Joan Ross
Oyster Harbour
John Stone, President
Ed Bedford, Esq.
Senior Vice President
Community Associations
Services
*John Stone is not an attorney, and nothing
you hear from him today is legal advice.
1) NC Open Meeting Laws and
Sunshine Laws Don’t Apply to Home
Owners Associations
2) Which Records Owners Are
Entitled To Review
3) Amendments To Covenants Are
Hard To Enforce
Henry W. Jones, Jr.
hjones@jordanprice.com
1951 Clark Avenue
Raleigh, N.C. 27605—0669
Telephone: (919) 828-2501
In 1999 the Planned
Community Act set 2 new
standards:
A.
§ 47F-1-102. Applicability.
(d)
Notwithstanding the provisions of subsections (a)
and (c) of this section, any planned community created
prior to January 1, 1999, may elect to make the provisions
of this Chapter applicable to it by amending its declaration
to provide that this Chapter shall apply to that planned
community. The amendment may be made by affirmative
vote or written agreement signed by lot owners of lots to
which at least sixty-seven percent (67%) of the votes in the
association are allocated or any smaller majority the
declaration specifies. To the extent the procedures and
requirements for amendment in the declaration conflict
with the provisions of this subsection, this subsection shall
control with respect to any amendment to provide that this
Chapter applies to that planned community.
B.
§ 47F-2-117. Amendment of declaration.
(a) Except in cases of amendments that may be
executed by a declarant under the terms of the
declaration or by certain lot owners under G.S.
47F-2-118
(b), the declaration may be amended only by
affirmative vote or written agreement signed by lot
owners of lots to which at least sixty-seven
percent (67%) of the votes in the association are
allocated, or any larger majority the declaration
specifies or by the declarant if necessary for the
exercise of any development right. The declaration
may specify a smaller number only if all of the lots
are restricted exclusively to nonresidential use.
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new amendment provisions and restrictions
must be “reasonable”
new financial obligations by amendment are
per se unreasonable and invalid unless
approved by 100%?
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But, the Supreme Court also said:
“Lot owners take their property subject to the recorded
declaration, as well as any additional covenants contained in
their deeds. Because covenants impose continuing obligations
on the lot owners, the recorded declaration usually provides for
the creation of a homeowners' association to enforce the
declaration of covenants and manage land for the common
benefit of all lot owners, thereby preserving the character of the
community and neighborhood property values… In a
community that is not subject to the North Carolina Planned
Community Act, the powers of a homeowners' association are
contractual and are limited to those powers granted to it by the
declaration. Citing Wise v. Harrington Grove…
§ 47F-2-117. Amendment of declaration.
(b)
No action to challenge the validity of an
amendment adopted pursuant to this section
may be brought more than one year after the
amendment is recorded.
§ 47F-2-117. Amendment of declaration.
(d)
Any amendment passed pursuant to the
provisions of this section or the procedures
provided for in the declaration are presumed
valid and enforceable.
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”Where the Assessment Amendment disregards the purpose of
the Declaration's original provisions and completely eliminates
the benefits to builders, we hold the amendment unreasonable,
invalid, and unenforceable. Holding otherwise would permit
homeowners' associations to amend similar provisions
whenever they acquire the requisite number of votes for
approval, regardless of the original intent. As our Supreme
Court stated in Armstrong, “[t]his Court will not permit the
Association to use the Declaration's amendment provision as a
vehicle for imposing a new and different set of covenants,
thereby substituting a new obligation for the original bargain of
the covenanting parties.” citing Armstrong
 Be
careful
 Be
conservative
 Achieve
100% consent, if possible
 New
financial obligations are
scrutinized most closely
 Other
issues must be reasonable
 PCA
communities enjoy the 1 year
safety valve
 G.
S. §47F-2-117(d) is effective
for all associations, but has not
been tested
4) Be Reasonable With Fines And
Foreclosure
Judge orders HOA insurance
company to pay family
$20,000
Guidance For Association Fining Procedures
A. Determine if the Association’s Declaration contains a fining provision. If a
fining provision exists in the Declaration, follow that provision. If the
Declaration does not contain such a provision, proceed with the steps
below.
B. The Association, through its Board of Directors, should establish and
follow a logical and coherent policy regarding covenant violations, i.e.
warning letter to offending homeowner identifying violation and remedial
action required, follow-up letter(s), etc. Once adopted, this procedure
needs to be communicated to all homeowners.
C. The following steps assume that the adopted policy is followed and the
violation remains has not been corrected.
Assuming no fining provision exists in the Declaration,
follow the provision contained in North Carolina State Law
(N.C. Gen. Stat. 47F-3-107.1), as follows:
1. Mail a letter to the homeowner identifying the nature of
violation and referencing the specific provision of declaration,
bylaws, or rules and regulations that has been violated. You
may want to take a picture to illustrate a visual violation. We
generally suggest that homeowners be given two weekends to
correct a typical violation. Obviously something like bringing in
a trash can does not require that much notice. The letter should
contain a specific date, such as on or before October 29th. If the
letter says within two weeks, you can wind up arguing about
deadlines.
