“Can they do that?” — The Authority of a Homeowners Association.
In North Carolina, a HOA is
usually initially formed by the developer of the planned community. A developer
of a planned community will go though the permitting process with the county
which usually includes preparing a plat or map of the development. That plat is
filed with the county register of deeds and can be copied or even downloaded
from the register of deeds website. In addition to the plat, a developer (also
referred to as the declarant) will file restrictive covenants (also known as
declarations) with the register of deeds.
When a person purchases a lot or house within that planned
community, their general warranty deed usually will refer to the plat by map
and page number to help identify what is being conveyed. It will also include
language that the deed is subject to all declarations and restrictions of
record. Assuming that everything is filed correctly, this binds the lot owner
to the declarations, even if they are not attached or specifically referred to
in the deed. It also binds the owner to information on the plat, primarily
easements for utilities or roads in the community.
In 1986, North Carolina enacted the North Carolina
Condominium Act to govern condominium developments. In 1999, a similar set of laws
was enacted called the North Carolina Planned Community Act, which encompasses
other residential subdivisions. These Acts are located in the North Carolina
General Statutes in Chapters 47C and 47F respectively. These two Acts govern
nearly every planned community in North Carolina since they were passed. Some
important provisions in the Acts apply retroactively, so even HOAs for planned
communities that were formed before the Acts were passed need to consider the
Acts in their decision making. The Acts contemplate the existence of a HOA and
a board of directors with broad powers and authorities. In some cases the Acts
allow their provisions to be set by or modified by the declarations, but in
other cases, they are inflexible or establish limits on the modifications
allowable.
The HOA itself is usually formed as a non-profit
corporation under Chapter 55A of the North Carolina General Statutes. Articles
of Incorporation are filed with the North Carolina Secretary of State and are
available at their website for download. The Articles, like most corporations
and non-profit corporations, are typically broad and mirror the declarations or
the powers listed in Chapter 47C and 47F. Some simply allow the HOA to engage
in all lawful purposes.
The declarations themselves establish the planned
community. They can be a brief single page, or much more lengthy. They will
establish the boundaries of the planned community and typically provide for a
HOA and the process for turning over control of the HOA from the declarant to
the homeowners. Usually they will also include provisions for assessments,
fines, and restrictions on the use of the property in the community. The
declarations themselves should also state how they can be amended. However, in
most cases, the Acts require at least a 67% majority of the members of the HOA
to amend.
The HOA is also usually governed by bylaws. Unlike
declarations, bylaws are not required to be filed with the register of deeds
although they often are. The bylaws of a HOA should only contain items that
govern the procedure of the HOA, such as meetings. In addition, the bylaws
usually include the terms, election procedure and numbers of directors.
The next governing document for a HOA is the rules and
regulations. The rules and regulations generally establish what day to day
rules are necessary or desired for the community. Things such as hours of
operation for the pool, community yard sales, and walking dogs are typically
the subject of the rules and regulations. Unless a restriction is present in
the declarations or bylaws, rules and regulations are established by the board,
and not the general membership.
When people refer to the “governing documents” or the
“condominium documents,” they are usually referring to the declarations, bylaws
and rules and regulations.
Finally, where the above authorities are silent, procedures
for membership and board meetings are governed by the latest version of
Robert’s Rules of Order.
The authority for a HOA and its Board comes from all these
sources. If the documents contradict each other, the priority is as follows:
Statutes (Chapter 55A, 47C, 47F) > Declarations and Articles > Bylaws
> Rules and Regulations > Robert’s Rules.
–Bradley A. Coxe is a practicing attorney in Wilmington, NC with
Hodges & Coxe PC who specializes in Personal Injury, Medical
Malpractice, Homeowner’s Associations, Contract and Real Estate disputes
and all forms of Civil Litigation. Please contact him at (910)
772-1678.