November 25, 2024
OAG 24-12
Subject:
(1) Whether the Planned Community Act (the “Act’) applies to
an association overseeing a community, development or
neighborhood consisting of both residential and non-residential
lots.
(2) Whether the Act grants an association the authority to
impose fines on members for non-compliance with rules and
regulations when the governing documents do not provide for the
imposition of fines.
Requested by:
Jason M. Nemes
Majority Whip, Kentucky House of Representativdes
Written by:
Jeremy J. Sylvester, Assistant Attorney General
Syllabus:
(1) The Act applies to “planned communities,” which are
statutorily defined as a group of residential dwellings composed
of lots for which a deed, common plan, or declaration requires
owners to be members of an association or pay membership fees
to support maintenance of common areas. The Act will still apply
to an association’s governance of a group of residential dwellings
meeting the definition of a planned community even if there are
also non-residential lots by, near, or among the group of
residential dwellings. The Act, however, will not apply to the
association’s governance or oversight of non-residential lots.
(2) The Act does not grant authority to associations to impose
fines on lot owners in a planned community who fail to comply
with restrictions and rules of the association when the existing
governing documents do not allow for the imposition of fines.Opinion of the Attorney General 24–12
November 25, 2024
Page 2
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Opinion of the Attorney General
The General Assembly passed the Planned Community Act in 2023.1 Prior to
that time, Kentucky lacked statutory laws addressing homeowner associations and
their governance of neighborhoods subject to covenants and deed restrictions.2 In
absence of such laws, homeowner associations enforced community rules and
regulations under a breach of contract theory based on the text of their governing
documents. See e.g., Colliver v. Stonewall Equestrian Estates Ass’n, Inc., 139 S.W.3d
521 (Ky. App. 2003) (interpreting restrictive covenants to determine whether
homeowner association has authority to approve or disapprove the construction of a
detached garage); Hensley v. Gadd, 560 S.W.3d 516, 522 (Ky. 2018) (“Parties are
bound by the clear meaning of the language used [in restrictive covenants], the same
as any other contract.”). Under this regime, some homeowner associations found it
difficult to effectively raise revenue to maintain common areas and to enforce
restrictions against non-compliant lot owners when the association’s bylaws, recorded
covenants, or deeds of restriction had been poorly drafted by developers.3
Homeowners suffered property value loss as common areas deteriorated.4 Some
associations also lacked formal rules for their governance and owners had no right to
financial transparency, which enabled association officers to abscond with or
mismanage homeowner association fees.5 The mandatory provisions of the Act were
intended to remediate these problems by serving as gap fillers for inadequate
association governing documents.
House Majority Whip Jason Nemes presented the Office with the following
questions about the Act:
(1) Does the Act apply to an association overseeing communities,
developments or neighborhoods consisting of both residential and non-
residential lots?
The Act applies to all developments or neighborhoods in Kentucky meeting the
statutory definition of a planned community. KRS 381.786(1). However, the Act’s
requirements do not invalidate any provision of a governing document of a planned
community if that document was adopted and recorded prior to June 29, 2023. Id.
Anyone wishing to establish a planned community after June 29, 2023, must file and
record a declaration with the county clerk of the county or counties where the planned
community is located. KRS 381.786(2). A “declaration” is any recorded instrument
1 2023 Ky. Acts ch. 23.
2 See testimony of former Senator, Ralph Alvarado, and attorney, Richard Hornung, Interim Joint
Committee on the Judiciary (Nov. 2, 2022), available at
https://ket.org/legislature/archives/2022/interim/interim-joint-committ….
3 Id.
4 Id.
5 Id.Opinion of the Attorney General 24–12
November 25, 2024
Page 3
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that “imposes restrictions, covenants, conditions, or maintenance or operational
responsibilities for any common areas on an association” or grants authority to an
association to impose assessments on lots or lot owners to pay “for maintenance or
services for the benefit of some or all of the lots or the common area.” KRS 381.785(8).
KRS 381.785(13) defines a planned community as follows:
(a) “Planned community” means a group of residential dwellings,
excluding condominiums, composed of individual lots for which a
deed, common plan, or declaration requires that:
1. All owners become members of an association;
2. Owners or the association hold or lease property or facilities
for the benefit of all owners; or
3. Owners support by membership fees or property or facilities
for all owners to use.
(b) “Planned communities” shall not include:
1. Any deed, subdivision plat or plan, or declaration which is
recorded whereby the sole common facility for sharing
maintenance expenses is for shared or common roadways
providing access to multiple lots; or
2. A current development or neighborhood that does not currently
have a homeowners’ association established by declaration,
subdivision plat, or deed.
The definition of planned community contains other defined terms.
“Residential dwelling” is “a building or portion of a building that is designed and
intended for use and occupancy by a single household and not for business purposes,
and which may share common walls, roofing, or other common structural elements.”
