Penalize This: Fines and Penalties Imposed on Associations

By Ellen Schuster, Esq.

We talk a lot about the fines and other penalties associations can impose on members who violate the governing documents. What about the fines and penalties that can be imposed on associations? Associations that violate certain Civil Code sections may have to pay monetary penalties or fines (typically called "civil penalties") in addition to paying for actual damages, attorneys’ fees, and court costs.

At a time when members are increasingly challenging associations and associations are under increased scrutiny, it is important to understand the common violations that can subject associations to significant fines and penalties.

Open Meeting Act (Civil Code section 4900, et seq.)

Associations that violate this act may have to pay attorneys’ fees, court costs, and civil penalties of up to $500 per violation. (Civil Code section 4955(b).) Common violations include failure to provide the required four days’ or two days’ notice of an open board meeting or executive session, respectively, failure to post an agenda, and failure to include time for a homeowner forum at an open board meeting.

Member Elections (Civil Code section 5100, et seq.)

A member who successfully challenges an election can be awarded their attorneys’ fees, court costs, and a civil penalty up to $500 per violation payable by the association. (Civil Code section 5145(b).) Association violations could include conducting an election in the absence of compliant election rules, improperly disqualifying a candidate, failure to appoint a qualified inspector of elections, failure to provide a ballot at least 30 days before the return deadline, and failure to comply with the election by acclamation notice requirements. Consult with legal counsel to ensure elections are conducted pursuant to the association’s governing documents and the law.

Record Inspection (Civil Code section 5200, et seq.)

A member who is not provided with all requested association records within the statutory timeframe may be awarded their attorneys’ fees, court costs, and a civil penalty up to $500 for the denial of each separate written request, payable by the association. (Civil Code section 5235(a). This could mean a $500 civil penalty for each document requested by the member to which they are entitled. Common violations include denial of records to which a member is entitled, failure to provide records within the statutory timeframes, and imposing costs on the member for which the member is not responsible. Each association should establish a process to respond timely and accurately to records requests, perhaps including a review by legal counsel, to mitigate the risk of these penalties.

Peaceful Assembly

Associations that violate members’ rights to peaceful assembly can be charged a civil penalty of up to $500 for each violation. (Civil Code section 4515(d).) Associations should be careful not to restrict members’ rights to peacefully assemble and should consult with legal counsel to amend governing documents containing illegal prohibitions, such as prohibiting meetings among residents or circulating information to other members at reasonable times and in a reasonable manner.

Escrow Documents to Sellers

Associations are required to provide specific documents to a current owner (i.e., the seller) during the sale of the owner’s separate interest, and failure to do so can subject associations to civil penalties of up to $500 in addition to paying actual damages and attorneys’ fees to the purchaser. (Civil Code section 4540.) You read that correctly: not only can the seller be liable to the purchaser for failure to provide documents, but ostensibly the association can be liable to the purchaser for failure to provide required documents to the seller. This means that associations should not only provide the seller with the documents, but also maintain a record of having done so.

Rental Restrictions

Violations of rental restriction laws can subject associations to civil penalties of up to $1,000 in addition to paying actual damages. (Civil Code section 4741(g).) Two common pitfalls are restricting rentals to less than 25 percent of the separate interests and counting owner-occupied separate interests toward the number of rentals and thereby improperly restricting someone’s right to vote. Consult with legal counsel to amend governing documents containing illegal rental restrictions.

Solar Energy Systems

Associations may reasonably restrict solar energy systems, but cannot prohibit them altogether. Associations that violate these statutes are subject to civil penalties of up to $1,000 in addition to paying actual damages and attorneys’ fees. (Civil Code section 714(f) and (g).) Consult with legal counsel to establish a solar energy system policy to ensure compliance with the law.

Electric Vehicle Charging Stations

Associations may reasonably restrict electric vehicle charging stations and electric vehicle time tracking meters, but cannot prohibit them altogether. Associations that violate these statutes are subject to civil penalties of up to $1,000 in addition to paying actual damages and attorneys’ fees. (Civil Code sections 4745(j) and (k) and 4745.1(h) and (i).) Consult with legal counsel to establish an electric vehicle charging station policy to ensure compliance with the law.

Ellen Schuster is an attorney at Hughes, Gill, Cochrane, Tinetti, PC, where she focuses on advising community associations on their governance, operations, and transactions, including real property issues and statutory compliance. Ellen also focuses on industry education.