Builder turns over HOA to homeowners, some neighbors clash

In Denver, N.C., the turnover of the Fox Chase neighborhood's HOA from the developer to the homeowners has sparked conflict. Residents like Nick Cox criticize the HOA board for being authoritarian, particularly regarding parking and boat storage in the lake community. Others, like Michael Mascaro, attribute issues to inexperience and lack of transparency, citing concerns about communication and financial management.

The HOA defends itself, claiming it has acted in good faith and condemns inflammatory accusations from residents. It highlights that its decisions have been legally reviewed but regrets needing to allocate community funds to address disputes instead of community improvements.

To resolve HOA disputes, residents are advised to unite with neighbors, meet with the board collectively, or consult legal counsel, though this can be costly. Meanwhile, the N.C. General Assembly is considering legislation to increase transparency and limit HOA powers, including timelines for record access and stricter criteria for liens and foreclosures.

Read More: WSOC-TV

Can an HOA in SC make you take down your Christmas lights and decorations when it wants?

Homeowners in neighborhoods with HOAs should be mindful of restrictions on holiday decorations, as most HOAs limit the time they can remain up. Columbia attorney Kathleen McDaniel notes that HOAs can regulate outdoor decorations, flags, and displays if allowed by their restrictive covenants, which commonly include such provisions. HOAs help maintain community standards, which can boost property values.

In South Carolina, about 25% of homes are under HOA regulation, and many allow holiday lights from 30 days before the holiday until the second week of the new year. Non-compliance may result in fines. The South Carolina Department of Consumer Affairs oversees HOA-related complaints but lacks enforcement power, instead tracking and reporting issues to the General Assembly.

Read More: TheState

Navigating HOA Taxes: Deadlines, Forms, and Expert Tips

Homeowners’ associations (HOAs) are generally classified as corporations for federal tax purposes and must file annual tax returns. Even if an HOA is organized as a non-profit at the state level, it typically doesn’t qualify for federal tax-exempt status under Section 501(c)(4) unless it meets specific criteria, such as serving the general public rather than just its members.

HOAs have two primary options for filing federal taxes:

1. Form 1120-H (U.S. Income Tax Return for Homeowners Associations): This form is tailored for HOAs, allowing them to exclude exempt function income—like membership dues and assessments—from gross income. The taxable income is subject to a flat rate of 30% for condominium management associations and residential real estate associations.

2. Form 1120 (U.S. Corporation Income Tax Return): While this form offers a lower tax rate of 21% on net income, it requires more detailed financial reporting and doesn’t provide the same exclusions for exempt function income. HOAs should compare their tax liabilities under both forms annually to determine the most advantageous option.

It’s essential for HOAs to file their tax returns by the 15th day of the fourth month after the end of their tax year, typically April 15 for calendar-year associations. Late filings can result in penalties and interest. Given the complexities of HOA taxation, consulting a certified public accountant (CPA) experienced in this area is advisable to ensure compliance and optimize tax outcomes.

For more detailed information, refer to the IRS guidelines on homeowners’ associations. If you have questions, your HOA manager can provide additional information or connect you with qualified professionals who specialize in HOA taxation.

Editor’s Note: The above information is only provided for general informational purposes and derived largely from the IRS website.

Breaking News: CTA Filing Requirements Paused Again by Fifth Circuit

This article was originally published on December 27, 2024 by Thomas Skiba for Community Association Institute.

On Dec. 26, the full panel of judges of the Fifth Circuit Court of Appeals issued an order vacating the stay of a preliminary injunction halting reporting compliance under the Corporate Transparency Act. The U.S. Department of Treasury’s FinCEN released a statement this afternoon announcing BOI filings are voluntary.  

The most recent decision suspends the upcoming Jan. 2025 deadline requiring community association boards to file sensitive personal information with the government in an effort to combat terrorist activities.  

The latest dramatic decision in Texas Top Cop Shop v. Garland follows a Dec. 23 order reversing a temporary preliminary injunction imposed by the U.S. District Court for the Eastern District of Texas.  

