Vermont Sets No Dollar Cap on HOA Fines, Only Notice and a Hearing

Two words carry the whole standard. The fine must be reasonable, and it must follow notice and a hearing. Vermont's legislature declined to name a number, so reasonableness is measured against the violation, not against a statutory table. Nothing in Title 27A authorizes a per-day accruing fine, a fine for a violation the owner was never told about, or a fine voted at a closed board meeting with the owner learning of it in the next statement. The sequence in the statute is notice, then hearing, then fine, in that order.

The hearing requirement extends to tenants. Under § 3-102(d), if a tenant of a unit owner violates the declaration, bylaws, or rules, the association may exercise its fine power directly against the tenant, and § 3-102(d)(2) separately allows a reasonable fine against the tenant after giving notice to both the tenant and the unit owner and an opportunity to be heard. Subsection 3-102(d)(3) goes further and lets the association exercise the rights the unit owner as landlord could lawfully have exercised under the lease, but § 3-102(e) makes those landlord-style rights available only if the tenant or unit owner fails to cure the violation within 10 days after the association notifies both of them. That 10 day window is the only cure period Vermont writes into the fine machinery, and it attaches to the landlord remedies, not to the fine itself.

Suspension is treated separately and more strictly. Subdivision 3-102(a)(18) permits an association to suspend any right or privilege of a unit owner that fails to pay an assessment, then draws four hard lines. It may not deny the owner or another occupant access to the unit, except as provided in § 3-116(q) for delinquent time-share owners. It may not suspend the owner's right to vote. It may not prevent the owner from seeking election as a director or officer. And it may not withhold a service if withholding it would endanger the health, safety, or property of any person. Note the trigger: the suspension power in (a)(18) is tied to failure to pay an assessment, not to an unpaid fine.

An unpaid fine is secured. Section 3-116(a) gives the association a statutory lien on the unit for any assessment attributable to that unit or fines imposed against its owner, and, unless the declaration says otherwise, for reasonable attorney's fees and costs, other fees, charges, late charges, fines, and interest charged under subdivisions 3-102(a)(10), (11), and (12). Recording the declaration is itself record notice and perfection of the lien under § 3-116(e), so no separate claim of lien is filed for each fine.

The payment waterfall in § 3-116(n) quietly matters to anyone trying to clear a balance. Unless the parties agree otherwise, the association must apply money it receives from a delinquent owner first to unpaid assessments, then to late charges, then to reasonable attorney's fees and costs and other reasonable collection charges, and only last to all other unpaid fees, charges, fines, penalties, interest, and late charges. Fines sit at the bottom, so partial payments will not retire them while assessments are outstanding.

Foreclosure has real gatekeeping. Under § 3-116(m) an association may not commence a foreclosure action unless, at the time the action is commenced, the owner owes at least three months of common expense assessments based on the periodic budget last adopted under § 3-115(a) and has failed to accept or comply with a payment plan offered by the association, and the executive board votes to commence foreclosure specifically against that unit. Subsection 3-116(o) then adds that unless the sums due include an unpaid assessment, no foreclosure may be commenced until the association has a judgment against the owner and has perfected a judgment lien. Section 3-116(p) requires every aspect of a foreclosure or sale, including method, advertising, time, date, place and terms, to be commercially reasonable, and § 3-116(j) routes the foreclosure itself through 12 V.S.A. chapter 172.

One coverage point sets fines apart from most of this act. Section 1-204(a)(1) extends subdivisions 3-102(a)(1) through (6) and (11) through (16), and section 3-116, to common interest communities created in Vermont before January 1, 1999, applying only to events and circumstances occurring after December 31, 1998. So an older Vermont condominium that escapes the rulemaking limits of § 3-120 is nonetheless bound by the reasonableness, notice and hearing requirements on fines and by the lien and foreclosure limits in § 3-116. The exception is a pre-1999 planned community of 24 units or fewer that is not subject to development rights, which under § 1-204(b) is subject only to §§ 1-105, 1-106 and 1-107 unless its declaration is amended to opt in.

If you are fined, the hearing under § 3-102(a)(11) is the first and cheapest place to fight it. The board is not obliged to pursue every violation: § 3-102(g) lets it decline enforcement where its legal position does not justify action, where the covenant or rule being enforced is or is likely to be construed as inconsistent with law, where the violation is not material enough to justify spending association resources, or where enforcement is not in the association's best interests, and § 3-102(h) forbids the board from being arbitrary or capricious in whom it pursues.

Subdivision 3-102(a)(16) lets an association require that a dispute between the board and an owner go to nonbinding alternative dispute resolution as a prerequisite to a court proceeding, so check the declaration before filing. § 4-117(a) permits a unit owner to bring an action to enforce a right granted or an obligation imposed by the title, the declaration, or the bylaws, and the court may award reasonable attorney fees and costs; in an action under § 3-116 the fee award is mandatory, because § 3-116(h) provides that a judgment or decree in any action brought under that section shall include an award of costs and reasonable attorney's fees to the prevailing party.

Two other timers are worth noting: § 3-116(f) extinguishes a lien for unpaid assessments unless enforcement proceedings begin within three years after the full amount becomes due, and § 3-116(i) requires the association, on a request made in a record, to furnish a statement of the amount of unpaid assessments against the unit within 10 business days, binding on the association, the board and every unit owner. Get that statement before you sell or refinance.