February 8, 2023
Fines are one of the most unpopular features of Virginia community association law. Despite the well-known tendency for HOAs and condominiums to misuse fine systems, a 2023 statutory amendment would stimulate HOAs to fine Virginia homeowners even more. Yesterday, the House of Delegates approved H.B. 2098 by a vote of 91-7. It is unclear to me what the Virginia Senate will do. In the HOA context, fines are a process for imposing a charge, usually $10.00 per day, for a perceived rule violation. Americans are accustomed to being fined by their government. For example, parking tickets or zoning notices of violation. In such instances, the agency can impose a monetary charge for a violation without first taking the resident to court. Usually the citizen can “appeal” the fine to a review board or official as an intermediary step before a court challenge. In Virginia community associations, the homeowner may be able to “appeal” a decision by the committee to the board of directors, but to go above that they usually have to go to the courts.
HOA fines differ from governmental fines in other ways. Government officials don’t ordinarily have a personal stake in the way a perceived violation is handled. By contrast, the association directors are neighbors with strong personal opinions about the rules and what they see as a problem in the community. Its common for the directors and homeowners to know of each other. It is difficult for a volunteer homeowner to separate their personal interests from their “directorial” duties regarding a perceived violation on a neighbor’s lot. Covenant enforcement is often delegated to a manager and attorney to manage. This can help ease the “interpersonal,” but the managers and attorneys have business interests in the management of covenant enforcement procedures.
2023 Virginia House Bill 2098 would change the statutes to make authorization to fine a “default” power of HOAs and condos, instead of requiring enablement by specific language in the recorded instruments. Also, it would make it easier for the association to impose additional charges for “repeat” rule violations.
I would like to use a hypothetical example to explain why I think this proposed amendment would make the world of HOA fines worse. Imagine a person in a community association who struggles to manage his property because of a physical disability. He decides to temporarily store a few personal items in plastic boxes on his patio. The boxes are visible from the sidewalk if one happens to be peering into the guy’s backyard. Someone complains about the plastic boxes to the manager. The recorded instruments say nothing about outdoor storage boxes. The recorded covenants require committee approval of any outbuildings, additions, swimming pools or structural changes to the house itself. The recorded restrictions forbid accumulation of trash or building materials. The covenants allow the board to adopt additional rules in furtherance of those contained therein. The covenants do not allow for fines, they only talk about going to court for enforcement. Ten years ago, the board voted to approve a resolution that limits items that can be kept on patios and decks to plants, furniture, grills, small appliances or other items expressly approved by the architectural committee. The patio resolution has never been challenged legally.
The manager sends a letter to the homeowner, who doesn’t come to the next meeting because of the mobility problem. The attorney explains to the board that they cannot fine the homeowner, because the existing statutes require the power to impose fines to be enabled in the recorded instruments. Va. Code § 55.1-1819(B) & § 55.1-1959(B). The HOA would have to file a lawsuit to compel compliance. Such efforts would be doubtful because the recorded instruments don’t say anything about regulation of storage boxes on the patio. The language about trash and building materials don’t quite give them this. Va. Code § 55.1-1819(A) & § 55.1-1959(A). The board has an unwritten policy to only sue homeowners as a last resort when they really want to come down hard on somebody. No suit is filed. No extrajudicial fines are imposed.
Suppose we add to the facts that H.B. 2098 is enacted as an amendment to the statutes. The HOA’s attorney sends all of her clients a newsletter announcing that the statutes no longer require the recorded instruments to specifically authorize the association to conduct fines according to Va. Code § 55.1-1819 & § 55.1-1959. With this change, the law is now the opposite: “The board of directors shall also have the authority, unless the declaration provides otherwise, to . . . assess charges against any member for any violation . . .” H.B. 2098. According to this new enactment, silence in the instruments regarding fines means that fines are allowed (instead of meaning that they aren’t allowed). In our hypothetical, the board of directors gets excited, because it seems to provide a work around. No longer would the HOA have to spend its own money pursuing a homeowner in court, with an uncertain outcome. With fines, the HOA can conduct its own hearing, where its agents act as the prosecutors, witnesses and judges of the notices of violation. With the power to conduct extrajudicial fines, the board shifts the burden to challenge onto the homeowner. As a practical effect, this emboldens the associations to be more aggressive in their approach to covenant enforcement, asserting broad, favorable interpretations of their own instruments. One of the problems of the fine statutes is that it stimulates fanciful readings of recorded instruments and adoption of regulations by the boards that go beyond what the covenants reasonably authorize.