This means beneficial ownership information reporting requirements have been paused again by a federal court for applicable community associations under federal statute. This continues to be a developing issue. Association boards should remain vigilant and informed on these ongoing updates.  

FinCEN issued the following statement “In light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.” 

Please visit CAI’s Corporate Transparency Act resource page for additional information. 

Sincerely, 

Thomas M. Skiba, CAE 

Chief Executive Officer  

Community Associations Institute  

UPDATE: Corporate Transparency Act Compliance Back on Hold

UPDATE: Corporate Transparency Act Compliance Back on Hold

December 26, 2024

The Corporate Transparency Act (CTA) is once again on hold. On December 26, 2024, a Fifth Circuit panel reinstated a nationwide injunction blocking enforcement of the CTA, just days after another panel lifted it. This ongoing legal back-and-forth has created significant uncertainty for compliance efforts nationwide.

To recap:

• The CTA, enacted as an anti-money laundering measure, requires U.S. entities that existed before 2024 to disclose their beneficial owners - individuals who own or control the business - by January 1, 2025.

• On December 3, a district court issued a nationwide injunction halting enforcement of the law following a legal challenge.

• On December 23, a Fifth Circuit motions panel lifted that injunction, stating the government is likely to succeed in defending the law's constitutionality.

• On December 26, another Fifth Circuit panel reinstated the injunction to "preserve the constitutional status quo" while the merits of the case are considered.

For AMG clients, this means compliance with the CTA is not currently required. If you are unsure about how to proceed, each community should consult with their legal counsel to determine the best course of action.

AMG encourages clients to wait until compliance is unequivocally required. We offer this recommendation for two key reasons:

1. Avoiding Unnecessary Costs: Premature action could result in expenses that may not ultimately be needed.

2. Minimizing Effort for Volunteer Members: Preparing and submitting the required information is a time-consuming task. Until compliance is mandatory, we believe communities should focus their resources elsewhere and avoid unnecessary burdens on their volunteer members.

For further information, you can refer to the following resources:

• Corporate Transparency Act Blocked by US Appeals Court Again (Bloomberg Tax)

• Corporate Transparency Act Back on Hold for Now (Law Firm Carolinas)

AMG does not provide legal advice. We strongly recommend that clients consult with their attorney before making important legal decisions regarding the CTA or any other matter. We remain committed to monitoring developments and keeping you informed. If you have any questions on this issue, please feel free to reach out to your Community Manager. 

Warm regards,

Dacy Cavicchia, CMCA, AMS, PCAM 
President 
Association Management Group, Inc.

Storage Caves, a Luxury Condo Garage Storage Developer, to Build 119 Luxury Garages in Fort Mill South Carolina

Storage Caves has acquired 5.5 acres in Fort Mill, SC, to develop a luxury storage facility for RVs, boats, cars, and business inventory. The facility, expected to open by summer 2025, will feature 119 spacious, climate-controlled units with cutting-edge security. Located near the Greater Charlotte area, the development addresses a growing demand for secure and customizable storage solutions. Storage Caves also plans additional projects in the region over the next 18 months.

Read More: Newswire

HOA Manager AMG Announces Good News for Community Associations: Federal Court Halts CTA Filing Requirements Nationwide

Association Management Group (AMG) announced that a federal court has issued a preliminary nationwide injunction halting the enforcement of the Corporate Transparency Act (CTA) filing requirements. The CTA aims to combat financial crimes by requiring organizations, including HOAs, to disclose beneficial ownership information, but the court cited concerns about compliance costs and data privacy. AMG advises community associations to hold off on filing and consult their attorneys for guidance. AMG remains dedicated to informing and supporting associations while offering tailored management services across the Carolinas.

Read More: PRWeb

One dead after carbon monoxide leak at Fayetteville condo, officials say

A fatal gas leak occurred Sunday morning at Lionshead Condos in Fayetteville, N.C., leaving one person dead. Firefighters responding to the scene detected high levels of carbon monoxide throughout the building and began evacuations. Hazmat teams are working to identify the source of the leak, and authorities advise avoiding the area due to ongoing police and fire presence.

