Delaware HOA fine rules

The association "May suspend any privileges of unit owners, other than the right of a unit owner to vote on any matter submitted to a vote of unit owners, or services provided to unit owners by the association (other than those necessary for the habitability of the owner's unit) for non-payment of assessments; may impose charges for late payment of assessments; and, after notice and an opportunity to be heard, may levy reasonable fines for violations of the declaration, bylaws and rules of the association" (25 Del. C. § 81-302(a)(11)). The chapter does not state what that notice must contain and prescribes no delivery method specific to fines. The general delivery rule is § 81-127: "Unless otherwise required or permitted by the declaration or bylaws, the following methods of giving notice suffice when notice is required: (i) Hand delivered to the unit owner or other intended recipient; (ii) Sent prepaid by United States mail to the mailing address of each unit or other intended recipient, unless that person has designated in writing a different mailing address in which case it shall be sent to the designated address; or (iii) Sent by electronic means in the manner described in subsection (b) of this section" (§ 81-127(a)), and "An association provides effective notice by electronic means if the unit owner gives the association prior written authorization to provide that notice, together with an electronic address" (§ 81-127(b)). Where the violation is by a tenant of a unit owner, the association may, "After giving notice to the tenant and the unit owner and an opportunity to be heard, levy reasonable fines against the tenant for the violation" (§ 81-302(c)(2)).

The chapter sets no cure period before a fine. The only fixed cure period in § 81-302 attaches to the association's power to collect from a tenant's rent, not to fines: "The rights referred to in paragraph (c)(3) of this section may only be exercised if the tenant or unit owner fails to cure the violation within 10 days after the association notifies the tenant and unit owner of that violation" (25 Del. C. § 81-302(d)); paragraph (c)(3) is the power to "Require, as a means of collecting a fine or past due association fee due from the tenant (and not the unit owner), that the tenant make payments directly to the association in the amount of the rent up to the limit of the amount owed the association." That 10-day period does not attach to the fine power in § 81-302(a)(11) or to the tenant fine power in § 81-302(c)(2).

25 Del. C. § 81-302(a)(11) — the association may, "after notice and an opportunity to be heard, ... levy reasonable fines for violations of the declaration, bylaws and rules of the association." The chapter sets no number of days within which an owner must ask to be heard, no deadline by which the association must hold the hearing, no procedure for it and no rule on who presides. The right cannot be signed away: "Except as expressly provided in this chapter, the effect of its provisions may not be varied by agreement, and rights conferred by it may not be waived" (§ 81-104) — although § 81-104 is not one of the sections that § 81-119 applies to communities created before the chapter's September 30, 2009 effective date. The board also has discretion whether to enforce at all: "The executive board shall use its reasonable judgment to determine whether to exercise the association's powers to impose sanctions and pursue legal action for violations of the declaration, bylaws and rules," and the association "shall have no duty to take enforcement action" where the board, "acting in good faith and without a conflict of interest," makes one of the four determinations listed in § 81-302(f)(i)-(iv), but "the executive board may not be arbitrary or capricious in taking enforcement action" (§ 81-302(f)). A separate complaint process, which is not limited to fines, does carry fixed day counts. The Common Interest Community Ombudsperson in the Delaware Department of Justice is charged "To establish a template of reasonable written procedures for the executive board of a common interest community association to adopt to internally handle complaints from unit owners and other interested parties. Each common interest community association shall adhere to the established written procedures when resolving complaints from unit owners and other interested parties" (29 Del. C. § 2544(8)). Those procedures may include "That the common interest community association shall provide written acknowledgment of the receipt of the complaint to the complainant within 14 days of receipt" (§ 2544(8)d.); "That, within a reasonable time prior to the consideration of the complaint, the complainant shall be notified of the date, time, and location that the complaint will be considered. For purposes of this paragraph, 'reasonable time' shall mean such time as established by the common interest community association's complaint procedure, but shall not be less than 7 days prior to the date for consideration of the complaint" (§ 2544(8)g.); and "That after the final determination is made, the written notice of the final determination shall within 14 days be hand-delivered or mailed by registered or certified mail, return receipt requested, to the complainant at the address provided or, if consistent with established procedure of the common interest community association, delivered by electronic means, provided the sender retains sufficient proof of the electronic delivery" (§ 2544(8)h.). "Prior to submitting a complaint to the Ombudsperson, complainants must complete the process established by the Ombudsperson and adopted by the executive board of a common interest community association pursuant to paragraph (8) of this section and must include a copy of the final determination with the complaint filed to the Ombudsperson" (§ 2544(9)).

