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"LEGISLATIVE CHANGES AFFECTING THE RIGHT TO FINE"

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Previously, this office has written about some of the many substantial changes to the laws that affect community associations. Senate Bill 1196 became law on July 1, 2010, and we would now like to address several important ways that these significant changes relate to a condominium association's right to collect fines, in addition to a crucial change with respect to HOAs.

Increased Penalties and Remedies for Failing to Pay Fines. As this office has previously explained, the recent changes to the law allow an Association to demand that renters pay all rents directly to the Association in the event that the unit being rented is behind in their maintenance, until the delinquency is cured. It is important to note; however, that the language in the bill addressing the right to collect rent, for both condos and HOAs does not merely apply to assessment related delinquencies, but instead "any monetary obligation", including, arguably, a monetary obligation based on fines levied against the unit. This would permit the association to make a demand for even a single month's rent to pay for an existing fine, up to the amount of the outstanding fines. Obviously the association would have to take care to abide by the new law's limitations on the right to collect rent, seeking no more than the current rental obligation in place at that time for a given period for which rent is owed. In addition, in seeking rent for delinquencies, the association can tack on any fine balance owed even if such fines cannot be included in the association's lien. In seeking such amounts, the Association must also take extreme care that its fining procedures are in strict compliance and that the power to fine can be found in the Declaration or By-laws.

In addition, the suspension of use and voting rights (in the case of Condominiums) given by the new law also apply to "a monetary obligation", and thus can be argued to apply to non-payment of fines. This gives teeth to the right to fine which was previously not present. Finally, ineligibility for condominium board membership and automatic removal from the Board also can occur due to a ninety day delinquency with respect to "any monetary obligation" due to the association, thus including the obligation to pay a fine lawfully levied.

HOA Lien Rights for Fines Over $1,000.00- Previously, HOAs could not lien for a fine; however, the new law now permits an HOA to lien for fines over $1,000.00 in the aggregate. Of course, fines of this size in the aggregate are only permitted if the governing documents allow them.

The Right to Fine For a Violation of the Obligation to Pay Maintenance Assessments- The recent changes to the Condominium Act have added language that highlights a right that the association may already have had prior to the new law, often overlooked, to implement fines against unit owners for the failure to pay maintenance in a timely fashion. The new law contains language strongly indicating that the right to fine is intended by the legislature to be available for an owner's violation of obligation to pay maintenance. Previously the statute arguably allowed this, due to the previous language that stated:

§718.303...

"(3) If the declaration or bylaws so provide, the association may levy reasonable fines against a unit for the failure of the owner of the unit, or its occupant, licensee, or invitee, to comply with any provision of the declaration , the association bylaws, or reasonable rules of the association." [ emphasis added ].

Despite this language, if an association's Declaration of Condominium or Bylaws provided an association with the right to fine unit owners for violations of the Association's restrictions or rules, there may have been uncertainty as to whether the right to fine existed for a violation of the covenant for the payment of maintenance. It is safe to say that fines have more traditionally been thought of as a remedy for rule breaking, as opposed to non-payment of assessments. The fact that fines for Condominium Associations are not subject to the association's lien, unlike past due maintenance, meant that as a remedy for nonpayment of maintenance, fines were not a very feasible remedy in most cases.

The new law has added language to §718.303 that says the following regarding fines for non-payment to the association:

"...(4) The notice and hearing requirements of subsection (3) do not apply to the imposition of suspensions or fines against a unit owner or a unit's occupant, licensee, or invitee because of failing to pay any amounts due the association. If such a fine or suspension is imposed, the association must levy the fine or impose a reasonable suspension at a properly noticed board meeting, and after the imposition of such fine or suspension, the association must notify the unit owner and, if applicable, the unit's occupant, licensee, or invitee by mail or hand delivery." [ emphasis added]

The new law therefore clearly allows the association to fine a unit owner for being delinquent, and that these fines don't need to be levied by an independent unit owner committee, as in the case of other types of fines, and instead may be levied by the Board, provided that the requirements of the above quoted section are met.

Practically, the right to fine unit owners for delinquencies still has the drawback of not being secured by the association's lien rights; however, in those cases in which it is feasible to seek a money judgment against a delinquent owner, the fining of the unit would create an additional amount that the association can seek. Currently, many associations have an influx of owners who may be subject to a money judgment, in light of the frequent ownership of condominium units by lending institutions, and investors, some of whom fail to pay maintenance in the manner required until formal collections actions are taken. Furthermore in light of the fact that unpaid fines also trigger the new rights to collect rent and suspend use and voting rights under the new law, fines have become far more feasible to collect.

In fining for delinquencies, there are several considerations to take into account. First, the Declaration and Bylaws still must provide the right to fine, and the association may have to contend with provisions in the documents (and their legality) which exclude certain types of units from fines, such as unoccupied units. In addition, there is the question of whether a fine for a failure to pay can be considered an unenforceable penalty. So long as the fine is a one time charge for the violation of the obligation to pay maintenance, the legislative support to the practice and goal of ensuring Declaration compliance may outweigh any argument that the fine is merely an excessive late fee penalty on the debt owed. Recurring fines for delinquencies should therefore be avoided.

Due to the increased available remedies for collecting fines, implementation of fines may assist in increasing cash flow in addition to their deterrent effect. The levying of fines for delinquencies can potentially be a practical way to increase the amount that is collectible from tenants and owners against whom an action for a money judgment is practical.

The Law Office of Cuevas, Garcia & Torres, P.A. is providing this newsletter as a brief summary of certain aspects of community association law. The information provided herein is for informational purposes only and should not be construed as legal advice. The publication of this news letter does not create any attorney-client relationship between the reader and Cuevas, Garcia & Torres, P.A. The hiring of an attorney is a decision that should not be based solely on advertisements or this newsletter. Before you decide, ask us to send you free written information about our qualifications and experience.

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