Read More: CBS17

Editor’s Note: AMG urges all owners to install and regularly maintain CO2 and smoke detectors. 

Construction prep begins on $18M downtown Greenville luxury condo development

Construction is set to begin this year on The Avant, an $18 million luxury condo development in downtown Greenville, expected to be completed by summer 2026. Located at 702 S. Main St., the four-story building will feature innovative design elements, including an 84-foot water feature and an automated basement parking system to optimize space and sustainability. Developer Stephen Mack emphasized local talent and Greenville’s heritage in the project, which overcame delays through value engineering to manage costs and enhance efficiency. The Avant aims to set a new standard for Southeast development while offering lifestyle-focused residences.

Read More: GSA Business Report

AMG Continues Tradition of Showing Gratitude for Employees with 5th Annual Thanksgiving On Wheels Meal

PHOTO CUTLINE: This week, AMG’s Thanksgiving On Wheels event brings fully-cooked turkey and sides to team members across the Carolinas.

“People say it’s not happiness that makes us grateful; it’s gratefulness that makes us happy. We believe that,” said AMG President, Dacy Cavicchia. “At this time of counting blessings, we feel it’s especially important to honor the efforts of the most important asset our company has–our staff. They are the key to our success and we appreciate their excellence, commitment, and professionalism.”

AMG is showing appreciation for the team with its fifth annual Thanksgiving On Wheels event. The company is making the holiday a little easier for its busy, dedicated employees by gifting them with the cornerstone elements of their Thanksgiving dinners. Each team member across its five offices in Greensboro, Winston-Salem, Charlotte, and Raleigh/Durham, NC, and Greenville and Aiken, SC, received a delicious fully cooked turkey and gravy, plus two scrumptious side dishes of beans and mac n’ cheese.

Since 1985, Founder and CEO Paul Mengert and Vice-President May Gayle Mengert have worked to instill a culture of service in the organization. But that ethos of giving isn’t just for association clients and nonprofits in the community–it also includes the company’s internal team. “AMG has a long history of excellent customer service, as well as tireless and dedicated community service to a number of organizations that focus on helping others,” Mengert said. “At this time of year, we just want our team across the Carolinas who give so much of their time and talent to our clients and communities that they are important to us, we need them, and we thank them for who they are and how masterfully they ‘show up’ for AMG day after day. We couldn’t do this–we wouldn’t be us–without them.”

The Cockaboose Corp. is the coolest HOA ever — and it’ll throw a yellow flag if needed

The Cockabooses are a unique set of 22 retrofitted railcars turned into luxury tailgating suites near the University of South Carolina’s Williams-Brice Stadium. Created in 1990 by Ed and Cathy Robinson, these iconic cabooses sell for upwards of $220,000 today and are governed by a homeowners association (HOA) called The Cockaboose Corp.

The HOA oversees external maintenance, enforces rules (like prohibiting signage and rentals), and plans for costly future repairs, such as repainting. Annual dues recently spiked to $5,000 to cover these expenses. Quarterly board meetings also address issues like trademark rights and game-day logistics. Owners, often wealthy USC alumni or enthusiasts, view Cockabooses as more than investments—they symbolize prestige and the ultimate tailgating experience. Despite the challenges of managing HOA duties, owners cherish the joy and exclusivity of hosting in these legendary spaces.

Source: TheState.com

War over windows: Charlotte homeowner wins 5-year fight with HOA, gets $75K settlement

Sherry Loeffler won a rare legal settlement against her HOA in Lake Wylie, ending a five-year dispute over vinyl windows installed in her townhome. Despite receiving $75,000 and keeping her windows, the ordeal cost her financially and emotionally. The HOA fined her nearly $12,000, placed a lien on her house, and threatened foreclosure, prompting Loeffler to sue.

The case highlights growing tensions between homeowners and HOAs in North Carolina, where foreclosure actions by HOAs have increased. Loeffler’s victory included canceled fines and legal fee reimbursements, but she endured significant stress and financial hardship. She advises homeowners to document everything when dealing with HOAs.