H.B. 2098, if adopted, would present a difficulty when it comes to previously created HOAs and condos where the authority to fine was not discussed at all in the recorded instrument. Under current law, the omission of fine authorization language is construed to mean that the drafter-developer intended for the association to not have the power to fine. Given the current language of the statutes, the rules that the courts use to interpret legal texts, and the drafting of such a declaration or bylaw, it would be preposterous to read into the “contract” an understanding that the legislature could later adopt an amendment that would cause the document to switch its meaning to the exact opposite of its intended effect. A contract or deed is normally interpreted to include by implication all relevant law in existence at the time it is made. H.B. 2098, as presently worded, would seem to invite litigation regarding any retroactive effect where the association tries to use it when the declaration or bylaws are silent on the issue of fines or reference such enforcement mechanisms in a manner made confusing or uncertain by statutory changes. Contracts would be cheapened if their intentional silence on an issue is later used as an opening for the legislature to completely reverse the meaning. In a hypothetical lawsuit challenging the retroactive application of H.B. 2098, our homeowner is demonized by others in the community for selfishly attacking the HOA’s volunteer efforts to promote good order in the community. The lawsuit drags on for years, coming down to an issue of how to construe the statutes, covenants, and handbooks.
H.B. 2098, if enacted, would render community associations law “wonky-donkey” regarding fines. Ordinarily the homeowners expectations regarding the subdivision are defined by how the developer physically constructed things, what the initial purchase contracts require, and what the disclosure packet of HOA documents says. After the developer implemented such plans, and the buyers join in by purchases, to then turn that upside down by such legislation turns the tables on the homeowners unfairly. Any changes to the recorded instruments and handbooks ought to conform to the “reasonableness” requirement (already used by the courts), so that communities can make adjustments to the “contract” as a consensus and changing circumstances allow, and not by a legislative trick.
The fine statutes are important for another reason. Once imposed, the fine can be used to pursue a foreclosure against the unit owner, or it can be used to initiate a lawsuit to convert it into a money judgment from which garnishments can issue. The fines are not just irksome pieces of paper, they can be used to harass or dispossess homeowners.
H.B. 2098 also proposes to no longer require the HOA to send out an additional notice for a “repeat” violation of the same rule or covenant in the same 12-month period. I also oppose this. More “due process” is needed, not less. With this wording, associations are going to start imposing fines for things that are not the same as the initial “violation,” the only commonality being the section cited in the rules.
Yesterday, H.B. 2098 was passed by the House of Delegates, by a vote of 91-7. The bill now goes to the Virginia Senate. I don’t see this bill helping anyone other than those people who like fining people or are paid to manage the process. This bill, if enacted, will solidify some of the things that give HOAs a bad name. I don’t think that people want to wake up in early July 2023 and find a Notice of Violation in mailboxes all across Hoaville, Virginia.
I would like to see the General Assembly delete the fine language out of the statutes. No more fines, prove your damages or basis for an injunction. If a HOA wants to tell a homeowner what to do with their own property, they ought to have to stand in line at the courthouse for a hearing date, and then prove their case under the rules of evidence. The practical effect of this would be to stop certain misuses of covenant enforcement from moving forward on doubtful grounds in the first place. This would not prevent the HOA from performing its core function of common area maintenance.
UPDATE: On February 21, 2023, H.B. 2098 was DEFEATED by a vote of 8-32 after Virginia Senate floor debate. Hopefully this bill will not be brought back next year.