North Carolina lawmakers urged to address growing HOA complaints

They say a man’s home is his castle. But what happens when that castle is under the rule of an unruly homeowners’ association?

North Carolina legislators began the task last week of studying current laws governing homeowners’ associations (HOAs), existing remedies for HOA violations, and what executive agencies were best positioned to assist homeowners in resolving complaints against HOAs.

There are approximately 14,000 HOAs and Property Owners Association (POAs) in North Carolina. And for years now, Rep. Frank Iler (R-Brunswick) has said he’s been hearing from homeowners who are unhappy with their associations.

“We’ve heard from hundreds of people that the HOA boards and board members have engaged in activities that should be concerning to those of us who represent these citizens,” Iler told his colleagues last Thursday.

But Iler said while the complaints have flowed, their advice has been very limited.

“Hire a lawyer. That’s been our advice to a lot of these folks. And in my opinion, I’ve never thought that was quite good enough,” he said.

Impacted HOA members speak out

Timothy Hinds of the NC Homeowners Association Law Reform Coalition told lawmakers that his own HOA was required by state statute to make financial records available for inspection by homeowners.

They are also required to provide the names and addresses of all association owners in preparation for each annual meeting, allowing  owners to communicate about association business.

“They’ve largely refused to do any of these things that are mandated in theory by the law,” explained Hinds. “The law is flouted because the only enforcement it provides is for homeowners to mount prohibitively expensive lawsuits against boards that have access to association money to drag out the cases until the homeowners money and time are exhausted.”

Hinds said HOA boards in the property management industry know this and will continue their “rogue” behavior until the General Assembly enacts some accessible remedy.

Mike Farmakis traveled from Charlotte to Raleigh to share his own experience.  Farmakis served as a member on his HOA in 2022. When he pointed out irregularities that misled homeowners into purchasing additional insurance policies that should have been covered by their HOA assessments, he was voted off the board.

“Homeowners have lost tens of thousands of dollars through a section of HOA fees or insurance policies that they didn’t need to purchase,” Farmakis said.

For Dennis Valkanoff, it was a case of an HOA in Fuquay Varina that never delivered.

“When we signed our contract, we were informed, as others were, that the amenity center, workout area, pools, et cetera, would be completed or would be started 12 months after the first owner moved in, which would have been February of 2021,” he explained.

It turned out that was not the case. Nearly three years later, Valkanoff is still waiting on some of those amenities he’s paying for.

“Shame on me. I did not pay attention to the HOA documents well enough.”

And in Valkanoff’s case, his builder controls the HOA board.

“And they will control the board until all 820 lots are sold and occupied,” he lamented.

Industry, AG’s office weigh in

Weldon Jones representing the North Carolina chapter of the Community Association Institute (CAI), which represents HOAs, told legislators many of these ‘misunderstandings’ can be worked out.

“We feel very strongly that education and better resources for homeowners is truly going to make a big difference in resolving some of these disputes.”

Sunila Chilukuri, a legislative liaison with the NC Department of Justice and Attorney General Josh Stein, said DOJ supports stronger transparency requirements for North Carolina’s HOAs.

Chilukuri said the department is concerned about reports of North Carolinians who genuinely did not know they were about to lose their homes because they owed modest sums of money to their HOA.

“Our office supports a minimum dollar threshold for unpaid assessments before an HOA may seek foreclosure,” said Chilukuri.

Chilukuri also suggested the General Assembly consider requiring associations to provide records to homeowners within a specific time frame after they’re requested and limit the charges for copying records to no more than the actual cost.

“Property owners also deserve adequate notice through all means on record with an HOA before their home is subject to foreclosure.”

Rep. Carla Cunningham (D-Mecklenburg) asked for more data on the foreclosure issue, specifically homeowners who struggled during the pandemic to pay their assessments.

An investigation by the Charlotte Observer and Raleigh’s News & Observer found HOAs have filed to foreclose on more than 5,500 properties since 2018.

Legislative action in 2024?

The chief question facing lawmakers in 2024 with respect to HOAs likely involves deciding the fate of House Bill 542. The bill, which passed both houses by huge margins in 2023 (albeit in different forms), would put some guardrails in place before a HOA could put a lien on homes for a minor unpaid fine or missed assessment. A conference committee was appointed in October to reconcile differences in the two versions of the bill, but no action has been taken since.

Kevin Jefferson, a former HOA board director, urged legislators to follow in the footsteps of South Carolina.

The Palmetto State collects and then shares online certain data from complaints involving HOAs. That information is shared with the governor, South Carolina’s General Assembly and the public annually. Consumers can start there to see if their HOA is responsive and transparent or skirting the law.

“An enforcement mechanism as a part of a consumer protection agency is a vital component of reform,” Jefferson told the committee.

Rep. Ya Liu (D-Wake) said she is hopeful legislators can find a way to level the playing field and give homeowners a bigger voice.

Rep. Steve Tyson (R-Craven) agreed the current statutes deserve a second look with nearly 30% of all homes in North Carolina now covered by an HOA.

“There’s many reasons for that, including increased density of development, stormwater management rules, city, and or county ordinances that require developments to have opened in our recreational spaces that have to be permanently maintained,” said Tyson.

“It’s just the world that we live in.”

The House Select Committee on Homeowners’ Associations meets on January 24. A final report is due to the General Assembly by March 1.