Effective Use of Fines as a Deterrent for Bad Behavior in Co-ops and Condos

Dear Mary:

Our bylaws allow us to fine shareholders when they don’t play by the rules. We’ve updated several older policies to increase the dollar amounts of those fines. They’re now at a level we were sure would be a serious deterrent. But we’re still seeing some of the same bad behaviors. Now we’re wondering: Do fines even work? What are we missing?

—─Fining in FiDi

Dear Fining:

It’s usually more effective to focus on creating positive results for behaviors you do want rather than creating negative results for behaviors you don’t want. That’s been a theme in this column. But sometimes that approach isn’t available, and you have to emphasize what will happen to rule breakers. It seems logical that threatening a fine would serve as a deterrent to bad behavior. And it often does — in buildings and in society. But as you’re seeing, it’s far from a guaranteed approach. Here are a few tips for making your use of fines as effective as possible.

Make sure shareholders know. A fine that no one knows about can’t possibly be a deterrent. As discussed in last month’s column, you need to communicate the information, perhaps more than once — and perhaps directly to specific individuals.

Make it big enough. Although you’ve increased your fine amounts, they still may not be high enough. Consider how the fine compares with other costs to shareholders. Is a $50 late fee meaningful to someone who’s consistently late on their $3,000 monthly maintenance? You may want to discuss fine amounts with your attorney or management company. 

Show that you’re serious. If shareholders think you won’t catch them, they may be willing to take their chances. Your job is to create more certainty. For example, let them know you’ll be checking Vrbo and Airbnb listings before approving a shareholder’s “guest.” Make sure you impose the fine. If possible, publicize that you’ve done so.

Frame it the right way. You might frame a fine as being compensation for a cost the building has incurred. But research shows that fines are more of a deterrent when you frame them as retribution for violating a social norm. So if someone’s dog keeps soiling the hallway carpet, don’t describe the fine as covering the cleaning cost. Instead, clarify that it’s for being an inconsiderate neighbor.

Consider non-monetary fines. If your bylaws allow it, a fine could be the loss of a related privilege. Someone who’s broken the rules in the pool might lose the use of that amenity. Someone who rents out their unit might not get permission to have overnight non-family guests in the future. Look for things that might be more impactful than money.

Don’t inadvertently encourage bad behavior. Oddly enough, fines can actually increase the very behaviors you’re trying to stop. How could this be? Because the perpetrator can view the fine as a reasonable price to pay for what they want to do — and thus take it as a permission. Say you have a $250 fine for renting a unit on Airbnb. If a shareholder is getting $300 a night for a week’s stay, that may strike them as a good deal. Maybe they just need to bump their price up a bit to cover the “kickback” to the building. Avoid this problem by making sure the fine is big enough, meaningful and certain to be imposed.

Keep in mind that fines are costly to you also. It takes time and effort to levy them and to ensure payment. Use the tips above to make your fines as much of a deterrent as possible.