Case law indicates that the authority of the board to manage the cooperative and adopt rules to carry out its general purposes is derived from the corporation’s articles of incorporation, bylaws and the proprietary lease, subject to applicable statutory and decisional law. All of these documents must be examined to determine whether a particular action is within the board’s inherent power.
While the proprietary lease is subject to the house rules, certain limitations exist on the board’s authority to adopt house rules. One such limitation is that the house rules may not alter the basic corporate structure of the cooperative or the financial and contractual rights created in the Offering Plan or Proprietary Lease.
In one case a board adopted a house rule for the payment of a late fee. The Court held that it directly altered a contractual right of the shareholders created by the proprietary lease. The late fee was disallowed.
Consequently, if the organizational documents do not grant the board authority to impose a fine or fee, it should not do so.
Levine & Montana
1019 Park Street – P.O. Box 668
Peekskill, New York 10566
I hesitate to open this can of worms. However, several courts have ruled that unless the Proprietary Lease gives the Board the authority to impose fines (as opposed to mere general authority to administer the cooperative), the Board lacks the authority to do so. Thus if a fine were not paid and the shareholder argued his or her position in court, the court might well decline to enforce the fine. Of course, the case has to get that far before the shareholder could obtain the requested relief. In practice, most shareholders simply pay the fine rather than fighting the issue. This also does not necessarily prohibit the Board from imposing fees to reimburse the Corporation for the cost of performing tasks that exceed the normal requirements of governance, provided the fees are reasonable.
Smith, Buss & Jacobs LLP
733 Yonkers Avenue
Yonkers, NY 10704
Unless the proprietary lease or bylaws authorize the board of directors to levy fines upon shareholders for violations of the house rules, then the board has no authority to levy fines under such circumstances. The Board also does not have the authority to adopt a rule which gives it the authority to impose fines. Instead, the board will need to seek an amendment of the co-op’s by-laws adding a provision authorizing the board to impose fines upon shareholders who fail to comply with the house rules. Typically, this requires a vote of 66 2/3 of the shareholders.
John Harris Gettinger, Esq.
Banks Shapiro Gettinger & Waldinger, LLP
118 N Bedford Rd
Mount Kisco, NY 10549-2553
Please see below an analysis I recently prepared summarizing the new South Carolina Homeowners Association Act, which is expected to soon become law, as it has passed both houses of the statehouse, has been ratified, and a veto by the governor is not anticipated. Section 27-30-130(B) addresses Rules and Regulations that are not made part of the declaration by amendment, i.e., adopted by Board action. Once this act becomes law, Rules and Regulations will be required to be recorded by January 10 of the year following their enactment by the Board in order to be enforceable. This new Act will apply to both an apartment (condominium) in a horizontal property regime or a lot in a subdivision.
My recommendation on fines in general is that a fine system for violations should be voted on by the members as an amendment to the declaration, as opposed to being newly created and implemented as Board action, unless there is specific enabling language in the recorded declaration (which could be a recorded amendment) that provides that fines are authorized and the amounts, reasons for imposing them, enforcement procedure, notice and appeal procedure may be set and implemented by the Board as part of Rules and Regulations (i.e., Board action).
If the association asking the question is a condo regime under the SC Horizontal Property Act, see also SC Code Ann § 27-31-170, which provides:
SECTION 27-31-170. Compliance with bylaws, rules, and regulations; remedy for noncompliance.
Each co-owner shall comply strictly with the bylaws and with the administrative rules and regulations adopted pursuant thereto, as either of the same may be lawfully amended from time to time, and with the covenants, conditions and restrictions set forth in the master deed or lease or in the deed or lease to his apartment. Failure to comply with any of the same shall be grounds for a civil action to recover sums due for damages or injunctive relief, or both, maintainable by the administrator or the board of administration, or other form of administration specified in the bylaws, on behalf of the council of co-owners, or in a proper case, by an aggrieved co-owner.
H 3886, the “South Carolina Homeowners Association Act”
· Recent action on bill, as of publication deadline of these materials:
Status of H 3886 as of Friday, May 4, 2018:
· Will take effect upon approval by the governor
· To be codified at S.C. Code Ann. § 27-30-110 et seq.
