Question: What is the legislation regulating imposing "fines" on homeowners concerning arrearage of dues? Lien filing/release fees vs. interest assessment on unpaid amount, or both?

Ms. Patterson's Answer: The answer is that it depends upon the state in which the association is located, and whether it is a condominium association or a homeowners' association.  Each state will have varying legislation, some may cover both types of association and some may only govern condominium associations.  For example, in New Jersey, there is no legislation governing homeowners associations, only condominium associations.  In the case where a state's legislation does not cover homeowners associations, one must refer directly to the homeowner association's Declaration and By-Laws (collectively, the "Declaration") to determine the existence and extent of such power. Typically fines are not imposed for the non-payment of common assessments.  However, before addressing that aspect of the question, one must determine whether there is even the authority for a board to impose fines at all.  

Take for example, a New Jersey condominium association.  Pursuant to the New Jersey Condominium Act statute (N.J.S.A. 46:8b-1 et. als)(the "Act"), subsection 15(f) of the Act permits a board to levy reasonable fines upon unit owners for their failure to comply with provisions of the master deed, by-laws and rules and regulations subject to certain limitations defined therein.  However, this power MUST also be expressed in the condominium's master deed or by-laws (the "Governing Documents") in order to be enforceable.  If the Governing Documents are silent about fines, the board will not have the right to impose fines unless and until they pass a board resolution to do so.  If the Governing Documents are silent, a resolution would arguably be sufficient in lieu of an amendment to be voted upon by the owners, since it is not contradicting what is already contained therein.   Keep in mind, however, that it still may be subject to challenge by the unit owners.

Despite the foregoing, fines are typically not imposed for failure to collect common assessments.  Fines are typically imposed for  housing-related violations for such things as parking, pets, etc. (i.e. violations of the rules and regulations).   The reason for this is that, most if not all Governing Documents in New Jersey contain specific provisions governing the procedure for handling the failure to pay common assessments.  So long as it is authorized by the Governing Documents, in New Jersey, a condominium board has the power to impose late fees, interest and attorneys' fees as a result of non-payment of common assessments.  Liens are authorized by the Act as well, under subsection 21, but also must be authorized by the Governing Documents.  With respect to homeowners associations in New Jersey, one must look directly to the Declaration and By-Laws for such authority.  

Most Governing Documents will provide for a lien to be recorded against a unit (with proper notice to the owner), the imposition of interest at the highest rate allowable by law (currently 16% in New Jersey), late fees and reasonable attorney's fees.  Some Governing Documents may not expressly authorize the collection of late fees.  If they do not, then again, the Board can pass a resolution instead of calling for an amendment since it is not a change in the By-Laws but rather an addition thereto.

Ms. Patterson's post can also be viewed on the AssociationHelpNow website at: associationhelpnow.com, or by clicking here: AssociationHelpNow.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.