KRS 381.785(16). “Association” is a defined as “a nonprofit corporation or
unincorporated organization that is composed of lot owners in a planned community
that is responsible for the administrative governance, maintenance, and upkeep of
the planned community.” KRS 381.785(2). Last, “lot” means “any plot or parcel or real
property designated for separated ownership or occupancy and is either shown on a
recorded subdivision plat for a planned community or the boundaries are described
in the declaration.” KRS 381.785(10).
It is the Office’s opinion that a neighborhood or community may still meet the
definition of a planned community even if it contains non-residential lots within,
among, or abutting a group of residential dwellings. This conclusion is supported by
the plain statutory language of the definition, which only specifically excludes
condominiums from being a part of a planned community. Century Aluminum of Ky.,Opinion of the Attorney General 24–12
November 25, 2024
Page 4
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GP v. Dep’t. of Revenue, 664 S.W.3d 546, 557 (Ky. 2022) (“When presented with an
issue of statutory interpretation, we begin with the plain words of the statute.”)
Moreover, “a statute must be read as a whole and in context with other parts of the
law.” Id. at 558 (quoting Lewis v. Jackson Energy Coop. Corp., 189 S.W.3d 87, 92 (Ky.
2005). A planned community will necessarily include more than a group of residential
dwellings. In fact, an association is granted authority over the maintenance of
common areas used and enjoyed by those living in the community. See KRS
381.785(5) (defining common area); KRS 381.796 (governing assessments for common
area expenses by the association). Moreover, a residential dwelling may consist of
only a “portion of building used for designed and intended for use and occupancy by
a single household and not for business purposes.” KRS 381.785(16). This definition
implies that the other portion of the same building may be used for business purposes.
Accordingly, the Act will apply to an association overseeing a community that
includes both residential and non-residential property. To interpret the statute
otherwise would render the Act “meaningless or ineffectual” and bring about “an
unreasonable result.” Century Aluminum of Ky., 664 S.W.3d at 558.
The Office, however, does not believe the General Assembly intended the Act
to apply to the association’s oversight of non-residential lots located within or among
the group of residential dwellings meeting the definition of a “planned community.”
By definition, a planned community consists only of a “group of residential dwellings.”
Moreover, the Act only applies to planned communities. KRS 381.786(1). Under the
plain language of these statutes, the requirements of the Act do not apply to an
association’s oversight of non-residential lots. See Century Aluminum of Ky., 664
S.W.3d at 558 (“When the meaning of the statutory language is plain and
unambiguous, a court cannot base its interpretation on any other method or source.”)
Even though the Act’s requirements do not apply to non-residential lots, the
Office recognizes the possibility that non-residential lots may be subject to covenants
and restrictions enforced by an association. See Hensley, 560 S.W.3d at 521–22 (when
interpreting restrictive covenants, courts examine the intent of parties as expressed
in the text of the covenant in consideration of the general scheme or plan of
development); Triple Crown Subdivision Homeowners Ass’n, Inc. v. Oberst, 279
S.W.3d 138, 140–41 (Ky. 2008)(same). In those instances, the association must rely
on the applicable provisions of the governing documents to enforce rules and to
impose assessments on non-residential lots. The Act cannot serve as a gap filler to
address deficiencies in those governing documents concerning the association’s
oversight over non-residential lots.Opinion of the Attorney General 24–12
November 25, 2024
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(2) Does the Act allow an association’s board to fine a member of the covered
association when the pre-existing governing documents do not provide
for fining the member, but does provide for other means of enforcement
for violations of the association’s governing documents?
Before the Act, an association could not assess fines against non-compliant
owners when the associations governing documents did not provide for fines. See e.g.,
Hans v. Villas at Andover Homeowners Ass’n, Inc., No. 2021-CA-0548, 2023 WL
4035462, at *8–10 (Ky. App. June 16, 2023) (decided before the Act’s effective date
and holding that an association had no authority to fine lot owners absent a provision
allowing for fines in the governing documents). The Act was intended to remediate
multiple problems with the governance of planned communities arising from poorly
drafted governing documents, including the enforcement of rules and regulations
against lot owners, and fines may serve as a deterrent for obstinate owners who
refuse to abide by rules and regulations of a planned community. With that said, the
Office believes the Act only provides enforcement mechanisms for the collection of
fines imposed under the authority granted to an association by its governing
documents. The Act did not go so far as to grant associations the power to impose
fines when an association’s existing governing documents do not provide for the
imposition of fines.