2.Send a second warning letter (optional) which states it is the final
warning. Once again, set a specific date for compliance.
3.If the violation is not corrected in response to the warning letter(s),
send a final letter. State they were sent a warning letter(s) which has been
ignored. Inform the homeowner that a show cause hearing will be held
and that a fine may be imposed. Inform them of the time and place of the
show cause hearing. Inform them that they have the right to bring an
attorney to the meeting. Be reasonable and allow adequate time between
the letter and the hearing date. I suggest a minimum of ten (10) days.
4.The hearing is to be held before an adjudicatory panel appointed by
Board or in front of Board. Be sure you have arranged a suitable location.
Someone’s home is not recommended.
5. At the hearing, the adjudicatory panel or Board must act impartially.
Listen carefully to what the homeowner has to say. Remember that the
homeowner may bring their attorney- if this happens it is a good idea to
have an attorney to represent the association present.
6. After the homeowner has presented his or her case and explained either
why they are not in violation or why they should not be fined, the
homeowner may be excused from the hearing. After the homeowner leaves,
the Board should determine if a fine should be levied and the appropriate
amount of the fine, up to $100.00 per day per violation. The fine should be
in line with the nature of the offending activity (for example, $100 per day
for an unauthorized above-ground swimming pool; $50.00 for a junk car,
$25 for an improperly parked car or garbage can violation). There are no
rules other than commons sense and those adopted by the Board.
7. The homeowner should then be notified (in writing) of the Board’s
decision and the date upon which a daily fine will commence. The Board
must wait at least 5 days after the hearing (and after providing written
notice) before levying a fine. The homeowner may still remedy the violation
and avoid the fine until that deadline is reached. If the hearing was held
before an adjudicatory board and the Board is imposing a fine, the letter
should include the right to appeal the decision within fifteen days to the
Board of Directors.
8. If the hearing was held before and adjudicatory board, and the
homeowner files an appeal repeat the above steps, beginning with
establishing an appeal date.
9. If the violation is not remedied, start fining. Be sure that the fine is
accounted for on the homeowner’s ledger. Send the homeowner a monthly
invoice for the fine.
10. At this point, the Association should hire an attorney if they have not
already done so. Under North Carolina law, the fine is an assessment. An
attorney can file a lien against the homeowners property to secure payment
of the fine if payment of the fine becomes past due. The lien may be
ultimately foreclosed. Note that the foreclosure must occur pursuant to
judicial foreclosure, not power of sale foreclosure as in the case with the
collection of assessments.
11. The Association should consider waiving all or part of the fine, but
generally not attorney fees, if the homeowner ultimately complies. The
purpose of fining is to get the homeowner to comply with the covenants,
not to generate revenue for the HOA.
The content of this presentation is for general information only. Associations
should consult with their attorney in establishing fining policies and
procedures.
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Payment is due on the 1st day (day 1) and late after
the 15th. Late fees are applied on the 16th. (check
your coupon book for exact dates, the due and late
dates may not be the 1st and 16th, it can vary by
association).
The first late notice is sent after late fees are
applied.
After day 60, the final late notice is sent.
After day 90, a 15-Day Demand Letter is sent. If no
response to the demand letter within the 15 days,
the account is sent to the attorney.
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
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The attorney sends their demand letter, which
includes a 10 day grace period. Attorney fees
are paid by the homeowner.
If no response to the attorney demand letter,
a lien is placed on the property. A letter
demanding payment including attorney fees is
sent to the homeowner with a copy of the lien.
The grace period for payment is 30 days.
After this 30 day time period, the foreclosure
process is begun. Foreclosure authorization
from the BOD is obtained prior to the
foreclosure hearing.
Remember…
At any time before the 90 days, the owner can work with CAS to put a
payment plan in place. Homeowners are expected to fulfill any
commitments made in a payment plan. This is generally a one-time
opportunity.
After an account is turned over to the attorney, the manager, CAS
staff, or the Board should not enter into dialogue with the owner
regarding the account. The attorney will be the only contact for the
owner regarding this situation.
Until the account is current, all checks must be sent to the attorney,
not to CAS or to a Board member. Any check sent to CAS instead of
the attorney will be forwarded to the attorney and considered received
when it is in the attorney’s office.
Until the account is current and all fees are paid, late fees will be
generated and the lien will be kept in place; eventually the process
may begin again.
Four Things All Boards Should Know About House Bill 882
1) HB882 would put all management companies in NC out of business on
10/1/15 as “The Commission shall not issue a license to provide
community association property management to a partnership,
association, corporation, limited liability company, or other business
entity.”
2) Community managers would have to become Licensed Real Estate
Brokers and only individual brokers could contract to provide
management services.
3) All associations would have to register with the Commission, pay a
$100 annual fee, and provide the names and address of all Board
members.
4) Board members would be required to take a four hour class provided
by the Real Estate Commission within 60 days of taking office. The
course would be taught by the Commission and will cost $75. Any
board member who refuses to take this class would be subject to daily
fines.