The HOA board, citing complaints about property values and mismatched windows, expressed frustration over the drawn-out dispute but aims to move on. Loeffler, disillusioned by the experience, plans to relocate to a community without an HOA.

Source: The Charlotte Observer

North Carolina Hurricane Helene Homeowner Resources

This article was originally published on October 15, 2024 by Community Association Institute in Disaster Recovery Resources webpage for Community Association Institute.

Community Association Institute- Disaster Recovery Resources

The devastation from Hurricane Helene has impacted communities of all sizes and types in North Carolina. CAI supports those communities recovering from this deadly storm and working to remove physical hazards in the way of recovery efforts. CAI has gathered the below information on current state, local, and federal resources to assist with the difficult task of rebuilding and recovering, online at: https://www.caionline.org/disaster-recovery-resources/.

FEMA continues to prioritize recovery efforts, including search and recovery, shelter, power, water, and other critical resources for hospitals, first responders, and those with life-threating circumstances.

IMMEDIATE DEBRIS REMOVAL

North Carolina Updated Disaster Declaration Highlights Debris Removal for Community Associations

Debris removal has been approved for Emergency Protective Measures (Category B)

Emergency protective measures conducted before, during, and after an incident are eligible if the measures:

• Eliminate or lessen immediate threats to lives, public health, or safety; OR

• Eliminate or lessen immediate threats of significant additional damage to improved public or private property in a cost-effective manner.

Community associations must work with the local municipal authorities to coordinate debris removal on public and private roads. All public and private roads should be covered under the local municipal debris removal efforts. It is important to note that community associations will not be reimbursed by FEMA or the locality for debris removal. The community MUST allow the locality to remove the debris (on both private and public roads).

For private roads, communities will be required to:

(a) Authorize the locality to remove the debris

(b) Indemnification FEMA and the locality from claims raised by debris removal.

NOTE: Communities seeking FEMA support for debris removal MUST work with their local municipality. FEMA does not provide money to community associations for debris removal. FEMA provides support and funding to the local municipality.

Common Area Critical Infrastructure Repairs

Community Association Critical Repairs of Common Area Infrastructure: Once communities move to phase II of recovery – following efforts related to life-safety – communities should:

· For removal of debris in and out of the community, that is considered life safety, contact the local municipality and coordinate debris removal.

· For other issues, not life threatening:

o Contact your insurance carrier to explore coverage.

o Contact the U.S. Small Business Association to inquire about low interest disaster loans and/or grant programs - https://www.sba.gov/funding-programs/disaster-assistance/hurricane-helene

o Contact the North Carolina Dept. of Public Safety - https://www.ncdps.gov/our-organization/emergency-management/hurricane-helene#Safety-8279

Individual Homeowner Resources

FEMA can provide individual assistance to condo owners and homeowners of housing cooperatives and single-family homes for their owner-occupied units in federally declared disaster areas.

However, FEMA will not help with damaged common areas or items that are the responsibility of the condominium association, housing cooperative, or homeowners association. Homeowners who rent out their units may not be eligible for FEMA assistance.

To qualify for FEMA assistance, you must:

· Be a U.S. citizen, non-citizen national, or qualified non-citizen

· Provide proof of identity and occupancy

· Provide proof of ownership for your home

· Have a primary residence in a disaster area that you can't access or live in

· Have no insurance or have filed a claim that doesn't cover all your losses

You can apply for FEMA assistance by: Visiting DisasterAssistance.gov, Using the FEMA mobile app, Calling the FEMA helpline at (800) 621-3362, and Visiting a Disaster Recovery Center.

You can expect FEMA assistance to last for up to 18 months after the disaster declaration, but it may be extended in some cases.

