When an owner violates a rule or covenant and doesn’t voluntarily comply after a courtesy letter is sent, most associations move to the next step in their covenant enforcement policy, which is typically the imposition of fines. This is an area where pitfalls can abound and it is important that associations cross the t’s and dot the i’s to have an enforceable and collectible fine. Properly imposing a fine is really about due process.

Before a fine can be imposed for a violation, the Colorado Common Interest Ownership Act (CCIOA) requires that the association have a covenant enforcement policy and fine schedule in place. Then, certain due process requirements must be complied with. Specifically, the violator must receive notice of the violation and be given an opportunity to have a hearing.  Without this notice and opportunity for a hearing, fines are unenforceable.

The following are the basic due process steps, which may vary depending on an association’s particular covenant enforcement policy:

A.  Issue a “cease and desist” warning letter which contains:

  • Notice of the alleged violation
  • The action required to cure the violation
  • A specific time within which the violation must be corrected (unless it is a discrete, repetitious violation that is not of a continuous nature the penalty (sanction) which will be imposed after a hearing if the violation does not end within the stated time

B.  Issue a notice of the right to a hearing if the violation does not end within the stated time after the warning letter, or if the same repetitious violation occurs again, which shall contain:

  • Notice to the violator informing him or her of the alleged violation
  • Notice that the violator is entitled to a hearing prior to the imposition of a fine (as opposed to an appeal to contest a fine, which implies that the fine will be imposed prior to the appeal or hearing)
  • Notice of when the hearing is or that the violator may request a hearing

C.  Hold the scheduled hearing.

  • This is a fact-finding hearing to determine if a violation has occurred. It is recommended that the hearing procedure be kept informal.
  • The hearing must take place before an impartial decision maker. If the Board is acting as the decision maker, any Board member who has a direct personal or financial interest in the outcome, that Board member should not be involved in the decision making.
  • The following are suggested procedures to be followed:
      • State the rule allegedly violated
      • State the possible penalty (e.g., fine)
      • Explain the rules of conduct to be followed for the hearing:
            • All remarks are to be addressed to the chair
            • Complaining witness(es) speaks first and/or presents evidence, if any
            • Hearing panel may then ask that person questions
            • Alleged violator speaks next and/or presents evidence, if any
            • Hearing panel may then ask that person questions
            • Chair asks if anyone else has anything to say
            • Panel will then deliberate and make a decision
            • Written decision will be issued by the date set forth in the association’s covenant enforcement policy

Again, the imposition of fines is a matter of due process and allowing the violator the opportunity to be heard prior to imposing the fine. Following the proper procedure will ensure an enforceable and collectable fine.  Additionally, if the matter is not resolved through the imposition of fines and the association brings a lawsuit against the owner to force compliance, showing that the association has afforded the violator ample notice and opportunities to resolve the issue prior to a lawsuit is always helpful.

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