One of the most common questions asked by community association boards and managers is: “Can the board simply adopt a rule addressing a problem in the community?” The answer depends on the source and scope of the association’s authority.
While most declarations grant boards some authority to adopt rules and regulations, that authority is not unlimited. In North Carolina, an association’s rule-making power must be grounded in authority contained within the recorded declaration or bylaws, and any rules adopted must be reasonable and consistent with applicable law.
Rule-Making Authority Begins with the Declaration
Before adopting any rule, boards should first determine whether some recorded document in the owner’s chain of title grants the association to regulate the subject matter at issue. Many declarations contain broad language authorizing boards to adopt rules and regulations concerning the use of common areas and association-owned property. Boards use this authority to adopt rules for pools, tennis courts and clubhouses, and activity on other common areas. Most declarations also contain some implicit authority to regulate changes to lots through the architectural approval process. Where boards get in trouble, however, is when they seek to supplement vague or poorly drafted restrictions related to lots and behavior on private property. Vague language stating an association can adopt rules and regulations is not enough, for example, to establish quiet times on lots, prohibit someone from mowing before or after particular hours, or even where someone can park on their own property. Boards need to review their rule making authority carefully and work with their manager and attorney to determine if they have sufficient authority to adopt a particular rule, or if that would require an amendment to a declaration.
Substantive Restrictions Generally Belong in the Declaration
North Carolina courts have repeatedly recognized that significant restrictions affecting an owner’s property rights should be contained in the recorded declaration rather than created through board-adopted rules.
The North Carolina Supreme Court’s decision in Armstrong v. The Ledges Homeowners Association, Inc., 360 N.C. 547 (2006), is one of the leading cases in this area. In Armstrong, the Court emphasized that restrictions imposed by an association must be reasonable in light of the original intent of the governing documents and the expectations of owners who purchased property in reliance upon those documents. The Court rejected the notion that an association could use a broad amendment power to impose entirely new and unexpected burdens on owners.
Likewise, in McDougald and Lavigne v. White Oak Plantation Homeowners Association, Inc., the North Carolina Court of Appeals invalidated a declaration amendment creating rental restrictions because the restrictions were not consistent with the original intent reflected in the governing documents. Although unpublished, the case demonstrates the continued willingness of North Carolina courts to scrutinize new restrictions that significantly affect ownership rights.
These cases serve as important reminders that substantive restrictions—particularly those affecting leasing, occupancy, property use, or financial obligations—are generally matters for the declaration rather than board-adopted rules.
Rules Must Be Reasonable
Even when a declaration authorizes rule-making, the resulting rules must be reasonable. A rule should further a legitimate association purpose, be consistent with the governing documents, and be applied uniformly. A ridiculous, but perhaps helpful example is this: associations can adopt rules for the pool, but could not require that everyone visiting the pool dance the macarena before entering the pool.
Ultimately, only a court can enter a final determination as to whether a rule is or is not reasonable. Courts are more likely to uphold rules that clarify (but don’t exceed) existing restrictions, govern the use of common areas, promote safety, or facilitate community operations. Conversely, rules that create new restrictions not contemplated by the declaration or that impose unreasonable burdens on owners are vulnerable to challenge.
Practical Guidance for Boards
Before adopting a new rule, boards and managers should ask three questions:
- Does the declaration grant authority to regulate this issue?
- Is the proposed rule consistent with the declaration and existing restrictions?
- Is the rule reasonable and necessary to accomplish a legitimate association objective?
Further, if an association has never had an attorney review their rules to determine if they founded on appropriate authority and reasonable, it probably makes sense to do so. No one wants to run up legal bills, but a review ahead of time can prevent costly litigation after the fact.
When the answer to any of these questions is uncertain, legal review before adoption can help avoid costly disputes and enforcement challenges. Please contact any of the firm’s community association attorneys for assistance in this area.
Harmony Taylor is a partner with Law Firm Carolinas who regularly represents homeowner and condominium associations on governance, compliance, and litigation matters. She advises boards on director and member meetings and represents associations in state courts and Fair Housing and other discrimination proceedings. Harmony is a Fellow of the College of Community Association Lawyers and an active leader within the Community Associations Institute, including service on the North Carolina Chapter’s Legislative Action Committee and the College’s Board of Governors.