uniform guidelines and procedures. The assumption of "police power" automatically compels a board to initiate a system which incorporates constitutional protections for association members and provide for due process of law.

The following must be adopted prior to levying of fines:

Notice
Hearing procedure
Schedule of fines
Opportunity for re-hearing
Enforcement

First, a board of directors cannot be in a position of "shoot first and ask questions later," when it comes to taking punitive action. Based upon statutory authority, it is clear that a "pre-fine" notice must be sent to the accused prior to board action.

Most declarations have guidelines for notice to its members, either by mail or personal delivery for any meetings of members. These requirements should be followed with the notice of potential punitive action. After a homeowner or the manager advises the board of a rule infraction, that owner who is the subject of the complaint should be notified in writing. In addition, the accused homeowner should be advised as to the following:

Nature of the offense.
Time and place of hearing (or in the alternative, a deadline in which a hearing must be requested).
The right to present a defense, evidence and even a right to counsel.
Failure to either request a hearing or appear might result in an adverse finding.

The requirements of the Illinois Condominium Property Act and the Illinois General Not For Profit Corporation Act are that all meetings of the board be open to the members, with the exception of "to discuss violations of rules and regulations of the association..." (Section 18.4(a)(9) Illinois Condominium Property Act). Therefore, a hearing should be conducted, preferably by a hearing committee, or the board or a board subcommittee at closed session.

Sometimes, for more serious infractions, an association will have its attorney attend the meeting in order to give the proceedings an aura of formality. A homeowner, property manager or other party making the accusation of rule violations should be present, in addition to all other witnesses. All photographs, correspondence, records, etc., should be presented at that time. Minutes of the proceedings or a tape recording should be maintained. The parties should have the right to question each other under the strict supervision of the committee chairperson, and if the accused wishes to be represented by counsel, they should have that right so long as they notify the board in advance so that the Association’s counsel can be present as well.

After all evidence has been presented, the parties should be discharged and advised that a full decision will be voted upon at the next open board meeting.

Thereafter, the committee or board should deliberate in private. Upon reaching a consensus, the matter should be deferred to the regular board meeting for a vote of the board at the open meeting and subsequent notification to the owners involved as to the outcome.

The next consideration for the board is the amount of the fine itself. Many of the typical rule infractions can be anticipated in advance for the preparation of a schedule of fines. Failure to clean up after a pet, illegal parking, noisy parties, etc. are common rule infractions. The board can check with the local municipality as to its fine schedule for these types of ordinance violations and establish a fine schedule of comparable or lesser amounts. In addition, the board may wish to establish a fine schedule for second and subsequent offenses, or even daily fines for continuing violations, always keeping in mind that the punishment must fit the crime.

Considering that the declaration is a covenant running with the land and any unpaid assessments are a lien against the property, no owner can convey clear title to his unit without a letter from the association. Nominal amounts that remain unpaid can be posted on the books of the association as an outstanding receivable, and late fees for unpaid fines are illegal.

Although interest on the unpaid balance must be in order, late fees are illegal because a one-time infraction that remains unpaid would accrue excessive late fees.

What if the offending conduct is perpetrated by a renter? Since the association generally has no contractual relationship (privity) with a renter, unless the renter signs a lease rider or other document agreeing to abide by the rules, the board may be compelled to seek redress against the owner itself just because it is easier to collect.

Without raising every possible hypothetical, the guiding rule should be as the case with all other association actions; use sound business judgment, common sense, act reasonably and objectively, and in the best interests of the association.