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HOAs May Assess $$ Penalties Against Errant Owners

By Sean E. Andrussier

The NC COA made clear yesterday in Riverpointe Homeowners Ass'n v. Mallory that home owner associations may impose monetary fines on errant home owners, even where the home owner association documents and declarations don't expressly allow for such fines.

In Riverpointe, the respondent bought a home in a planned community that required yard maintenance, like keeping the grass under 6 inches, and prohibited removal of landscaping without permission. The petitioner HOA sent the respondent a "friendly reminder" of the rules, saying it had received complaints that she had been violating them. When respondent did nothing to address the violations, the HOA sent her a notice of hearing. The hearing was held, and respondent was found to have violated rules and was assessed monetary penalties. When respondent didn't pay, the HOA filed a lien on the property and then sought foreclosure on the lien.

At issue in the appeal was, first, whether respondent had had proper notice of the foreclosure. The COA held respondent waived that argument when she showed up at and participated in the foreclosure hearing.

The second, and main, issue on appeal was whether the HOA could assess the monetary penalties without express enabling by the HOA documents or declarations. The COA made clear that the answer was yes. The COA noted that a 2003 NC SCT case, Wise v. Harrington Grove Community Association, indicating otherwise was superseded by legislative change in 2004. That change, to N.C. Gen. Stat. sec. 47F-3-102 of NC's Planned Community Act, made clear that unless HOA documents or declarations expressly block the HOA from assessing fines, an HOA may impose them. Here, all of the respondent's violations for which she was fined occurred after 2004, after the legislative change, and therefore the HOA had the power to impose the fines -- and file a claim of lien and foreclose when those fines went unpaid.

Full post as published by North Carolina Appellate Blog on February 20, 2008 (boomark / email).