Intro to Community Rules Enforcement a.k.a Compliance

My first role in this industry was doing rules enforcement and architectural review committee administration for a large planned unit development.  What I found out very quickly is that in order for rules to be effectively enforced, the enforcement has to be done in a consistent and timely manner and the rules themselves (as well as the consequences) must be clearly delineated.

First, let’s talk about the rules themselves.  The initial rules for the community are set by the developer/builder (also known as the declarant) in the governing documents themselves.  These are generally put together in a section with the words “rights” or “restrictions” and may be in the Declaration or Bylaws (depending on whether the community is a condominium or a PUD).  These are the most basic rules that all owners implicitly agreed to when they closed on their home and a board cannot opt to ignore violations of these rules (note, if there is a rule that is generally considered not to reflect the desires of the neighborhood, the board, with the consent of an appropriate percentage of the owners, can pass and record an amendment to remove that rule).  The documents usually also give the board the authority to pass additional rules that are deemed to the benefit of the owners, provided that these new rules do not conflict with the governing documents.

Once the rules are identified, the next step is to determine how the community will respond to infractions of these rules. Some communities choose to send a friendly reminder notice first before sending a formal violation letter.  I have had others opt to speak to the owner first (either by phone or in person).  Whatever process the board determines is best for the community, this process should be a) in writing and b) followed each and every time (this is where a compliance resolution can be very helpful).  A typical process looks like this:

a.  A compliance violation is reported to the board.

b.  The board confirms the violation exists.

c.  A compliance letter is mailed to the owner.  This compliance letter must include the nature of the violation, the date by which the violation must be corrected, what must be done to correct the violation, and, if a fine is to be imposed upon failure to correct, the fine amount and the right to be heard.

d.  If the violation is corrected within the specified period, the violation and correction are filed away and the matter ends.

e.  If the violation is not corrected within the specified period, a written notice of the intent to fine and the right to be heard is mailed to the owner (unless the initial notice included this).

f.  If the matter is still not resolved within the specified period and the owner has not requested a hearing, the fine amount indicated in the letter is applied to the account.

g.  Fines continue to accrue if the matter is still not resolved, until the matter is turned over to the association’s law firm or until the owner has resolved the violation.

It is important to remember:  fines cannot be imposed unless the owner has been given the right to be heard.  Fines also cannot be imposed if the board has not adopted and published a fine schedule.  It is also critical to remember that fines are not an appropriate way for the association to make money and must not be unreasonable.  Instead, the purpose of the fine is to be a deterrent and to cover any costs associated with gaining compliance.

The absolutely best way for the board to set themselves up for rules enforcement is by adopting a compliance resolution.  This resolution includes the authority of the board to make and enforce rules, how infractions are enforced, the fine schedule, and the appeal process.  It is also prudent to include (as an exhibit or attachment) the rules being enforced.

It is also useful to determine how rules violations will be identified and followed up on.  As a manager I have done many compliance reviews (both by myself and with board members).  This can be good for spotting initial violations but is problematic for follow up as the board usually doesn’t want to pay the management company to drive back out in a week (or whatever the deadline is) to check on the status of the issue.  What I think works much better is for a committee to be established by the board (which can include less than a quorum of board members) to periodically inspect the community for infractions and return to those locations after the correction date to determine if the problem has been rectified or if further compliance action needs to be taken.  Unless the committee is very vigilant with its paperwork, I prefer that the management company sends the enforcement letters since we are normally the ones who receive the calls from the violators.  However, a thorough committee (or a self-managed community) can be successful with rules enforcement provided it is consistently and frequently done.

One final note:  board members are not exempt from following the rules.  If a board member has an infraction at his/her home, she or he should receive a notice just like everyone else.  It’s uncomfortable to have to enforce against a board member (for rules violations, failure to pay dues on time, etc.) but the board has a responsibility to treat all members equally.