Due Process Changes in Virginia
Takeaway: Review your declaration and bylaws carefully. The penalties that a board can impose for violations need to be based in those documents, not just your rules and regulations.
Discussion: For years, Virginia community associations have enforced their governing documents by suspending nonessential privileges or by imposing monetary sanctions against owners who violate association covenants. Associations typically establish the process they will follow to impose sanctions through adoption of resolutions called "due process resolutions." The resolutions typically outline the process for notifying the owner of the violation, an opportunity for the owner to be heard, and the remedies available to the association. Virginia law permits sanctions in the amount of $50.00 per violation, or $10.00 per day for continuing violation, but only for a period of ninety (90) days.
However, there have been recent Virginia court rulings that prohibit an association's right to impose monetary sanctions or suspension of privileges unless there is express language in the association's governing documents to establish such a right. Virginia law defines an association's governing documents to include an association's declaration (or master deed) and its bylaws. The Virginia courts are demonstrating a tendency toward restricting any powers exercised by community associations unless the power is expressly created by the associations' governing documents.
In a recent case in Fairfax County Circuit Court, the court concluded that no homeowners association may recover charges imposed for covenant violations if neither the association's bylaws nor its declaration expressly provide the authority for the association to do so. See Samir R. Farran, et al. v. Olde Belhaven Towne Owners Association. The judge concluded that Virginia law does not establish the right of a community association to impose sanctions against delinquent owners by adopting a rule or regulation, unless its bylaws or declaration expressly allow it to adopt rules and regulations that impose sanctions. The court refused to interpret Virginia statutes to allow establishing enforcement powers through rules and regulations.
The decision is contrary to a decision made on the same issue in Loudoun County Circuit Court. See Lee's Crossing Homeowners' Association v. Linzie Zinone. The court determined in the Zinone case that a plain reading of the applicable Virginia statutes allow associations to authorize charges in either the declaration or the rules and regulations. Although it appeared the Virginia Supreme Court would resolve this conflict in favor of lesser restrictions on community associations, it recently rendered an unpublished opinion that makes it unlikely that there will be a successful challenge to the Farran decision in the Virginia Supreme Court. See Shadowood Condominium Association v. Fairfax County Redevelopment and Housing Authority.
In Shadowood, the Virginia Supreme Court ruled that the association's imposition of assessments for rules violations exceeded its authority as defined by its governing documents. The Court upheld the lower court's ruling that fines assessed were beyond the association's authority and the policy resolution authorizing the assessments was invalid. The Shadowood court made clear that it considers the Virginia statutes concerning community associations to be permissive in nature and that they do not confer authority to a community association beyond what is included in the association's governing documents. In other words, if the declaration (or master deed) or bylaws do not expressly authorize imposing sanctions or provide authority to enact rules and regulations that authorize sanctions against delinquent owners or covenant violators, the Virginia courts will consider the rules to be invalid and unenforceable.
Since these rulings, the Virginia courts have been carefully examining governing documents and only allowing recovery of those sanctions or fees that the declaration or bylaws expressly provide that an association is entitled to collect. They have not been satisfied by rules and regulations that purport to add additional fees and costs to delinquent owners unless the declaration or bylaws expressly provide the authority for the Board to establish those additional fees and costs. Even if an association has given itself such authority in its rules and regulations, the Virginia Courts have ruled that such authority must be present in the governing document, otherwise such provisions in the rules and regulations are considered invalid.
The recent court rulings do not leave associations unable to enforce their covenants or pursue owners for breach of the governing documents. Typically, association documents provide the association a continuing lien against the property for unpaid assessments, including the right to bring a lawsuit against the delinquent owner and/or foreclose upon the lien. In either event, the association may claim interest, attorney's fees and costs as part of the delinquency.
The governing documents also typically give the Board the ability to correct violations and assess the unit owners for the costs in remedying the violation. It can then pursue the collection of that assessment, pursuant to its authority to pursue delinquent assessments under the association's documents. It can also file suit to obtain an injunction to compel compliance with the covenants and recover a judgment for the attorneys' fees it incurred in pursuing compliance.
Enforcement of covenant violations may be pursued more quickly and efficiently because of a significant change in the Virginia Code in July 2011. The Virginia Code now grants the Virginia General District Courts jurisdiction to litigate covenant enforcement actions and allows the courts to order an owner to abate or remedy any covenant violation. The authority to award injunctive relief was previously reserved for the Virginia Circuit Courts and required associations to bring covenant enforcement actions in the higher court, which typically resulted in a more costly and time consuming endeavor. The General District Courts are the preferred venue for associations because the matters are heard on a more expedient basis and are typically less costly.
If you need assistance in reviewing your declaration and bylaws, please contact Kevin Kernan at kkernan@wtplaw.com or 703-573-1031.