A recent decision from the North Carolina Court of Appeals has generated real debate among HOA Boards. Some are reading it as a win for associations. Others are calling it a loss for homeowners.

Both reactions miss the more useful question. It isn't "does this apply to us?" It's "what does this decision actually say, and how does it compare to our governing documents?"

With more than 40 years managing communities across North Carolina and South Carolina, we have learned that expensive governance mistakes usually start with assumptions, not bad intentions. A headline is not a legal opinion, and one decision rarely answers every community's question.

We explore this principle in *Boards, Bylaws, and Better Governance*, the first volume of the *Lessons from the Neighborhood* series. Good governance starts with understanding what your documents actually say before deciding what they mean. Learn more at www.LessonsFromTheNeighborhood.com.

What did this decision actually involve?

According to reporting by WCNC Charlotte, the case involves the Smoky Mountain Country Club Property Owners' Association in Swain County, in the mountains of Western North Carolina.

The community's founding governing documents contractually obligate every property owner to pay dues supporting a private clubhouse. That clubhouse sits outside the gated neighborhood and is owned by the community's original developer, not by the association itself. A group of homeowners stopped paying, arguing they should not have to fund an amenity they don't own, especially one the general public can also use. A trial court initially sided with them.

The Court of Appeals reversed. Based on the reporting, the court held that the association has the authority to collect the dues because homeowners purchased their properties already subject to that obligation, regardless of who owns the clubhouse or where it sits. The association's attorneys reportedly pointed to an earlier appellate decision, roughly a decade old, that had already addressed a similar clubhouse-dues arrangement in the same community, and the appellate judges agreed that earlier ruling controlled.

The homeowners' attorney has been outspoken about the decision, describing it to WCNC Charlotte as unfair to homeowners statewide and warning it could allow other for-profit companies to embed similar permanent payment obligations into a community's covenants. The Smoky Mountain Country Club Property Owners' Association declined to comment for the story.

Reasonable people see this differently

That tension is worth acknowledging directly. Homeowners who rarely or never use an outside amenity can understandably feel it's unfair to fund it indefinitely, particularly when someone else owns it. At the same time, recorded covenants exist precisely because they're supposed to be predictable. They put buyers on notice, through the public record, of the obligations attached to a property before closing. Courts have long treated that predictability as valuable, even when an individual owner later wishes the obligation didn't exist.

This isn't an isolated question in the Carolinas. WCNC Charlotte has also reported on a separate community near Charlotte, in Union County, where homeowners were required to pay dues for a pool, clubhouse, and tennis courts owned by a private builder rather than their association. After that reporting, the builder voluntarily gave more than 200 homeowners the option to opt out of the monthly dues, and roughly half took it. Both situations point to the same practical lesson: agreements between a developer or builder and an HOA can outlast the relationship that created them, and homeowners are often the ones left paying.

One decision is rarely the final word

Appellate decisions are built on the specific facts, contracts, and governing documents in front of the court. The homeowners' attorney has suggested this ruling could affect any community with a similar third-party amenity arrangement. Whether that turns out to be true for your community depends entirely on how your association's attorney interprets your own declaration, plats, and related agreements, not on how one case was decided elsewhere in the state.

A few grounded questions matter more than the headline. Does our declaration contain a similar contractual obligation to an outside party? Do we have amenities owned by a developer or private company rather than the association? Has that arrangement ever been challenged or amended? If the answer to all of those is no, this case may have little bearing on your community. If the answer to any of them is yes, that's exactly the kind of question worth raising with your association's attorney now, rather than after a dispute begins.

The documents matter more than the debate

Several years ago, we sat in on a Board meeting where directors were under real pressure to eliminate an assessment that had existed since the community was built. Most of the room agreed it no longer made sense. One director finally said, "Let's vote tonight and stop collecting it."

Before the vote, the association's attorney asked one question: "Where in your declaration does it give the Board that authority?" The room went quiet. After reviewing the documents, everyone reached the same conclusion. The Board couldn't eliminate the assessment on its own. Any change required a member vote under the amendment process the declaration established.

No one left that meeting with the answer they had hoped for. Everyone left with clarity, and the Board redirected its energy toward educating homeowners and pursuing an amendment the right way. A Board's role isn't to rewrite governing documents during a meeting. It's to govern within the authority those documents actually provide, even when that authority is unpopular.

