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Howie Miller, Home Owner in Dallas, TX

Can a Texas HOA/POA board impose fines for covenant violations if fines are not explicitly allowed in its CCRs' enforcement provision?

Asked by Howie Miller, Dallas, TX Thu Feb 21, 2013

The HOA's covenant enforcement section empowers it to seek remedy "in law or in equity" only. Fines are not mentioned in the Declaration of Covenants, the Articles of Incorporation, or the Bylaws. After 20 years following a no-fine policy, a motion was enacted in a regular board meeting, whereby the board granted itself the power to fine. The homeowners did not vote on or otherwise approve the imposition of a fine policy.

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T.E. Sumner’s answer
Typically, the CCRs do grant some power to levy fines, when warranted, but not always. You have to read carefully what the rules are. Sometimes the introduction of monetary fines requires a super majority of homeowners to agree by voting.

Often the board is limited in what it can do and how it must be done. Many HOAs enact "policies" that do not conform to the CCRs (declaration of covenants, conditions and restrictions). Policies may fit into the CCRs or may not. The adverse action procedure is also often described: what notice must be sent, what must be in the notice, how long the owner has to respond, and so on.

My personal experience is boards never read the CCRs and don't understand what they did read. They usually rely on professional management companies to guide them, but they don't read them either. They go by what they have done in the past. And they have lawyers on staff to guide them.

The unfortunate reality is that as a homeowner you cannot appeal to the Justice of the Peace Court, which handles small claims and the like.

Appeals of decisions made by the board to levy fines may not follow their own "rules" and certainly ignore the CCRs. Worse, you can't appeal those appeals to the board by going to JP court. It is simply too expensive to challenge.

You have to go to County Court, which requires an attorney to sue for you. So, inequities in the way the board acts, sometimes not following the CCRs or abusing the articles, go unquestioned and unchallenged.

Ask your state representative to change the law to make JP Courts a first line of judgment about bad HOA actions. At least then you can afford to challenge bad conduct.

In this particular case, only an attorney can give you advice on whether the board can change the rules.
Web Reference: http://www.SumnerRealty.com
0 votes Thank Flag Link Mon Feb 25, 2013
If I remember my business law classes correctly.... the "law or equity" provision both mean they can levy fines. In legal speak this is explicit. It had something to do with the way the English court system was set up and I believe it still exists in some countries today...where if you want a ruling you go to one court, but if you want money you go to another. I think this provision or wording means the board can do either.

You might look that up in a legal dictionary or ask your family lawyer.

We're typically not lawyers here and these are probably points for a lawyer, but my guess is in the past they have not imposed fines as a courtesy. They did not grant themselves the power, they had it all along, but did not use it. I'll guess the homeowners did not have to vote on this provision.
0 votes Thank Flag Link Thu Feb 21, 2013
Thank you for your assistance, Bruce.

In modern legal parlance, online legal dictionaries equate "in law or in equity" to a civil lawsuit. This is the only enforcement power to which the homeowners have explicitly agreed. Amendment requires 75% support of homeowners. In any conflict with the covenants and a board resolution, the covenants prevail.

The fine policy is a simple board resolution which violates the covenant requirement for a lawsuit. The CCRs say enforcement "shall be . . . in law or in equjty". The word "shall" in legal speak carries a similar meaning to "must". Therefore the covenants leave the board no wiggle room to enforce in any other manner.

No power to fine existed prior to this board resolution. I was on the board myself. I know our governing docs well. I have read the legal opinion on which fines were based (basically, if the governing docs don't prohibit fines, then fines are acceptable)

Texas courts have not been supportive of HOAs creating new powers for themselves. I have not been able to find a single case similar to ours that the courts ruled in favor of the HOA.
Flag Sat Feb 23, 2013
Bruce Lynn, Real Estate Pro in Coppell, TX
MVP'08
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The board can do that. It should be in your governing documents what the boards powers are. Contact a real estate attorney to clarify your particular CCR's.
0 votes Thank Flag Link Thu Feb 21, 2013
As a former board member I know our CCR's pretty well. The only enforcement provision says enforcement "shall be . . . in law or in equity" which translates roughly to "must be by a lawsuit". No authority to fine was agreed to by the homeowners when we signed the CCRs nor is any such power granted to our HOAs by the state.
Flag Sat Feb 23, 2013
If it doesn't specify in by laws contact a Real Estate Attorney.

Kenny
Turtle Creek Realty
0 votes Thank Flag Link Thu Feb 21, 2013
It depends on what your by laws say, but if a majority of the owners vote yes and/or the by laws say they can, they can. Check your HOA by laws.

Kenny
Turtle Creek Realty
0 votes Thank Flag Link Thu Feb 21, 2013
wrong. It depends on what your CC&Rs say. The by-laws should agree with the CC&Rs, and if they don't the CC&Rs take precedent.
Flag Mon Jun 16, 2014
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