Senate Bill 378 Could Devastate North Carolina’s Community Associations—And Burden Responsible Homeowners

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This article was originally published on May 8, 2025 by Jim Slaughter for Law Firm Carolinas Blog.

Senate Bill 378, recently passed by the North Carolina Senate, contains a provision that could unintentionally cause enormous financial harm to North Carolina’s 15,000+ homeowner and condominium associations . If left uncorrected, this language would punish the homeowners who pay their dues on time—while giving a free pass to those who don’t.

A Well-Intentioned Bill With a Deep Flaw

SB 378 was introduced to address concerns about associations overreaching—particularly when it comes to violations of rules and covenants. That’s a fair issue to explore. Many agree that when disputes arise over governing document violations—where facts may be unclear or subjective—a judge should have some discretion in whether to award attorneys’ fees.

But the bill goes far beyond that.

As currently written, SB 378 makes attorneys’ fees discretionary in all association-related legal cases—including lawsuits to collect unpaid assessments. That change may have been an oversight, but its consequences would be serious and far-reaching.

Dues Collection Isn’t Optional—It’s the Lifeblood of a Community

Associations rely entirely on owner assessments to function. There are no profit margins or financial cushions. Assessments cover basic services: power, insurance, maintenance, and trash pickup. Many of these associations don’t even have amenities—just infrastructure to maintain. While some associations charge high assessments and provide numerous amenities, most associations in North Carolina only take care of essential services for owners and have no discretionary funds. There are even Habitat for Humanity associations for first-time home buyers!

Every owner agrees to pay association dues when they purchase a home in the community. The amount is known up front, disclosed by law, and recorded in filed public documents. If assessments aren’t paid, there is no backup funding and only one place the money can come from–the other paying owners.

SB 378 Would Shift Delinquent Owners’ Costs Onto Everyone Else

Under current law, if a homeowner doesn’t pay and the association is forced to sue, the court charges attorneys’ fees to the nonpaying owner. That ensures the cost of enforcement falls on the person who breached their obligation—not on their neighbors.

SB 378 would change that. Even when an association wins in court, it might be unable to recover legal costs. In other words, the association might have to pay an attorney $500 to collect $500—or more. That could make enforcement of assessments irrational and unsustainable.

If SB 378 passes in its current form, many associations will have no choice but to stop pursuing collections. And once word spreads that there’s no real consequence for nonpayment, delinquencies will rise. The result: paying homeowners will be forced to make up the shortfall, or services will be cut.

This Isn’t About Overreach—It’s About Survival

The concerns that prompted SB 378 related to some associations aggressively enforcing minor violations. That’s not the issue here. There’s a major difference between:

  • Violations, where facts can be disputed, and

  • Assessment nonpayment, which is clear and documented—either the dues were paid or they weren’t.

In violation cases, it may make sense to allow judicial discretion with attorneys’ fees. But applying the same rule to dues collection is a mistake—one that would make it harder for associations to function and easier for owners to ignore their financial obligations.

Associations Are Already Cautious and Transparent

Associations do not rush to collections. The process is deliberately slow and heavily regulated under state law. Multiple notices must be sent—by different methods and to multiple addresses—over the course of several weeks or months. The association’s only goal is to secure payment of the owed assessments, not to pursue legal action. Only after extended nonpayment and repeated outreach does a final “15-day letter” go out, offering one last opportunity for the owner to pay without owing any attorney’s fees. This level of notice and leniency far exceeds what is required of banks, credit card companies, or utility providers.

Associations don’t want to sue their owners. But they must—because they have a fiduciary duty to every other member of the community to pay the association’s bills.

This Can—and Should—Be Fixed

The issue with SB 378 is correctable. The provision about discretionary attorneys’ fees should be limited to violation enforcement cases only. It should not apply to the collection of assessments. That clarification would protect associations without undermining the bill’s broader goals.

The Bottom Line

Without this change, SB 378 would cause real harm. It would:

  • Discourage assessment collection.

  • Encourage nonpayment.

  • Shift costs to other homeowners who must shoulder the non-paying owner’s costs—essentially forcing them to pay twice.

  • Threaten the financial viability of entire communities.

This may not have been the legislature’s intent—but that makes it all the more important to fix. North Carolina’s associations, and the millions of homeowners they serve, are counting on it.