Before your Board reacts

Much of what is publicly known about this case comes from media reporting and the perspective of the homeowners' attorney, not from an independent review of the court's opinion or a response from the association. That's worth keeping in mind. Whether your community has a similar contractual arrangement, whether it could be challenged or renegotiated, and what your options would be are fact-specific questions that depend on your own governing documents and legal advice, not on how any single case has been reported.

Professional management doesn't replace legal counsel, and nothing here should be read as legal advice. Its practical value is elsewhere: knowing which contracts and agreements exist within your community, keeping them organized, and flagging anything that resembles a reported case so your Board and attorney can review it before it becomes a dispute.

Have questions about your own community?

If you're already working with AMG, reach out to your community manager. They can help you think through whether a situation like this has any bearing on your community. If you're not yet an AMG client, our client services team is happy to point you toward qualified resources, whether or not that leads to working with us.

Frequently Asked Questions

Does this ruling apply to every HOA in North Carolina?

Not automatically. It involved a specific contractual arrangement described in one community's founding documents. Whether a similar obligation exists in your community depends on your own declaration and any agreements with developers or outside amenity owners, so Boards should review those specifics with legal counsel rather than assume.

Can an HOA require dues for an amenity homeowners don't use, or that's owned by someone else?

In many communities, historical practice shows that when recorded governing documents establish that obligation, it has applied regardless of who owns the amenity or how often it's used. Whether a specific arrangement is enforceable depends on the contract and covenant language involved, so Boards and homeowners should confirm this with legal counsel rather than assume.

Can a Board or developer change or remove one of these arrangements?

It depends on how the obligation was created and what the governing documents allow. Some builders have voluntarily offered homeowners an opt-out from similar arrangements; others have not. Changing an existing obligation typically requires either a formal amendment process or a renegotiated agreement, so Boards should consult legal counsel before assuming either is possible.

Paul's Key Guidance

Here's what I'd actually do after a case like this becomes public. I wouldn't start by asking whether the ruling applies to us. I'd start by pulling every contract and recorded agreement our association has with a developer, builder, or outside company, especially anything tied to an amenity the association doesn't own outright. That's the exact fact pattern at the center of this case, and it's also the fact pattern most Boards have never fully inventoried.

I'd also treat this as a standing practice, not a one-time reaction. Once a year, ask your manager and your attorney to review any third-party agreements attached to your community, before a dispute or a news story forces the conversation. The builder in the Union County case referenced above chose to offer homeowners an opt-out voluntarily. Not every company will make that choice. Boards that know what they've signed are in a far stronger position than Boards that find out from a headline.

Volunteer directors are protecting one of the largest investments most families will make. That deserves a documented inventory, not a scramble after the fact.

About the Author

Paul Mengert, CMCA®, PCAM®, is a visionary leader, award-winning educator, and transformative strategist in community association management. With over 40 years of experience, he is the founder and CEO of Association Management Group (AMG), an AAMC®-accredited firm that began in 1985 with three Greensboro, North Carolina, associations, and is now a leading, nationally respected management company. Today, AMG serves over 30,000 property owners across the Carolinas, stewarding communities with a combined asset value exceeding $5 billion.

Paul was named a Community Associations Institute (CAI) Educator of the Year and serves as senior faculty there. He is a longtime guest lecturer at Wake Forest University School of Law and teaches in the Harvard Business School alumni program at Queens University, focusing on the intersection of governance, finance, law, and human dynamics.

Paul's influence extends beyond community associations. He has advised the U.S. Department of State on housing initiatives in the former Soviet Union and served five terms as Chair of the Piedmont Triad International Airport Authority. Recognized as a "Most Admired CEO" by the Triad Business Journal, Paul is the author of the acclaimed *Lessons from the Neighborhood* book series. Through writing, speaking, and consulting, he equips community leaders with practical frameworks for governance excellence, while preserving the human touch that makes neighborhoods thrive.

Learn more at www.amgworld.com and www.LessonsFromTheNeighborhood.com.

Author's Note: I have spent more than 40 years working with community association Boards and managers throughout the Carolinas. My perspective is based on practical experience in community association management, governance, and Board decision making. I am not an attorney, and nothing in this article is intended to provide legal advice or to substitute for the advice of qualified legal counsel. This article relies on published media reporting rather than an independent legal review of the court's opinion. Court decisions are highly dependent on the specific facts presented, the governing documents involved, and the legal issues before the court. Before taking action based on this or any court decision, Boards should review their association's specific circumstances with qualified legal counsel.