The Limits of Board Fining Authority

Condominium and homeowner association boards have real authority to impose fines for rule violations. That authority is an important tool for maintaining community standards and protecting property values. But it is not unlimited authority, and boards that treat their fine power as unchecked discretion often discover, when they try to collect, that the courts do not agree. Understanding where the line is, and why it matters for actual collections, is something every board should take seriously before issuing a fine.

Where Fining Authority Comes From

A board's power to fine does not come from the board itself. It comes from the governing documents. For condominiums, the declaration and bylaws, read together with New York's Condominium Act under Real Property Law Article 9-B, define what the board can and cannot do. For homeowner associations, the declaration of covenants and bylaws serve the same function. If those documents do not authorize fines for a particular type of violation, or if the fine amount exceeds whatever schedule or cap the documents establish, the board is acting outside its authority before the fine is even issued.

This is the first and most straightforward reason boards lose in court: they fine for things they were never authorized to fine for, or they issue fines in amounts that have no basis in any adopted schedule. Courts do not fill in those gaps on the board's behalf.

The Business Judgment Rule and Its Limits

The leading case governing board conduct in New York is Levandusky v. One Fifth Avenue Apartment Corp., decided by New York's Court of Appeals in 1990. That decision established that board actions are reviewed under the business judgment rule, the same standard applied to corporate directors. Under that standard, courts generally defer to a board's decisions and will not second-guess them simply because a unit owner believes the board was wrong or unreasonable.

But Levandusky deference has clear limits. A board decision, including a fine, will not be protected by the business judgment rule if it is arbitrary and capricious, if it is taken in bad faith, or if it reflects discriminatory or selective enforcement. Those are not narrow exceptions. Courts apply them with regularity when unit owners challenge fines, and boards that lose those challenges often find their fines rendered wholly unenforceable.

What Arbitrary and Capricious Actually Means

Arbitrary and capricious is a legal standard, not simply a description of a board acting unreasonably. In the context of condominium and HOA fining, a decision is arbitrary and capricious when it has no rational connection to the violation at issue, when it is imposed without any consistent standard, or when the punishment is so disproportionate to the conduct that no reasonable governing body could justify it.

A $1,000 fine for a fence painted the wrong color is a useful example. If the governing documents do not set a fine schedule, if the board has never imposed anything close to that amount for a similar violation, if the unit owner received no prior warning, and if the board cannot articulate any principled basis for that number, a court is likely to view that fine as arbitrary. The board did not make a judgment. It made a number up.

Arbitrariness also shows up in inconsistency. If the board fines one owner aggressively for a violation that other owners have committed without consequence, that selective enforcement is itself a form of arbitrariness, and courts treat it as a defense to collection. The standard is not that every owner must receive identical treatment in every case, but that enforcement must reflect a consistent, principled approach rather than personal animosity or favoritism.

Due Process Is Not Optional

Before any fine can be collected, the unit owner must have received proper notice of the violation and a meaningful opportunity to be heard. New York courts have been consistent on this point. A fine imposed without following the notice and hearing procedures set out in the governing documents is procedurally defective and often unenforceable regardless of whether the underlying violation was real.

In practice, that means the board must send a written notice identifying the specific violation, citing the governing document provision that was violated, stating the fine amount and the authority for it, and providing the owner with an opportunity to request a hearing or respond before the fine is assessed. If the declaration or bylaws require a hearing before any fine is imposed, the board cannot skip that step because the violation seems obvious or the owner seems unlikely to appear. Cutting corners on procedure gives the unit owner a ready-made defense in any collection proceeding.

Why This Matters When You Try to Collect

Boards sometimes treat fining and collecting as two separate problems. They are not. A fine that cannot withstand legal scrutiny cannot be collected. When a board attempts to recover a legally defective fine through Civil Court or Small Claims Court, the unit owner will raise exactly these defenses: no authority in the governing documents, no proper notice, no hearing, no rational basis for the amount. Courts take those arguments seriously.

The practical consequence is that a board which has spent months accumulating a fine balance against a non-compliant owner may find itself unable to recover any of it, because the fines were imposed in a way that does not hold up. Worse, the board may have created a record of arbitrary enforcement that affects its ability to collect legitimate charges from that owner going forward.

What Boards Should Do Instead

The answer is not to avoid enforcement. It is to enforce correctly. Every board should have a written, formally adopted fine schedule that sets specific amounts for specific categories of violations. That schedule should be proportionate: minor aesthetic violations warrant modest fines, repeat or serious violations warrant escalating consequences. Fines should follow written notices with clear cure periods. Hearings should be conducted and documented. Enforcement should be consistent across all unit owners.

A board that builds that foundation can fine with confidence and collect with confidence. A board that wings it will often find itself on the losing end of a challenge it could have avoided entirely.