Delaware sets no dollar cap on an association fine. The only statutory limit on amount is that fines be reasonable — the association may "levy reasonable fines for violations of the declaration, bylaws and rules of the association" (25 Del. C. § 81-302(a)(11)). Fines are secured: "The association has a statutory lien on a unit for any assessment levied against that unit or fines imposed against its unit owner. Unless the declaration otherwise provides, fees, charges, late charges, fines, and interest charged pursuant to § 81-302(a)(10), (11), and (12) of this title, and any other sums due the association under the declaration, this chapter or as a result of an administrative or judicial decision, together with court costs and reasonable attorneys' fees incurred in attempting collection of the same, are enforceable in the same manner as unpaid assessments under this section" (§ 81-316(a)). Three restrictions in § 81-316(m) limit what that lien can do. "No foreclosure action may be commenced unless: (A) the unit owner, at the time the action is commenced, owes a sum equal to at least 3 months of common expense assessments based on the periodic budget last adopted by the association pursuant to § 81-315(a) of this title; and (B) the executive board expressly votes to commence a foreclosure action against that specific unit" (§ 81-316(m)(1)). Payments are applied to fines and penalties last: "The association shall apply any sums paid by unit owners who are delinquent in paying assessments as follows: (i) first, to unpaid assessments; (ii) then to late charges; (iii) then to attorney's fees and other reasonable collection charges and costs; and (iv) finally, to all other unpaid fees, charges, penalties, interest and late charges" (§ 81-316(m)(2)). And a fines-only debt cannot be foreclosed without a judgment first: "If the only sums due with respect to a unit consist of fines and related sums levied against that unit, a foreclosure action may not be commenced against that unit unless the association has first secured a judgment against the unit owner with respect to those fines and has perfected a judgment lien against the unit under state law" (§ 81-316(m)(3)). Separately, the suspension power in § 81-302(a)(11) reaches privileges and services for non-payment of assessments but excludes "the right of a unit owner to vote on any matter submitted to a vote of unit owners" and services "necessary for the habitability of the owner's unit."

"Subject to the provisions of subsection (c) of this section, all records kept by the association, including the association's membership list and address, and aggregate salary information of employees of the association, shall be available for examination and copying by a unit owner or the unit owner's authorized agent so long as the request is made in good faith and for a proper purpose related to the owner's membership in the association. This right of examination may be exercised: (i) only during reasonable business hours or at a mutually convenient time and location, and (ii) upon 5-days' written notice reasonably identifying the purpose for the request and the specific records of the association requested" (25 Del. C. § 81-318(b)). Section 81-318(a) lists the records the association must maintain, including "Detailed records of receipts and expenditures affecting the operation and administration of the association," minutes of member and executive board meetings, and a record of members. Records "may be withheld from inspection and copying to the extent that they concern" personnel or medical matters; commercial transactions "currently in or under negotiation"; "Pending or threatened litigation, arbitration, mediation or other administrative proceedings"; "Matters involving federal, state or local administrative or other formal proceedings before a government tribunal for enforcement of the declaration, bylaws or rules"; attorney-client or work-product communications; disclosures that would violate law; executive session minutes or other confidential executive session records; or "Individual unit owner files other than those of the requesting owner" (§ 81-318(c)). "An attorney's files and records relating to the association are not records of the association and are not subject to inspection by owners" (§ 81-318(d)). The association "may charge a fee, in advance, to the unit owner for converting records into written form, for permitting inspection, and for providing copies of any records under this section, but that fee may not exceed the actual cost of the materials and labor incurred by the association" (§ 81-318(e)), "is not obligated to compile or synthesize information" (§ 81-318(g)), and information provided "may not be used for commercial purposes" (§ 81-318(h)). The association must also, on written request, furnish a statement of unpaid assessments against the unit "within 10 business days after receipt of the request," for a charge that "shall not exceed $25, except in cases where an account has been referred to the association's legal counsel" (§ 81-316(h)).