State Resources

North Carolina State Information and Resource Pages:

• North Carolina Department of Public Safety Hurricane Helene Resources Page- https://www.ncdps.gov/our-organization/emergency-management/hurricane-helene

• North Carolina Board of Elections Information Page- https://www.ncsbe.gov/voting/upcoming-election/helene-recovery-and-voting

• North Carolina Department of Insurance Hurricane Helene Information Page- https://www.ncdoi.gov/hurricane-helene-response-and-recovery

• North Carolina Department of Health and Human Services Hurricane Helene Resources Page- https://www.ncdhhs.gov/assistance/hurricane-helene-recovery-resources

List of counties included in Governor Cooper’s Major Disaster Declaration (click for designated website with disaster resources/updates, if available): Alexander, Alleghany, Ashe, Avery, Buncombe, Burke, Caldwell, Catawba, Clay, Cleveland, Gaston, Haywood, Henderson, Jackson, Lincoln, Macon, Madison, McDowell, Mecklenburg, Mitchell, Polk, Rutherford, Swain, Transylvania, Watauga, Wilkes and Yancey

How to Apply for FEMA Assistance Press Release: https://governor.nc.gov/news/press-releases/2024/09/29/how-apply-fema-assistance-after-hurricane-helene

Federal Resources

FEMA-designated disaster areas in North Carolina: https://www.fema.gov/disaster/4827/designated-areas

FEMA has an information page for each state impacted by Hurricane Helene with a map showing the areas recognized as disaster areas:

• Alabama- https://www.fema.gov/disaster/3618/designated-areas

• Florida- https://www.fema.gov/disaster/3615/designated-areas

• Georgia- https://www.fema.gov/disaster/3616/designated-areas

• North Carolina- https://www.fema.gov/disaster/3617/designated-areas

• South Carolina- https://www.fema.gov/disaster/3619/designated-areas

FEMA also has a general landing page for Hurricane Helene with links to relevant resources and state agencies: https://www.fema.gov/disaster/current/hurricane-helene.

Federal Disaster Assistance Resources: https://www.disasterassistance.gov/

Source: Community Association Institute (CAI)

Construction prep begins on $18M downtown Greenville luxury condo development

Construction will begin this year on The Avant, an $18 million luxury condo development in downtown Greenville, slated for completion in summer 2026. The four-story building at 702 S. Main St. will feature an 84-foot water installation, an automated parking system, and locally designed architecture, with a focus on sustainability and efficient use of space. Despite initial delays due to rising construction costs, the project advanced through value engineering to optimize both cost and design.

Source: GSA Business Report

‘It’s not fair’: South Strand parents of children playing sports in community area issued cease and desist from HOA

In the Creekhaven community of Murrells Inlet, South Carolina, tensions have escalated between parents over kids playing sports in a common grassy area. Some parents received a cease and desist letter from the HOA, claiming the area is "not for organized sports," while others argue the games are informal and beneficial for the children. Despite some neighbors' concerns about growing numbers of kids and potential disruptions, many hope for a resolution that allows the children to continue playing outside.

Source: WMBF News

A regressive HOA made up a rule and then tried to take away this family's home — so they fought back in court

A Raleigh, North Carolina family won a four-year legal battle against their HOA, allowing them to keep solar panels on their roof. The HOA had fined the family and attempted foreclosure, despite state law that prohibits entirely banning solar panels but allows restrictions on front-facing installations. The North Carolina Supreme Court ruled in the family's favor, setting a precedent that makes it easier for homeowners to install solar panels in the state.

Source: The Cool Down

Elevating Customer Satisfaction: The Core of AMG's Strategy

At Association Management Group (AMG), our mission has always been clear: to deliver unparalleled service that not only meets but exceeds the expectations of our clients. Our strategy is rooted in a deep commitment to achieving the highest level of customer satisfaction. This commitment extends beyond just meeting the needs of the communities we serve; it involves creating programs and services that enhance the satisfaction of both community members and their leaders.

The Synergy of Satisfaction: Customers and Employees

At AMG, we believe that there is a powerful synergy between customer satisfaction and employee satisfaction. Our team members are the backbone of our company, and their well-being directly impacts the quality of service we provide. When our employees feel valued, supported, and empowered, they bring that positivity and dedication to their interactions with our clients. This, in turn, fosters stronger relationships with the communities we manage and drives higher levels of satisfaction across the board.

