Most associations assess fines if a homeowner does not resolve a covenant enforcement violation. If the homeowner does not pay those fines, what can the association do? Generally speaking, the association can collect the fines just as they collect unpaid assessments.
In fact, the Colorado Common Interest Ownership Act (“CCIOA”) explicitly states that fines are considered assessments for collection purposes. Collection of fines (just like assessments) can be sent to the association’s legal counsel to contact the owner, obtain judgment against the owner, and attempt to collect the balance through garnishments and other available collection options. But, is that the right option for the association? We suggest a board consider the following when deciding how it will proceed with collection of unpaid covenant enforcement fines:
First, consider if the underlying covenant enforcement violation has been resolved. The purpose of covenant enforcement fines is to motivate the homeowner to resolve the violation. If a violation has been resolved and the only issue remaining is unpaid covenant enforcement fines, the board may consider waiving the fines. After all, if the violation has been resolved, the purpose of the fines has been fulfilled. The board is not under any type of obligation to waive fines, if properly levied, but this is an option available to the board.
However, if the underlying violation has not been resolved, we recommend proceeding with a covenant enforcement action rather than a collection action. Although collecting the fines may result in the resolution of the underlying violation, there is no guarantee this will occur and the association may end up getting money, but no compliance. Therefore, we recommend the board take the more direct route to obtain compliance by specifically pursuing a covenant enforcement action.
Second, confirm that proper notice has been provided to the homeowner. In cases involving collection of unpaid covenant enforcement fines, there are two types of notice that must be provided to collect the fines.
- Follow the Covenant Enforcement Policy: Notice of the alleged violation and opportunity for a hearing must be provided to the homeowner in accordance with the association’s Covenant Enforcement Policy. The association’s Covenant Enforcement Policy should have detailed requirements regarding the procedures for the notice that must be provided to the homeowner regarding a covenant enforcement violation and also the notice that must be provided to the homeowner regarding the fine(s) associated with that violation. Additionally, the homeowner must be provided the opportunity to have a hearing with the board regarding the violation. Finally, the Covenant Enforcement Policy should provide the fine schedule for the violation. Before proceeding with collection of unpaid covenant enforcement fines, confirm that your association has provided to the homeowner, the required notice, an opportunity for a hearing, and has levied the correct fine amounts.
- Follow the Collection Policy: Notice of the delinquent status of the account must be provided to the homeowner in accordance with the association’s Collection Policy. The association’s Collection Policy will provide a procedure for the content and number of delinquency letters that must be provided to the homeowner before sending the matter to an attorney for collections. For example, many collection policies require a first delinquency letter be sent to the homeowner when the balance is 30 days overdue, then require a second letter if the balance remains unpaid after 45 days, then allow the association to forward the matter to a collection attorney after 60 days. Before proceeding with collection of unpaid covenant enforcement fines, confirm that your association has provided the required delinquency notices to the homeowner.
Given the correct circumstances, collection of unpaid covenant enforcement violation fines can be effective and appropriate. However, before sending a matter to collections, be sure the association’s procedures have been properly followed.