I was asked by The Charlotte Observer and Raleigh News & Observer to respond to recent reporting looking at changing North Carolina’s HOA/condo laws. My article, “Caution: When NC HOA Laws Change, Property Values and More Are at Stake,” appears in both newspapers today. If you are a subscriber, links to both are below and the full op-ed follows.
Caution: When NC HOA Laws Change, Property Values and More Are at Stake
Living in a community where owners agree to abide by rules that enhance benefits for everyone requires balancing individual rights with neighbors. Legislators have historically balanced those effectively. Substantially increasing individual rights for a few risks harming other owners.
The laws regulating North Carolina’s community associations (homeowner and condominium associations) work remarkably well. Improvement may be possible. However, drastic statutory changes will likely have unintended consequences, harming property values, associations, and homeowners. For instance, one proposal prevents associations from stopping in-home small group music lessons. This might work for single-family homes, but midnight trumpet teachers won’t please townhome or condominium neighbors with shared walls!
Over 2.7 million North Carolinians live in 14,500 associations, having agreed with neighbors to abide by common rules. Homeowner satisfaction surveys repeatedly show that 89% of residents have overall positive HOA/condo experiences. Owners are also generally happy with their specific communities.
Caution is warranted when changing laws that work for the overwhelming number of homeowners. Happy or neutral owners are generally silent. Those with grievances are loud. While 100 or 1000 complaints might seem a lot, it takes 27,000 owners to equal even 1% of association residents.
Some propose making it harder to pursue owners for failing to pay agreed-upon dues (“assessments”). Association members benefit from sharing expenses. Assessments cover things like water/sewer services, insurance on roofs or homes, HVAC, exterior maintenance, and sometimes amenities like playgrounds or pools. Unpaid or delayed assessments mean an association can’t pay its bills. Few realize condos and HOAs are nonprofits. Dues pay only budgeted expenses. There’s no “extra” money. If required assessments aren’t collected, associations must stop services or require other owners to pay more. Making it harder to pursue non-paying owners harms owners who pay their share.
Fortunately, almost all owners pay assessments on time. For the few who don’t, there are more legal safeguards than almost any other collections, including repeated communications for many months before a property can be foreclosed. Our firm’s experience (backed by reporting) is that far less than 1% of properties sent to legal collection reach that point. While even the rare foreclosure is unfortunate, a delay or barrier to pursuing collections means other neighbors lose essential services or pay more.
Other proposals would make it harder to enforce community rules by forcing associations into court faster and at great expense to other owners. Association restrictions are private contracts. All owners promise to follow the same rules when purchasing their homes. If an association prohibits junk cars, the documents state that. These rules protect property values. Association details must also be provided by sellers to purchasers through required disclosure statements. Seeing these rules, no one has to buy into an association or a specific community. However, if purchased, private contract rights obligate owners to follow the rules they and everyone promise to follow. If laws make it difficult to enforce such restrictions, responsible owners who follow the rules will suffer and property values harmed. Remember, if enough owners don’t like a restriction, they can change it.
Our firm has represented thousands of community associations. Our experience is that volunteer board members work exceptionally hard to do what’s best for their communities and owners. If they fail, laws regulating associations are plentiful, including federal and state collection statutes and fair housing laws. Members can access financial records, meeting minutes, require a financial audit, and attend a board meeting to express concerns. Ten percent of owners can demand a meeting to take action. Homeowners elect and can remove boards and amend all association documents.
Given the delicate balance in community associations and the important investment one’s home is to all homeowners, changing laws should be considered cautiously. Despite good intentions, the unintended consequences could negatively impact North Carolina’s thousands of associations, millions of members, and real property values.
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Jim Slaughter is a partner at Law Firm Carolinas (www.lawfirmcarolinas.com). He is past President of the national HOA/condo lawyers organization and NC Chapter of the Community Associations Institute.