Can My HOA Do that?

A homeowner association must act in conformity with its governing documents -- but even then its actions may not be legal.

      Disputes between property owners and their homeowners’ association (HOA) are all too common and they can just as frequently make mountains out of mole hills.

      To borrow a real-life example: a property owner neglected to obtain permission to build a structure over his wellhead before he actually built it. The as-built structure was professionally-designed, elegant and even used the same native stone as was used on the owner’s home itself. Unfortunately, the new building was also four inches larger than the restrictive covenants governing the association allowed. Despite the owner’s numerous attempts to obtain the association’s permission retroactively, the association stood firm and ultimately required the owner to tear down the new structure even though it otherwise would have authorized it but for the size differential. (As you can guess, this dispute was more about personality than compliance with the covenants – a not unusual aspect of many covenant enforcement disputes between HOAs and their members.)
      Generally speaking, HOAs interact with property owners in three principal ways: (1) collecting assessments for maintenance of the subdivision's common areas; (2) enforcing restrictions in the community against certain potentially objectionable uses of property such as allowing weeds to grow or parking inoperable vehicles, etc.; and (3) enacting rules and regulations that clarify or supplement the covenants to address unanticipated situations.
      In any of these three areas, a property owner may well wonder whether the HOA has the legal authority to take the action it is taking?
      In answering this question, the starting point is invariably to read all of the governing documents of the HOA to determine if the issue at hand has been addressed in them. Those documents, in order of comparative strength, are: (1) the subdivision’s Declaration (also called the “Covenants,” “Restrictions,” or perhaps the “Restrictive Covenants”); (2) the association’s Articles of Incorporation, (3) the Association’s Bylaws, and (4) any “rules and regulations” lawfully adopted by the association’s board of directors or membership. It is important to check that you are consulting the most recent versions of these documents as they may have been amended or entirely ”restated” from time to time.
      But even if these documents appear to grant the HOA the authority to undertake the challenged action, the action being taken may still not be legal on account of a state statute or judicial opinion (“precedent”) that limits the HOA’s authority to act regardless of what the documents say, and so these sources need to be reviewed as well.

(1) Assessments

      For example, an association’s process for collecting assessments is subject to detailed procedural requirements set out in North Carolina’s General Statutes; if the HOA does not follow these procedures, either the assessment itself or its collection effort may be invalid. In general, HOAs must budget for assessments, give notice to the property owners or the budget, and conduct a vote on the budget and proposed assessments.
      There are even greater procedural requirements for fine assessments where the HOA tries to collect money for behavior it believes is improper on the part of a property owner. Those procedures include providing notice to the owner of the alleged wrongdoing, and giving that owner the opportunity for a hearing at which the owner can present evidence and arguments why she should not be fined.

(2) Enforcement of Use Restrictions

      A second area in which associations typically interact with owners is in the enforcement of “use” restrictions found in the Declaration such as limiting improvements on the property to single-family residential structures, prohibiting nuisances, imposing architectural and landscaping requirements, and so on. In enforcement actions, the essential dispute between the parties is most often over whether the challenged restriction is the type of restriction that can be imposed in the first place, and whether, even if it is theoretically valid, it is written clearly enough to be understandable.
      The details in use restrictions can become quite specific, such as whether window treatments inside a home, but visible from the outside, meet certain requirements. Again, certain types of restrictions – although sounding valid enough – are governed by statutes that effectively nullify the covenants if they contradict the statute. For example, restrictions regarding satellite dishes, solar panels, displaying patriotic flags, and political signs are all subject to state statutes or federal regulations.
      Typically, at the heart of these disputes is whether the restriction is impermissibly ambiguous so as to leave compliance by an owner too difficult to ascertain. The general rule is that a court will enforce a given restriction so long as it is not ambiguous, and that where the court determines that the restriction is ambiguous, the court is then duty bound to resolve the dispute by imposing the less restrictive use of the property and nullifying the challenged restriction. For this reason, lawyers draft restrictions using very detailed language in an attempt to avoid ambiguity – and this practice leads to lengthy restrictive documents.

(3) Enforcing Rules and Regulations

      Finally, most HOAs are empowered to enact rules and regulations that help to clarify or carry out mandates contained in the Declaration or Bylaws. Such “rules and regs” frequently include placing limits on the hours of use for given amenities, imposing fees for the use of those amenities, or otherwise regulating what activities can occur in the common areas.
      The Board’s power to enact such rules and regulations is not absolute. Rather, the law requires that any such rules and regulations be “reasonable” and that they otherwise do not conflict with the other documents governing the subdivision. For example, if the Declaration sets a numeric limit on the number of owners who may rent their properties at any one time, and requires a vote of the members to change that number, then the HOA’s board of directors cannot circumvent that requirement simply by enacting a “rule.”   Courts have held that the following “rules and regs” were “reasonable” under the specific circumstances of the cases before them: prohibiting alcoholic beverages in a clubhouse; allowing the towing of unlicensed cars; and banning dog leashes in excess of 20 feet.
      To conclude, this article intends to present a very broad overview of the primary actions in which HOAs act, and the legal limits on those actions. What may be valid or “reasonable” in a specific situation will turn on the precise language used in the various documents governing the subdivision, and an in-depth analysis of that language in the context of “precedents” set by North Carolina courts in similar cases.