A Cautionary Tale
A Legal Moment

Community Association Leaders -- A Cautionary Tale!

A Recent North Carolina Case Illustrates the Potential Pitfalls of Using Inappropriate Pressure to Wrest Payment of Late Dues and Assessments.

   Running a community association can be a frustrating experience – especially collecting past due assessments from your members – but a recent opinion by the North Carolina Court of Appeals underscores how important it is to “play by the rules” or potentially suffer dire consequences.

   In a case arising out of Mecklenburg County, Faucette v. 6303 Carmel Rd., LLC, 775 S.E.2d 316 (Ct. App. 2015), the president of a commercial condominium association had a longstanding dispute with one of the owners, a dentist, over past due assessments.

   The president himself owned several units in the condominium including one adjacent to the dentist.  Coincidentally, a water pipe burst in the adjacent unit, causing extensive damage to the dentist’s unit.

    The dentist’s insurance policy paid for all of the damages to his unit but for the $5,000 deductible on the policy.  The president’s insurance company also covered the loss and part of the claim proceeds it paid to the president included a reimbursement to the dentist for the $5,000 deductible he had paid.  The insurance company assumed the association president would in turn pay over to the Dentist.

    Unfortunately, that did not happen.  Instead, the president unabashedly withheld making the $5,000 payment until the Dentist agreed to pay the alleged past due assessments.  After a great deal of back-and-forth wrangling, the dentist sued the president individually (rather than as president of the association) for Conversion (essentially theft) and for violating North Carolina’s Unfair and Deceptive Trade Practice Act (“UDTPA”). N.C. Gen. Stat. §75-1.1 et seq. (Notably, the Association itself was not sued.)

    The president defended the suit on the theory that his actions were neither “unfair and deceptive” nor “in or affecting commerce” – two essential elements of a UDTPA claim –  arguing that this was simply a "private and personal dispute” between two individuals or, alternatively, an “intra-corporate dispute among and between members of the condominium association.”

    The trial court disagreed with his analysis, ruling that the president’s conversion of the $5,000 amounted to an unfair and deceptive trade practice.  Pursuant to the remedies afforded successful plaintiffs in UDTPA claims, the court then trebled the dentist’s damages to $15,000 and further ordered the president to reimburse the dentist for $27,000 in attorneys’ fees and costs, rendering final judgment in the case personally against the president to the tune of $42,000.

    The Court of Appeals affirmed the trial court’s judgment.  Noting that an “inequitable assertion of power or position” can amount to an unfair trade practice for purposes of Chapter 75, the appellate court held that the president “abused [his] position of power to withhold payment of the money [the dentist] legally was owed, solely to pressure [the dentist] to resolve . . . an ongoing dispute involving payment of condominium association dues. This wrongful conduct is unfair or deceptive within the meaning of the statute.”

    Although the Faucette case involves facts that are not likely to recur anytime soon, it does nonetheless serve as a cautionary tale for community association directors and officers.  What might sound like a good idea at the time in terms of putting pressure on a deadbeat owner to pay up can result in unanticipated and fairly catastrophic personal liability.

    As we have stated in a past article, it is important to follow the dictates both of your community association’s governing documents and North Carolina law governing your association, be it a condominium or homeowners association.


Other Recent Articles
Philip Roth is a founding shareholder at Marshall, Roth & Gregory, PC. One of the firm's principal litigators, Philip's practice involves myriad issues involving community associations.

To receive more information on this topic or to suggest topics for future editions of "A Legal Moment," feel free to contact Philip by email ( or telephone (828.281.2100).

Or visit our firm's website.

Other articles which may be of interest to you may be found in our Newsletter archives.

You may not rely on this content as legal advice for any specific situation, but should instead contact an attorney for specific advice.
Copyright © 2016 Marshall, Roth & Gregory, PC, All rights reserved.
Email Marketing Powered by MailChimp