· Key provisions:
o § 27-30-130(A): Governing documents must be recorded in the county records in order to be enforceable
o § 27-30-130(B): Rules and Regulations:
§ Are effective upon passage or adoption
§ But must be recorded in the county records by January 10 of each year following their adoption or amendment
§ Must be made accessible to the homeowners upon request, unless posted in a conspicuous place in the community and available in the HOA’s website
o § 27-30-130(D): Recording of the rules, regulations, bylaws, and amendments to rules and regulations are not subject to the requirements of witnesses and acknowledgements required under S.C. Code Ann. § 30-5-30
o § 27-30-140(1): Before an HOA association may increase an annual budget in any single year, the HOA must provide notice to homeowners at least 48 hours in advance of the meeting in which a decision to raise the annual budget is made.
§ § 27-30-140(2): However, the provisions of § 27-30-140 do not apply to an HOA incorporated under the S.C. Nonprofit Corporation Act, S.C. Code Ann. §33-31-101 et seq.
o § 27-30-150: The access to documents provisions of the S.C. Nonprofit Corporation Act, §§ 33-31-1602 through -1605, apply to all HOAs not subject to the S.C. Nonprofit Corporation Act for the purposes of allowing homeowners access to inspect and copy an HOA’s annual budget and homeowners membership lists.
o § 27-30-160: Magistrate court shall have concurrent jurisdiction to adjudicate HOA monetary disputes arising under this article, provided the dispute meets the jurisdictional requirements of § 22-3-10.
Article 3: “Department of Consumer Affairs Services for Homeowners and Homeowners Associations Act”
o § 27-30-330: Dept. of Consumer Affairs is authorized to include on its publicly available Internet website:
§ (1) information for homeowners and HOAs concerning how they may contact the department on its toll free phone number or submit complaint forms;
§ (2) information concerning the governance of HOAs under the S.C. Code; and
§ (3) educational and reference materials about HOAs, including general information about the roles, rights, and responsibilities of the board, declarant, homeowners, and other parties.
o § 27-30-340(A): Dept. of Consumer Affairs shall receive and record data from any calls or written complaints from homeowners or HOAs.
o § 27-30-340(B): Lists and describes the minimum information to be included on the complaint form to be completed by the HOA or homeowner, or, if the complaint is received by telephone, an employee of the Dept. of Consumer Affairs
o § 27-30-340(C): Requires Dept. of Consumer Affairs to provide a copy of the complaint to the HOA, Board or homeowner complained about. The HOA, Board or homeowner may submit a response to the complaint.
o § 27-30-340(D): By January 31 of each year, Dept. of Consumer Affairs shall make a report of all data collected and complaints received to (1) the Governor and General Assembly, and the public through the department’s website.
The public report must include categorized, filterable, and searchable information compiled from the complaints and responses, and redact any homeowner personal or private information, such as names, addresses, and telephone numbers. For data to be included in the report, a complaint form must be executed by the homeowner, HOA, or department employee.
o § 27-30-340(E): The Dept. of Consumer Affairs is prohibited from:
§ (1) promulgating regulations or issuing guidelines concerning HOA administration, governance, or governing documents; or
§ (2) serving as an arbiter in disputes between the homeowner and HOA.
Amendment of Residential Property Condition Disclosure Act, § 27-50-10 et seq.:
o 27-50-40(A)(9): Amends real property transaction disclosure statement requirement to include new subsection (9). The disclosure statement must now include whether the property is subject to governance of an HOA, which carries certain rights and obligations that may limit the use of the property and involve financial obligations.
Finkel Law Firm, LLC
PO Box 41489
Charleston, SC 29423-1489
I take a generally conservative approach to fines or other monetary penalties attached to co-ops, condos, and other similar communities. Most documents for these types of communities allow the Board to adopt either “house rules” or other rules and regulations governing common areas of the community. For anything that would either impose an affirmative payment obligation (like dues in a condo or fines in any of these communities), I have always taken the approach that the membership should be involved in approving them. Then, when a homeowner complains about the rules or about the fines, the homeowner cannot point to just the Board for imposing the obligation, instead it was a supermajority of all owners in the community–usually at least 2/3. If the Declaration (as in a condo) or Bylaws or other similar documents imposes the affirmative obligation then that is the best method, rather than the Board simply imposing them unilaterally. Placing any potential fining authority into the governing documents for the community is likely the best practice and places current and future owners on notice of the rules.
David C. Wilson
Black, Slaughter & Black , P.A.
1927 S. Tryon St., Suite 100
Charlotte, NC 28203