Chapter 8 - § 8.3 • RULE ENFORCEMENT
| Jurisdiction | Colorado |
The association is authorized to exercise any powers necessary and proper for the governance and operation of the association, and that would include enforcing the declaration, bylaws, and rules and regulations.77 Indeed, associations generally have a duty to enforce compliance with the rules and regulations they promulgate.78 Therefore, the governing board acting, as the CCIOA empowers it to do,79 on behalf of the association, may undertake to enforce the declaration, bylaws, and rules and regulations. The board needs to be aware that the CCIOA requires associations to adopt policies, procedures, and rules and regulations regarding enforcement of covenants and rules,80 and that CCIOA imposes on every contract or duty governed by it an obligation of good faith in its enforcement.81 The Uniform Act has the same provision, and a comment to it says that good faith is required in performance and enforcement of all agreements and duties. Good faith, it says, means "honesty in fact" and observance of reasonable standards of fair dealing. The term is not defined by either the CCIOA or the Uniform Act, but it is derived from and used in the same manner as the Uniform Commercial Code.82
Governing boards need to be aware that the association has an obligation to enforce covenants and that "covenant enforcement may require the exercise of discretion as to both the timing and the manner of enforcement."83 An association that simply ignores violations of the declaration would not be acting in good faith, but if the association is properly exercising its discretion, its actions will be governed by the business judgment rule.84
While the CCIOA makes no mention of a rules enforcement committee, these committees are one tool that associations use to enforce their rules. The CCIOA does not explicitly authorize the governing board to appoint committees, but the Act provides that committees are to be appointed pursuant to the association's governing documents or, if those documents have no applicable provisions, then pursuant to the applicable statute in the Colorado Nonprofit Corporation Act.85 That statute allows a board to create committees unless the bylaws provide otherwise.86 It also says that, to the extent stated in the bylaws or by the board itself, a committee has the authority of the board,87 and that procedures that apply to the board also apply to any committee.88 The CCIOA adds that all regular and special meetings of any committee must be open to attendance by all unit owners89 or their representatives, but that in limited circumstances,90 committees may hold executive or closed-door sessions and restrict attendance.91 Before a committee may convene in executive session, however, the chair must announce the general matter of discussion.92 Both the CCIOA and the Nonprofit Corporation Act require the association to keep a permanent record of all actions taken by a committee of the board in place of the board on behalf of the association.93
Thus, a governing board may create a rules enforcement committee and delegate to it the authority to enforce rules. While the board may take that action pursuant to the applicable statute in the Colorado Nonprofit Corporation Act, it is probably desirable for the association's governing documents to provide specific authorization. The committee may function as the sole arbiter of the rules, or its decisions may be subject to appeal to the governing board. Whether an association decides to establish a rules enforcement committee, and what authority it invests in the committee, will to a considerable degree depend on the size of the community. In small communities, the board will probably want to retain the rule enforcement function, if for no other reason than it may be difficult to find enough owners to serve on a committee. In larger associations, the busy board would probably welcome delegation of the time-consuming task of responding to allegations of rule violations, but may wish to retain an "appellate" role. In very large associations, the board may not want any role in rule enforcement because the responsibilities it has for day-to-day management are so great.
One specific type of rules enforcement committee is an architectural control committee. These committees, which have existed in single-family subdivision homeowners associations for at least 50 years, serve to prevent development that would violate the general plan of construction for the community and to assure property owners, through approval of building and site plans, that their plans conform to that scheme.94 There does not appear to be anything in the CCIOA that would prevent a rules enforcement committee from enforcing building or architectural restrictions as well as all other association rules. However, there are special statutory requirements that apply to review of applications to make architectural or landscaping changes. Under the CCIOA, decisions to approve or deny them cannot be arbitrary or capricious and must be made in accordance with standards and procedures in the declaration, bylaws, or in duly adopted rules and regulations.95 An action to enforce the terms of any building restriction in the declaration, bylaws, articles, or rules and regulations or to compel removal of a building or improvement that violates the terms of any building restriction must be commenced within one year from the date from which the plaintiff knew, or in the exercise of reasonable diligence should have known, of the violation.96
Whether the governing board or a rules enforcement committee is charged with rule enforcement, there must be policies, procedures, rules, and regulations in place governing enforcement.97 One procedure that needs to be addressed is how allegations of rule violations will be initiated. Some associations have found it desirable to require that a signed written allegation be submitted to the association. That has at least two consequences. It begins the creation of a written record and it avoids the "whispering campaigns" that sometimes arise in common interest communities by requiring someone to put his or her name to the charge. The other side of the coin is that if no one will sign a complaint, a scofflaw goes unchecked.
When the association receives a complaint or becomes aware of a rule violation through any means, it has an obligation to investigate and evaluate it, although its actions in doing so are protected by the business judgment rule.98 Once the association has investigated a complaint by whatever process it uses and determined a rule has been violated, it has three means to gain compliance with the rules: moral suasion and peer pressure, fines, and legal action. Actually, there is a potential fourth method found in the Restatement of Property: withdrawal of privileges to use common recreational and social facilities.99 The Restatement says it is less commonly used than fines, but may be especially apt as a response to violation of rules that govern use of common facilities.100 There are, however, two problems with this approach. First, there is some doubt about the legality of denying a unit owner access to common elements, especially where he or she is a co-owner of the property. Secondly, there is the practical difficulty in keeping the unit owner from gaining access to common recreational and social facilities. Who will stand by the pool gate or clubhouse door and bar entry?
Peer pressure is a surprisingly effective method of achieving rule compliance. Unfortunately, many associations misuse it. Often the first response of an association to an apparent rule violation is to send a letter notice of violation — frequently in officious and imperious language — accusing the unit owner of violating a rule, demanding compliance, and threatening action. The recipient's first response is usually anger and intransigence. A better approach is informal. A representative of the association — a member of the governing board or rules enforcement committee, or perhaps the professional manager — should call or visit the unit owner. The representative should diplomatically explain that having a congenial community requires...
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