This article is presented in six parts:
Part One – Covenant Violations
Part Two – “I want to opt out of the HOA”
Part Three – How are violations determined?
Part Four – How are managers trained to find violations?
Part Five – Hearing Letters
Part Six – “Nothing like that would happen in our community even if we did not have the HOA”
Sending warning letters to members who are in violation of the CC&Rs may not be required by the HOA’s governing documents. In North Carolina mailing a hearing letter is the first legal step in the covenant enforcement process. The first legal step per North Carolina state statute in enforcement is to notify the HOA member of the potential violation and call this member to a hearing before the HOA’s board of directors or an adjudicatory panel (please reference NCGS § 47F-3-107.1. for planned communities, single-family home HOAs and Townhome HOAs; NCGS § 47C-3-107.1. for condominium associations). Even though North Carolina statutes do not require warning letters to be sent, there may be other individual HOA requirements that may need to be followed. If the covenants, rules and regulations, board resolutions, or other association documents require additional enforcement processes, and these processes are not followed, this could jeopardize the HOA’s legal case. It is important for a board to always remember when the board appears in court, all the bases must be covered. The reason being, enforcement of the CC&Rs is always the burden of the enforcer, the HOA board of directors. The author has been in court on several occasions when a board member has assured him that they were certain the judge would see it the board’s way and they would prevail. This is not a good legal strategy.
South Carolina does not have specific statutes regarding planned communities and condominium associations (South Carolina does have statutes in which HOAs are addressed to a very limited degree). Since there are no specific statutes regarding HOA covenant enforcement in South Carolina, enforcement authority is derived from the HOA’s filed governing documents. These filed governing documents typically being the CC&Rs and rules and regulations. Since no two sets of CC&Rs are written the same, this can also apply to the CC&Rs enforcement provisions in South Carolina. The author has reviewed CC&Rs that mandate a very elaborate covenant enforcement process with a multitude of verbal and written communications, extended time periods to cure, appeal processes, and mandated low fine amounts that result in members just paying the fine and not correcting the violation. The author has also reviewed CC&Rs in South Carolina with enforcement provisions that are as simple as the board could determine a member is in violation and then send the member the fine to pay. In South Carolina, it is basically whatever the CC&Rs say, goes.
A board of directors must be prepared to go to court with every warning letter sent. Fortunately, full-blown, sitting in a courtroom, litigation is far less than 1% of all the enforcement processes begun. Even more fortunately, of the below 1% that result in full-blown litigation, in most instances the HOA prevails. The news media will promote stories of when an HOA lost in court on a well-founded enforcement issue, but again those are a rarity. The big loser is all the HOA membership that many times must foot the legal expenses in connection with winning the case. Now, this is not to say that showing up in court with a strong enforcement case is always a guarantee of a positive ruling from a judge. Because it is not, the author has seen well-grounded and incredibly documented enforcement cases go sideways in court. One case that the author recalls that was so legally strong in favor of the HOA and still lost, the only thing that can be determined is that the HOA’s attorney must have reminded the judge of his ex-wife. Even then, that HOA won easily on appeal.
Does the HOA make money on fining members?
A better question is do the fines collected by the HOA offset the enforcement expense. In the author’s experience, the fines collected, never come close to offsetting the expense of enforcement. This is especially true in rare cases when litigation must be pursued. A good point to emphasize here is that some boards, not all boards, will waive some, if not all the accrued fines if the member will simply correct the violation. Reducing or waiving fines is not always appropriate, and in many cases cannot be done anyway. However, this does emphasize the point that the board’s ultimate objective is every member’s compliance with the covenants.
Why are enforcing the covenants so important?
Not too many years ago, it was common for some developers to advertise their communities as “not” being within an association and thus no HOA dues. Apparently, at the time, this was an effective selling tool for these developers. The author has not seen any developers pushing this as a sales line in recent years, so the effectiveness of this may have waned as more and more people realized there are benefits of their community being under protective covenants.
