Effective Covenant Enforcement - Tools in the Toolbox
When a board wants to enforce its covenants, it is good to start with the association’s primary goal in mind. Once a board knows what it wants to achieve, then the board can reach into its toolbox (metaphorical, please, do not use an actual toolbox) and choose the tool that is most likely to achieve this goal. The choice of tool is important. Like actual tools, the legal tools available to a homeowners’ association should be used in certain ways. This article seeks to give a brief overview of some of the tools available to associations and when, in this author’s opinion, these tools are most effective:
Fines
When Most Effective:
Owner Violates Use Restriction: Typically, an association’s goal is to compel an owner to stop using the property in a manner that is prohibited by the association’s governing documents (e.g. number of residents in a dwelling, leasing, pets, parking, use of other limited common elements and garages, and nuisance and noise). Often, an association has an escalating fine schedule in its covenant enforcement policy. Levying a fine by itself will not achieve the goal, but the owner is more likely to cure the violation to avoid additional escalating fines. That said, if the violation of the use restriction is egregious, equitable relief might be a compelling alternative.
Owner Fails to Maintain Property: Typically, an association’s goal is to compel an owner to cure a failure to maintain property in accordance with the association’s governing documents (e.g. house that needs to be repainted, weeds, debris, unsightly landscaping). Again, levying a fine by itself will not achieve the goal, but the owner is more likely cure the violation to avoid additional escalating fines. That said, if the failure to maintain is egregious and can be cured by a specific act within a set period of time (e.g. house that badly needs to be repainted), equitable relief might be a compelling alternative.
Association Wants to Deter Future Violations: In part, fines are like speeding tickets. The speeding ticket creates a disincentive for the driver to speed in the future. Similarly, if an owner violates an association’s governing documents, regardless of the type of violation, fining an owner can create a disincentive for future violations.
Pointers:
Before levying fines, an association must have a covenant enforcement policy that includes certain procedures.(1) These procedures must give notice and an opportunity to be heard to owners alleged to have violated the governing documents and subject to fining.(2) The amount of the fine should be reasonable.(3) Not so high as to be deemed unreasonable by a court, but not so low as to be ineffective for your community. Once an association has levied a fine, the association should follow its collection policy to actually collect the fines.(4)
2. Equitable Relief – Specific Performance and Injunctive Relief
What It Is:
The association may initiate litigation with the goal of obtaining an order from a court requiring an owner to remedy a past breach of the association’s governing documents (specific performance) or prevent future breaches of the association’s governing documents (injunctive relief).
When Most Effective:
Owner Violates Building Restrictions. Typically the primary goal is to compel an owner to remove an improvement from the owner’s property that violates the association’s governing documents. For example, if an owner constructs a shed that was not approved and paints a house an unapproved color, the association’s primary goal is to compel the owner to remove the shed and paint the house an approved color. Initiating litigation to seek an order from a court requiring an owner to remove an unapproved improvement or, alternatively, allowing the association to do so achieves the association’s primary goal. Fining an owner is unlikely to be as effective. Conceivably, an owner might pay the fines and not remove the improvement, an outcome that would not achieve the primary goal.
Owner Egregiously Fails to Maintain Property: Sometimes, an owner’s failure to maintain property is so bad and an association’s attempt at fining has been ineffective. In that case, additional fines are unlikely to achieve the association’s primary goal. For example, if an owner’s house has fallen into severe disrepair and requires new paint, the primary goal is to get the owner to paint the house. Rather than to continue to fine the owner, it might be more effective to seek an order requiring the owner to paint the house an approved color by a certain date.
Pointers:
Building restrictions are subject to a one-year statute of limitations from the date the association knew or should have known of the violation, regardless of the remedy sought by the association.(5) This means that the association must file a lawsuit within that one year. Generally speaking, courts consider what is fair when deciding whether to grant equitable relief. This means that a court might not grant the association’s request for equitable relief, if the court concludes that the remedy requested is unfair to the owner, even if the court concludes the owner violated the association’s governing documents.
3. Suspension of Use of Amenities
When Most Effective:
If the association has amenities (e.g. pool, gym, clubhouse) and the association’s governing documents allow this remedy, this can be used both to create a disincentive for future violations and to compel an owner to cure a past violation. This might be best if paired with fining or equitable relief.
Pointers:
The association’s governing documents might require the association to provide notice and an opportunity to be heard before the suspension is effective.
This is a brief overview of these tools, not to mention other less common tools an association might consider using. Of course, before using any of these tools, the board should consider conferring with its legal counsel about whether the tool is appropriate for the situation. When to use these tools is not always clear. The framework provided by this article should help a board think through these issues and make an educated decision about what appears to be the most effective tool.
Footnotes
C.R.S. § 38-33.3-209.5(1)(b)(IV)
C.R.S. § 38-33.3-209.5(2)
C.R.S. § 38-33.3-302(k)(I)
C.R.S. § 38-33.3-209.5(5)
C.R.S. § 38-33.3-123(2)