One of the leading questions clients ask us is, "How do you retain your managers?" This question arises because many new clients come to us from companies where manager turnover has been a persistent issue. At AMG, our managers have been with us for an average of over 10 years. The key to this retention lies in our belief that, in order to keep good people, they must be treated and compensated appropriately. Labor is our biggest single cost and asset, and maintaining a skilled and dedicated team is essential. By investing in our employees through competitive salaries, continuous training, and a supportive work environment, we ensure that they have the motivation and resources needed to deliver the exceptional service that AMG is known for.

Quality Service: The Value Behind the Cost

We understand that providing high-quality service comes with a cost. However, we firmly believe that the value of exceptional service far outweighs the price. At AMG, we are sensitive to the financial realities that our communities face, and we work diligently to balance quality with cost-effectiveness. Our priority is to ensure that every dollar spent translates into tangible benefits for the community.

It’s essential to recognize that just because a service has an upfront cost, that doesn’t mean it’s more expensive in the long run. I recall a situation where an association decided to proceed with repaving a parking lot without hiring an engineer to diagnose a wetness issue. Unfortunately, the repaving didn’t solve the underlying water problem. Later, the board discovered that a French drain would have addressed the issue at a much lower cost than the repaving. This is a clear example of how investing in the right services from the start can prevent more significant expenses down the line.

In another instance, a community had not reconfirmed its registered agent for many years. Although the agent was a highly competent former judge, he had retired and failed to forward crucial legal documents to the association. This oversight ended up costing the association hundreds of times what it would have cost to verify the registered agent’s status. At AMG, we’ve implemented programs that not only raise satisfaction but also, in many cases, offer associations overall lower costs by proactively addressing potential issues before they become costly problems.

Industry-Leading Results and Recognition

Our dedication to excellence is not just an internal metric; it is recognized by the broader community as well. AMG consistently achieves industry-leading results, a testament to the hard work and commitment of our team. Our company is often placed in the very elite of community management firms, as evidenced by our exceptional Google reviews and other customer feedback platforms.

These accolades are more than just numbers; they are a reflection of the trust and satisfaction of the communities we serve. We take pride in being recognized as a leader in our field, and we remain committed to maintaining and enhancing this reputation by continually striving for excellence in everything we do.

Conclusion

At Association Management Group, customer satisfaction is not just a goal—it is the foundation of our strategy. By creating programs that elevate the satisfaction of both community members and their leaders, investing in our employees, and balancing quality with cost, we ensure that AMG remains at the forefront of the community management industry. As the examples above demonstrate, a thoughtful investment in quality service can lead to significant savings in the long run, reinforcing our commitment to providing the best value for our clients. We are proud of our industry-leading results and the recognition we receive from our clients, and we will continue to prioritize satisfaction in all aspects of our work.

That pesky HOA? Here's why you should embrace it

South Carolina has one of the highest percentages of homeowners living in community associations (HOAs), with 80% of new homes built in 2020 requiring an HOA. Approximately 26% of the state's residents live in HOA-governed communities, reflecting a trend towards planned developments. HOAs are valuable for maintaining property values, enhancing community aesthetics, and fostering a sense of community. However, while some residents criticize HOA rules as overreaching, these organizations play a crucial role in ensuring safety, effective governance, and the overall quality of neighborhoods in the state. Despite occasional issues with board overreach, HOAs remain essential to South Carolina’s thriving communities.

Adapted from source: Greenville News

Condo owner sues HOA over Ring camera, loses, has to pay $73K

Teywonia Byrd, a Charlotte resident, installed a Ring camera outside her condo for security after being drugged and sexually assaulted, but her HOA denied her request to keep it, citing privacy concerns. Despite the denial, Byrd kept the camera, leading to daily fines and a lawsuit, which she lost. She now owes $73,000 plus potential attorney fees of $115,000. The HOA had offered to waive the fees if she removed the camera, but Byrd refused, prioritizing her safety over financial considerations.