In the past twenty years, most single-family home developments were constructed under the protective covenants of an HOA. The known benefits from living within an HOA are simple to contemplate. There is the obvious benefit of the shared costs of the common amenities. The shared cost of the HOA’s swimming pool as compared to the cost of an individual member constructing a pool, along with the cost of regular maintenance of that pool is almost incomparable.
The primary unrealized benefit of an HOA is the increased property values. Why this would be unrealized is akin to why the value of police protection is unrealized. For example, if a community has a low crime rate and good police protection, the correlation between the two is not always drawn. However, if a community has a high crime rate, the first question asked is where are the police. The same is true with a well-run HOA, if the board of directors and management company is doing an excellent job, how many members realize this? What is the membership’s frame of reference? If a member has lived in a high-crime area and moves to a low-crime area, that member may notice. However, the member who has lived in a low-crime area and moves to a high-crime area will surely notice the difference. These members who have moved have a frame of reference when it comes to high-crime communities.
The comparison here is when the HOA or a non-HOA community is run down, and it is apparent that the covenants are not being enforced effectively. This is even more apparent to potential home buyers because they have probably looked at other communities where the covenants are being enforced effectively. Unfortunately, a member who has possibly lived within the HOA for an extended period may have no frame of reference with what a well-run or a poorly-run HOA looks like. Consequently, this member may not realize the benefit they are receiving from a well-run HOA, or conversely the burden they have if the association is not well-run.
A 2005 research study that is still relevant today about HOAs is “What Are Private Governments Worth?” Researchers Amanda Agan and Alexander Tabarrok discovered that homes within community associations can add 5 to 6 percent property value increases over similar homes in nearby non-association communities. Writing in Regulation magazine, the researchers said that the home value increase attributed to community associations is “especially remarkable when one considers that (HOA) residents pay twice for many local services—once in taxes and then again in HOA fees.” The researchers also posed valid questions such as: “Do community associations increase home values because they offer better-quality services than local government or because they offer services that local governments cannot offer (like more restrictive zoning) or do not offer (like greater security)?”
In the debate of the necessity of HOAs, a point sometimes arises that individual deed restrictions can accomplish what an HOA accomplishes. Correct, many individual home deeds have well-written restrictions attached. An individual property deed can be highly restrictive, and in certain instances, it can almost be impossible to amend or remove a restriction. The question here is if there is no HOA, who is going to enforce the deed restrictions if a neighbor violates the restrictions? The answer would be the neighbor who has an issue with the other neighbor who is not adhering to those deed restrictions. This typically means the neighbor filing a lawsuit against the other neighbor. In cases such as this, sometimes a few other neighbors will join the lawsuit and help defray the legal expenses. What can make these types of cases difficult is if other neighbors had not been following their deed restrictions for an extended period. And not necessarily the deed restriction that generated the lawsuit, but other deed restrictions had not been followed.
As a sidebar to other solutions without the necessity of an HOA. Often sighted that municipalities will help enforce deed restrictions. This one is easy to address, yes, in many municipalities if a neighbor’s grass exceeds a certain height the municipalities will take action. The author has seen municipal maximum grass ordinances, some with heights as high as sixteen inches before the municipalities would possibly intervene. This intervention could be a relatively simple phone call to the city to get something done or a hearing with the city taking many more weeks. Another local ordinance that many municipalities have enacted is in response to nonoperational vehicles parked in yards and driveways. In some of these municipalities removing nonoperational vehicles from private property can take literally years. The takeaway is if a person is fine with a neighbor only being mandated to having to cut their grass at fifteen and a half inches, this person does not need an HOA.
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-Disclaimer: Since every state has different statutes or no statutes at all regarding HOAs, and every association’s declaration of covenants, conditions, and restrictions (CC&Rs) are different, any information provided within this blog is for non-legal and entertainment purposes only. For legal advice please consult an attorney who specializes in community association law.