Developer Giving Homeowners the “Cold Shoulder”?

Q: I live in an HOA-governed community in Cabarrus County, North Carolina, that is still under the developer’s control. It’s been over two years since an annual meeting of the HOA was held, and the developer refuses to schedule one. Some homeowners want to withhold payment of the annual assessments, but they fear the repercussions for doing so (late fees, interest, liens, etc.)

A: The North Carolina Planned Community Act (“PCA”), which is a body of state laws governing homeowners’ associations, requires that HOA boards hold a meeting of the association at least once each year. This is not optional; it is mandated by the statute.

I am assuming from your question that the HOA’s governing documents allow the developer to exercise full control of the HOA board at this point. Regardless, a developer cannot ignore the requirements of the PCA. An HOA board must follow the law, no matter who the board members are, and regardless of whether the developer retains control of the community.

The PCA and other state laws, such as the North Carolina Nonprofit Corporation Act, as well as most HOA bylaws, bestow upon homeowners a good deal of protection from “rogue” boards or developers. For example:

• The PCA requires HOA boards to schedule open board meetings “at regular intervals” to give homeowners the opportunity to ask questions and voice concerns.

• The PCA gives members of an HOA the right to remove some or all of the directors from the board of directors—except directors appointed by the developer, unfortunately—by a majority vote of the members of the HOA.

• After the board approves the HOA’s annual budget, the board is required to call a meeting for members to vote on ratification of the budget.

• The board may not sell or mortgage common areas owned by the HOA without the affirmative vote of 80% of the members.

• Names and addresses of directors and officers must be published within thirty days of their election or appointment.

• Members must be given written notice and the opportunity for a hearing before the HOA can levy any fines or suspend community services or privileges for alleged violations of the covenants or bylaws.

In terms of remedies, I do not recommend withholding payment of HOA assessments as a “protest.” The law does not support that approach. As your neighbors have noted, withholding payment puts them at risk of incurring late fees, interest, a possible lien against their property, or suspension of community privileges. If you cannot get the developer to voluntarily comply with the law, you may need to engage an attorney experienced in community-association law to represent you and your like-minded neighbors.

This column was originally published in the Charlotte Observer on April 28, 2018. © All rights reserved.

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