Fining Procedures and Fla. Stat. 720.305(2) and (2)(b)

This week I corresponded quite a bit with a homeowner who was experiencing problems with the way his HOA was imposing fines and it's amazing how many holes you can find in a statute that seems pretty clear cut.

The statute, Fla. Stat. 720.305(2) reads:

The association may levy reasonable fines of up to $100 per violation against any member or any member’s tenant, guest, or invitee for the failure of the owner of the parcel or its occupant, licensee, or invitee to comply with any provision of the declaration, the association bylaws, or reasonable rules of the association. A fine may be levied for each day of a continuing violation, with a single notice and opportunity for hearing, except that the fine may not exceed $1,000 in the aggregate unless otherwise provided in the governing documents. A fine of less than $1,000 may not become a lien against a parcel. In any action to recover a fine, the prevailing party is entitled to reasonable attorney fees and costs from the nonprevailing party as determined by the court.

Let's break this down.

"The association may levy reasonable fines of up to $100 per violation....except that the fine may not exceed $1,000 in the aggregate unless otherwise provided in the governing documents."

Right away the debate begins.  The HOA lawyers argue this statute gives all associations the right to levy fines even if it's not in the governing documents.  Other lawyers argue it doesn't because an association cannot engage in any conduct not authorized by its governing documents according to a case called S&T Anchorage v. Lewis.   (I'll leave out the case citations because they are usually meaningless to non-lawyers and this is about keeping it simple or as simple as possible.)

Here's the exceptions.  A case called Cohn v. The Grand Condominium reinforced earlier case law that held while the statutes trump the governing documents of an association if there is a conflict, you have to look to the statute which was in effect when the documents were recorded UNLESS the documents contain language the association was organized pursuant to or subject to a specific statute "as amended from time to time" or similar language.  This language manifests the intent to be subjected to amendments to the statute.

Here's the exception to the exception.  If a statute is curative, remedial, or passed as a matter of public policy, then it does apply.  Now the hard part?  How do you tell if it was passed for one of those purposes? It's not always easy.  If the statute states "the Florida Legislature finds...", then that was clearly a matter of public policy.  Otherwise you have to find the bill that created the statute and read the history and committee notes or find a case that talks about the statute.

Personally, I think this statute could not be remedial or curative because it created more problems then it resolved.  This language has been put in, out and back in of Chapter 720 with subtle but important differences.  The old version clearly stated if the association had the authority to impose fines then the procedures in paragraph 2(a) applied.  The new version gives the impression all associations have the authority.  This is the kind of language that keeps lawyers employed.  The language was removed previously because an association could lien and foreclose on your home for an unpaid fine no matter how small the fine.  The new language requires the fine to exceed $1,000.00.  Did that help homeowners? No, because the associations now make sure every fine is at least $1,000.00!

Now let's look at the second portion that is troubling - Fla. Stat. 720.305(2)(b).

(b) A fine or suspension may not be imposed without at least 14 days’ notice to the person sought to be fined or suspended and an opportunity for a hearing before a committee of at least three members appointed by the board who are not officers, directors, or employees of the association, or the spouse, parent, child, brother, or sister of an officer, director, or employee. If the committee, by majority vote, does not approve a proposed fine or suspension, it may not be imposed. If the association imposes a fine or suspension, the association must provide written notice of such fine or suspension by mail or hand delivery to the parcel owner and, if applicable, to any tenant, licensee, or invitee of the parcel owner.

Let's break this down.

"A fine or suspension may not be imposed without at least 14 days’ notice to the person sought to be fined or suspended and an opportunity for a hearing"

What's missing? Anyone see when the 14 days' notice starts.  Common sense would tell you 14 days from the date the owner receives the notice right?  Common sense and HOA are an oxymoron when used together.  Looking at this from the HOA's point of view, how do you notice a hearing when you don't know when the owner will receive the notice?  Understandable at least, but what happens when the HOA plays games and postmarks the envelope and then holds the letter to make sure the owner doesn't get it until right before the hearing?  This happens a lot based on the number of complaints I have heard from owners.  How hard would it be to use the 5-day mail rule the courts use?  Send a certified letter and notice the hearing for 19 days from the date of mailing, allowing 5-days (which is plenty) for the receipt of the mail.  The other option is to reschedule the hearing if the owner says they received the notice late. This is way too simple to solve if the HOAs were interested in solving it.

Here's the second problem with that section:  "an opportunity for a hearing"

So many HOAs get this wrong.  It's a hearing, not a meeting.  It's not the opportunity to create a public lynching of the owner by noticing it to the community as an open meeting.  If the HOAs really thought it was a meeting why do so many of them not have minutes?  The HOA should have minutes regardless, but they will claim it's a committee and they are not required.  WRONG!!!

Next up:

"If the committee, by majority vote, does not approve a proposed fine or suspension, it may not be imposed."

There is no statute or case law on the issue of the vote being done at the hearing in front of the owner, at the hearing behind closed doors or after the hearing.  Until someone sues on this issue and it goes up on appeal, there are no published rulings from the judges.  Most likely if it ever made it to the judge, a judge would rule based on the most convincing arguments and would have to determine if committee was improperly influenced by the Board of Directors to vote in secret so they could attend. 

The board doesn’t have to meet and ratify the decision, but they can and usually do, unless of course the committee doesn’t vote in their favor – then they don’t want that to get out.

Next:

"a hearing before a committee of at least three members appointed by the board who are not officers, directors, or employees of the association, or the spouse, parent, child, brother, or sister of an officer, director, or employee."

Seems clear enough for the average person, but you would not believe the games HOAs play with this. The board will recruit a committee by asking them if they will impose a fine against a specific homeowner. They will appoint former board member to the committee. Board members will resign to serve on the committee only to be reappointed to the board afterwards. The board will appoint the community association manager (CAM) despite the language above, claiming they are not an employee, but an agent.  The board will appoint their in-laws because the statute doesn't prohibit that.

Now here's the most troubling part of the statute:

"If the association imposes a fine or suspension, the association must provide written notice of such fine or suspension by mail or hand delivery to the parcel owner and, if applicable, to any tenant, licensee, or invitee of the parcel owner."

HOA lawyers have advised the HOAs this means the HOA can throw out all the other procedures and has authority to impose a fine by a vote of the board of directors.  Somehow they are convinced the fining committee is not part of the association.

Back in 2007 fines removed from the statute, so no matter what the HOA docs said they could not fine.  Then in 2010 it was put back in with the $1000.00 limit.  The effect was that now HOAs no longer have to mediate the issue of covenant violations if they impose a fine because monetary obligations are not subject to statutory mediation.  The homeowners lost valuable protections and rights because unless you have deep pockets to litigate, the HOA wins.  Plus, if you stop to think about this it’s cheaper to pay their extortion by fine then to litigate ($1,000 or $150,000).

As we pass more laws, lawyers think of more ways to get around the law.

My advice is pay the fine and then take the HOA to small claims court to get it back.  Remember a dispute over a monetary obligation is not subject to pre-suit mediation; however, a recommend sending the pre-suit mediation offer anyway because the judge will make you mediate first before he looks at the case at the first hearing.