The Pretty Committee

Many homeowner associations have an architectural review committee or board, whose job it is to oversee the appearance and structure of homeowner’s lots and enforce the declarations and the rules of a planned community. The declarations limit the amount of power the ARC has over each homeowner’s lot. Some are limited only to setbacks and height requirements and some are more expansive in requiring or prohibiting certain architectural elements. Some are confined to structure and others can approve or not approve a set of plans for purely aesthetic reasons. Under North Carolina law, if that broad discretionary power is included in the declarations (aka restrictive covenants) they are enforceable. However, the exercise of the authority to approve or not approve a particular architectural element is not unlimited. A declaration is enforceable only if the exercise of the power in a particular case is reasonable and in good faith.

Practically, it is very difficult to prove that a board or committee has not acted in good faith in making a determination about a violation. Boards have the benefit of the “business judgment rule” which essentially allows boards of HOAs, as well as other types of corporate entities, to make bad or stupid business decisions, as long as they were done in good faith. Some things to look at in trying to build a bad faith claim:

• Does the board have its own procedure for making ARC decisions, and did it follow that procedure?
• Did the board make the decisions without a review of actual documents, plans, a site inspection, or arguments of the homeowner?
• Is the denied detail essentially the same as other, approved, details?
• Did it make a proper denial? Some declarations will provide that acceptance by the ARC is automatically granted if the ARC does not deny an application in writing in a certain amount of time.

If a homeowner is found to be in violation of an architectural detail, after a hearing and an opportunity to be heard, the North Carolina General Statutes allow a fine of $100 per day for the violation for each day more than five days after a violation occurs. An HOA’s particular declarations may provide for specific hearing procedures and a different fine structure (although it cannot exceed the statutory amount).

-Bradley A. Coxe is a practicing attorney in Wilmington, NC who practices in Personal Injury, Car Accidents, Medical Malpractice, Contract and Real Estate disputes, and all forms of Civil Litigation. Please contact him at (910) 772-1678.