Homeowners Associations: FAQs
- What is a Homeowners Association (HOA)?
- Do I have to join the Association?
- Do I have to pay association dues?
- How are fees and assessment figured in a HOA?
- Can my homeowner';s dues be increased?
- Is there any limit on what an owner has to pay the association?
- Can the HOA tell me what I can and cannot do on my own property?
- What is the developer's role in a mandatory association?
- What happens if an owner fails to pay funds claimed by the association?
- What is the role of local government in HOA administration?
- Are associations and persons who manage them required to be licensed?
- What can I as an owner do if the HOA is not performing its duties or if other ownersviolate restrictive covenants or bylaws?
- Who pays my legal expenses if I am sued by my association?
- Who owns the roads in a residential subdivision or planned community?
- Who is responsible for road maintenance in a subdivision or planned community?
- How do I know which "common areas" of a subdivision or planned community are reserved for the use of all owners?
What is a Homeowners Association (HOA)?
It is an association of owners, typically in a residential subdivision or planned community, whose properties are subject to restrictive covenants limiting their use. The association may be responsible for the maintenance and control of the common areas in the development and enforcement of the restrictive covenants.
Do I have to join the Association?
It depends on whether it is "voluntary" or "mandatory". Membership in an association is typically mandatory if the restrictive covenants are recorded in a property's chain of title. Some neighborhoods have a less formal voluntary association, generally with less power than mandatory associations. Regardless of whether it is mandatory or voluntary, if you are a member of the association, typically you will have a voice in its operations.
Do I have to pay association dues?
If your association is voluntary, then any payments necessary to maintain membership are also voluntary. However, if membership in the association is mandatory, you must pay all lawful assessments, dues or charges.
How are fees and assessment figured in a Homeowners Association?
Homeowners association fees are considered personal living expenses and are not tax-deductible. If, however, an association has a special assessment to make one or more capital improvements, condo owners may be able to add the expense to their cost basis. Cost basis is a term for the money an owner spends for permanent improvements throughout their time in the home and is used to reduce eventual capital gains taxes when the property is sold. For example, if the association puts a new roof on a building, the expense could be considered part of a condo owner's cost basis only if they lived directly underneath it. Overall improvements to common areas, such as the installation of a swimming pool, need to be considered on a case-by-case basis but most can be included in the cost basis of any owner who can show their home directly benefits from the work.
Can my homeowner's dues be increased?
YES. The common expenses of your development may include grounds' upkeep, building maintenance, insurance premiums, property taxes and management fees. When these expenses go up, the cost is usually passed on to the property owners in the form of increased dues and assessments. The legal authority to increase dues and to assess homeowners should be set forth in the documents which govern the development.
Prior to signing a contract to purchases a condo or townhouse, you should examine the governing documents to determine if you will be obligated to pay maintenance fees and assessments, which may increase over time. You should find out who has the authority to establish fees and assessments and whether there are any limits to the amount, which can be charged. You are less likely to be shocked by fee increases if you have read this information prior to signing a purchase agreement.
Is there any limit on what an owner has to pay the association?
No, so long as dues, charges and/or assessments are lawfully imposed in accordance with procedures established by the restrictive covenants. Sometimes, when assessments are for substantial undertakings they can be costly; therefore, prospective purchasers should consider the amount of any current or pending dues, charges and assessments when determine whether they can afford the property. If an existing owner believes an association has improperly imposed a charge of some kind, only a court can determine whether it is lawful.
Can the homeowners association tell me what I can and cannot do on my own property?
MAYBE. The law allows you great freedom to tailor the use of your property to your particular lifestyle. However, this freedom is not unlimited and is subject to certain restraints. A homeowners' association my be authorized by the declaration to adopt bylaws or other rules and regulations which may govern your conduct. This can substantially affect your ability to use your property. It could even restrict your ability to rent your unit to others.
What is the developer's role in a mandatory association?
Under North Carolina law, the developer of any real estate project is the owner of all unsold lots or units in the project. As long as the developer owns a majority of them, it controls the votes and therefore the association itself. The developer may have the power to amend the covenants and restrictions so long as it acts in accordance with the legal documents creating the association. The developer has a fiduciary obligation to act in good faith, in accord with the law, and in the best interest of the association. Since the adoption of the North Carolina Planned Community Act, January 1, 1999, developers covered by the Act cannot exempt themselves from paying their share of the common expenses. However, the question remains as to whether they can exempt themselves from paying assessments in subdivisions created prior to the Act or in subdivisions that are not subject to the Act.
What happens if an owner fails to pay funds claimed by the association?
The association must use the rights granted in the restrictive covenants to collect them. In developments subject to the Planed Community Act, liens and foreclosures are permitted.
What is the role of local government in HOA administration?
Generally, residential subdivisions and planned communities must be approved by a local government zoning authority - city or county, depending upon the location of the property. When subdivision approval is required, it is illegal for a developer to offer or contract to sell or to convey an interest in the subdivision until the final plat of the subdivision is approved and recorded at the Register of Deeds. Typically, after the plat approval and inspection of construction, the local government has no further role in administering the homeowner association, except to assure compliance with local ordinances or state laws.
Are associations and persons who manage them required to be licensed?
Not unless they engage in acts classified as real estate brokerage or time share development. If they do, they must be licensed by the North Carolina Real Estate Commission.
What can I as an owner do if the association is not performing its duties or if other owners violate restrictive covenants or bylaws?
Your remedy is to sue the association and/or the offending property owners in court for an order compelling them to abide by all lawful covenants and bylaws. But remember, these are private rights of action that you must assert on your own. No state agency, other than the court system, can determine or enforce an owners' rights.
Who pays my legal expenses if I am sued by my association?
With only rare exceptions, you will be responsible for you won attorney fees and other legal expenses.
Who owns the roads in a residential subdivision or planned community?
Unless the roads have been dedicated to public use and formally accepted by the appropriate government agency, neither the state nor any public agency owns legal title to the land over which a street runs. Where the developer has retained title to the streets, it is liable under state law for erosion control and possibly civil damages if injuries result from a lack of maintenance. This is true even after all lots have been sold.
Who is responsible for road maintenance in a subdivision or planned community?
Until responsibility for road maintenance is lawfully transferred to a municipality or the North Carolina Department of Transportation, either the developer or the owners will be responsible. However, if a developer becomes insolvents, is dissolved or dies, the owner alone will have to bear the cost unless a government agency takes control.
How do I know which "common areas" of a subdivision or planned community are reserved for the use of all owners?
They will be specified by the developer in the recorded map or plat of the property. Even if the developer retains title to the common areas or conveys them to some other person or entity, these areas cannot be used for any other purpose, and all of the owners in the subdivision may use the property for the specified purpose.