Excessive Fines Cause Courts To Find Liability – A Lesson In Fair Debt Collection Practices

Husch Blackwell LLP

If your Association excessively fines an owner, expect a court to find a way to penalize the association.

The Facts

In 2004 Mr. and Mrs. Mills (“Mills”) bought a home in the subdivision called Galyn Manor. In 2007 Galyn Manor began fining Mills for a commercial work vehicle parked in their driveway in violation of the association rules. Galyn Manor advised Mills that the fines would be $50 for each day that the commercial vehicle was parked on their property. By the end of 2007, the fines amounted to $645. In January of 2008, the association hired the Andrews Law Firm (“Law Firm”) to collect the fines. Between 2008 and May of 2015 many demands for payment were made, and many payments were made. In addition to being charged quarterly assessments of $105, Mr. and Mrs. Mills were notified of the following:

  • March 2008 – A $1,500 administrative fee (which was added to $660 of fines);
  • April 2008 – The Law Firm notified Mills that they owed $2,632.84;
  • June 2008 – A Lien filed for $3,581.88;
  • August 2010 – The Law Firm notified Mills that they owed $4,256.88;
  • October 2010 – A Lien filed for $4,791.58;
  • June 2012 – After receipt of some payments, Law Firm advised Mills that they owed $14,433.86. This included a charge of $6,450 that was on “block entry” for March 2011;
  • May 2013 – After receipt of another payment, Galyn Manor notified Mills that they owed $15,473.75 ($5,268 of which was attorney fees and costs). (The total charges were $19,864.75, offset by payments of $4,391.) Only $2,426.26 of the charges were quarterly assessments.
  • August 2014 – Gayln Manor and Law Firm claim the balance due is $9,249.14 going back to 2008.
  • May 2015 – Galyn Manor had recorded $28,938.83 in liens against the Mills’ property.

A number of suits were filed during the process. In the end, the case made its way to the court of appeals on various claims of violations of several consumer protection and collection acts.

Court of Appeals

The primary issue was that the fines levied by Galyn Manor violated various consumer and collection acts because (1) the fines were not authorized by the association’s governing documents, and (2) because some of the debts sought to be collected were beyond the statute of limitations. In the end the court found that:

  1. Although some of the Law Firm’s actions were exempt from violations of the act (professional services were exempt) services that could be provided by a collection agency were not exempt; and
  2. Where the Law Firm’s legal services were exempt on vicarious liability claims, the association was not exempt.
Lessons Learned
  1. If you are going to fine a unit owner, you must follow your association governing documents;
  2. Fines must be reasonable;
  3. Lawyers who act outside of the law may make their association client liable; and
  4. Make sure your lawyers know what they are doing in the collection world.

Andrews & Lawrence Professional Services, LLC v. Mills, No. 5 ___ A.3d ___ (Md. Ct. App. Jan. 29, 2020) Unpublished.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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