The Act was codified in KRS 381.785 to KRS 381.801. KRS 381.797 and KRS
381.799 are the only statutory sections mentioning fines. KRS 381.797(1) states:
In addition to the provisions of the declaration, bylaws, rules, or
regulations of the association the assessment for each lot shall consist
of:
(a) The allocated common expense liability;
(b) Fines for violations levied by the board;
(c) Individual assessments for utility services that are imposed or levied in
accordance with the declaration;
(d) Costs of maintenance, repair, or replacement incurred due to willful or
negligent act of an owner or occupant of a lot or the family, tenants, guests,
or invitees or an owner or occupant of a lot; and
(e) Costs of charges associated with the enforcement of the declarations,
bylaws, rules and regulations of the association, and any provision of this
section, including but not limited to reasonable attorney fees, costs, and
other expense.Opinion of the Attorney General 24–12
November 25, 2024
Page 6
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Id. (emphasis added). KRS 381.797(2) requires the association board to give a lot
owner notice and opportunity to be heard prior to imposing a charge for fines,
damages, or individual assessments. Last, KRS 381.799(1) provides for a statutory
lien in favor of associations on a lot for the non-payment of assessments or charges
levied under KRS 381.797, “as well as any related interest, fines, administrative late
fees, enforcement assessments, collection costs, or reasonable attorney fees.”
The Act defines “assessment” as “the liability for an expense that is allocated
to a lot in a planned community in accordance with government documents.” KRS
381.785(1). The plain text of this definition limits liabilities allocated to lot as those
established under the governing documents. Governing documents, in turn, are
defined as “the articles of incorporation, bylaws, plat, declaration of covenants,
conditions and restrictions, rules, regulations, policies, and guidelines of an
association, or other written instrument granting the association the authority to
manage, maintain, or otherwise affect the property under its jurisdiction.” KRS
381.785(9). The Office believes that KRS 381.797(1) broadens the general definition
of “assessment” so that an assessment for a lot shall include other liabilities, even if
those are not explicitly considered “assessments” under the governing documents.
The plain text of KRS 381.791(1) supports this interpretation. The list of
allocated liabilities for each lot that associations “shall” impose as an assessment is
prefaced with the phrase “[i]n addition to the provisions of declaration, bylaws,
rules or regulations of the association.” In using this prefatory language, the General
Assembly granted associations the authority to include the listed liabilities as part of
an assessment for a lot “in addition to” liabilities the governing documents define as
assessments. The General Assembly perhaps should have used the statutorily
defined term, “governing documents,” in this prefatory language. But the Office
believes the General Assembly was referring to “governing documents” when it used
the phrase “declaration, bylaws, rules or regulations” since all those instruments are
included as examples of “governing documents” under the statutory definition of the
same. KRS 381.785(9).
By including an itemized list of liabilities, including “fines levied by the board,”
as part of an assessment, the General Assembly intended these liabilities to be legal
and enforceable against lots in a planned community just like any other
“assessments” specifically mentioned in the governing documents. As a result, the
association may use the enforcement mechanisms in the Act applicable to
assessments. Namely, the association may include these liabilities as part of its lien
for assessments against a lot and may collect its reasonable costs and attorney feesOpinion of the Attorney General 24–12
November 25, 2024
Page 7
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in an action to collect liabilities that go unpaid. KRS 381.797(1)(e); KRS 381.799(1).
Interpreting the statute in this manner also effectuates the purpose of the Act to
address ineffective governing documents that were hampering association’s efforts to
enforce rules and regulations. See Century Aluminum of Ky., 664 S.W.3d at 558 (the
“ultimate goal” when interpreting statutes is to give effect to the intent of the General
Assembly, as derived from statutory language or “as generally understood in the
context of the matter under consideration”).
Even though the Act provides enforcement mechanisms for the collection of
fines that association may levy against a lot, KRS 381.797(1) does not independently
grant authority to associations to impose fines. Compare KRS 381.791(1) with N.C
Gen. Stat. §47F-3-102(12) (association may impose reasonable fines for violations of
rules and regulations) and, Fla. Stat. § 720.305(2) (association may levy reasonable
fines for violations up to a maximum of $100 maximum unless otherwise provided in
governing documents). Rather, the statute assumes an association has already
determined the liabilities that “shall” be included under an “assessment” based on
some identifiable criteria, either in the Act or the governing documents.6 In fact, the
verbs used to describe each element of an assessment are in the past tense. See e.g.
KRS 381.797(1)(b) (“[f]ines for violations levied by the board”). The Act also does not
provide any criteria for determining fine amounts in KRS 381.797(1) or elsewhere.
For these reasons, it is the Office’s opinion that the Act does not grant
independent statutory authority to an association to impose fines against lots in a
planned community when the association’s governing documents do not provide for
the imposition of fines. If an association desires to impose fines against lot owners, it
must first properly amend its governing documents to allow for fines.
Russell Coleman
ATTORNEY GENERAL
Jeremy J. Sylvester
Assistant Attorney General
6 For example, the allocated common expense liability is determined in accordance with KRS
381.796. Utility assessments are those “imposed or levied in accordance with the declaration.” KRS
381.797(1)(c).