NOTE

Harmony Taylor with Law Firm Carolinas spoke to the attorney handling this case, who reported:

"The owner in this case had a camera that pointed not just into the hall, but showed other units and individuals coming and going to those units. She used recordings to report on her neighbors to the Association.  It was a sad situation because the owner was assaulted in her own unit by someone she let into her units, after she initially installed the cameras.  The Association may have allowed the camera to remain in other circumstances. This case underscores the facts that:

1. Most associations require architectural approval for the installation of Ring or similar doorbell cameras, particularly in condos.

2. The cameras must be positioned to target their view to the unit's interest and not invade others' privacy.

3. The cameras must not be used to effectively police neighbors.

Adapted from article at source: WSOCTV

When Is an HOA or Condo Rental Restriction Unreasonable (Part II)

This article was originally published on August 7, 2024 by Harmony Taylor in HOA & Condo Associations Real Estate Blog for Law Firm Carolinas.

Law Firm Carolinas Blog

As attorneys, we are regularly asked by homeowner and condominium associations to assist with restrictions on rentals, whether complete or percentage bans, restrictions on short-term rentals, or limiting corporate rentals. (See past articles, including HOA/Condo Rental Restrictions, Corporate Owners & Institutional Investors and Short-Term Rentals in North Carolina and South Carolina HOAs and Condominiums). In February of this year, the NC Court of Appeals struck down a condominium rental amendment as unreasonable. (When Is an HOA/Condo Rental Amendment Unreasonable?)

Yesterday, August 6, 2024, the NC Court of Appeals again visited the issue of whether a specific declaration amendment restricting rentals is reasonable.

McDougald v White Oak Plantation HOA (“White Oak Plantation”) is an “unpublished opinion,“ which means the decision is not controlling legal authority and should not be cited in other cases. However, even unpublished opinions give a sense of the Court’s thinking as to specific issues and how subsequent courts may rule.

White Oak Plantation is a planned community in Buncombe County, NC. The original 1992 restrictive covenants predated modern rental platforms such as VRBO or Airbnb and contained no language regarding rentals. Instead, the covenants contained general language related to “residential use” and prohibitions against “business operation.” Many owners believed the business operation prohibition already restricted rentals. The covenants were amended at various points, but no specific rental restrictions were added. Plaintiffs are lot owners who began to rent their properties on a short term basis. Thereafter, the membership in 2019 adopted a declaration amendment to prohibit rentals of less than 90 days. Plaintiffs filed suit seeking a declaration that the amendment was invalid as to them and their lots. The trial court granted summary judgment in favor of the homeowners, and the association appealed.

The Court of Appeals analyzed the rental amendment to determine if it was “reasonable” using the standard established by the Armstrong v Ledges case. Noting that reasonableness may be determined from the language of the original covenants, deeds and plats, as well as other objective circumstances, the Court determined that nothing in the original development scheme precluded short term leasing. Thus, the court concluded, the new rental restriction was not reasonable and would not be applicable as to the Plaintiffs who brought suit.

So, what does the case mean or not mean? Again, as an unpublished decision, the opinion only applies to the parties involved and does not have precedential value. Fundamentally, the decision does not change our firm’s approach to rental amendments. ALL amendments must be reasonable, which means that circumstances matter. Associations that have never had any rental restrictions should approach them carefully. Any rental restrictions should be tailored to address membership wishes while protecting vested usage rights. This is why we always encourage associations to discuss such issues with the membership before pursuing any rental amendment to solicit input on the scope of the change and how it should be applied to existing owners (see Rental Amendment Concerns).

With any decision, it’s always best to read the actual case if you want to know how it might impact a specific association. The White Oak Plantation decision can be found here: McDougald v White Oak Plantation HOA.

If your association is considering a rental amendment, you should consult an experienced community association attorney at the outset to make sure that any amendment is pursued correctly–both as to the procedure and as to the substance of the amendment. Please contact any of our community association attorneys in North or South Carolina to discuss such issues.

Harmony Taylor

Law Firm Carolinas, LLC