A home away from HOA control: Property owner wants to empower homeowners

HUNTERSVILLE – Jim Lane is a man on a mission. The Huntersville resident wants to reform and improve homeowners associations, which he believes have run amok and are “too controlling of residents’ lives.” Lane said he’s petitioning all Charlotte area HOAs and homeowners to join his new organization, Greater Charlotte Alliance of Homeowners Associations.

Homeowners in disputes with their HOAs will get some relief from two laws passed by the N.C. General Assembly during this year’s session, one of which takes effect Oct. 1. That law, initiated in HB 331, requires that a trustee be appointed by the HOA to conduct disputed foreclosures.  The bill also has rules for collecting association assessments and giving notices of liens and foreclosure.

Another bill that was signed by Gov. Pat McCrory, HB 278, provides guidance for voluntary mediation of disputes between homeowners and associations.

But the one that would have the greatest impact on HOAs and homeowners, HB 175, did not make it out of the House Judiciary Committee for consideration by the Senate prior to the end of the 2013 legislative session. This bill would have barred homeowners associations from foreclosing for dues and fees owed by an owner.

Rep. Rodney Moore (D-Mecklenburg), who co-sponsored the legislation with Rep. Susi Hamilton (D-New Hanover) and Rep. Kelly Alexander (D-Mecklenburg), said the issue is not dead.

“In 2011, we tried the same thing with HB 183,” he said. “I’m going to re-introduce it again if I’m re-elected.”

Lane, of Gilead Ridge, faced foreclosure when his neighborhood homeowners association placed a lien on his home for not paying a fine over 36 pansies. Under the North Carolina Planned Community Act, “the association may foreclose the claim of lien in like manner as a mortgage on real estate under power of sale.”

In the battle that followed, Lane became an advocate for homeowners.

He said an initial fine of $100, for trying to spruce up a flower bed in a common area – in violation of association rules – ballooned into “$10,000 in fees to the HOA and their attorney and another $10,000 in fees for my attorney. They even tried to have me arrested for trespassing.”

Calls and emails to the Gilead Ridge homeowners association and property management office for comment were not returned.

Lane said his organization is seeking greater participation of individual residents in the running of associations, many of which now are run by management companies.

Moore said he believes that HOAs started off as a great idea, but in some cases they need to be reined in. He added that there is a “strong lobby of people who are profiting from these (legal) actions. Property management companies, attorneys and entities who specialize in HOA, they have a very strong lobby.”

Lane also believes disputes over dues and fines should be settled in small claims courts, not through the foreclosure process.

Mike Hunter, a Charlotte attorney at Horack Talley specializing in real estate and litigation, said that without the current law granting the power of foreclosure, homeowners associations would have no effective means of enforcement.

“Delinquency rates will sky rocket. HOAs won’t be able to maintain pools,” he said. Hunter added he’s never seen any abuse by HOAs. A new law would be equivalent to “using a sledge hammer to kill a gnat.”

Hunter also thinks homeowner associations’ attorneys have plenty of business as it is.  With a new law banning HOAs from foreclosing on delinquent owners, he would expect to see more lawsuits.

“Lawsuits are more expensive and more risky to the homeowners association. It exposes them to more countersuits.”

Not all homeowners associations act in bad faith, admits Moore, but “there has been abuse by some associations. They may not be mean-spirited, but they don’t understand the law or the need for reform of HOAs in North Carolina.”

Bill Bittenberger is president of the Alliance of Brunswick County Property Owners, a coalition of 17 homeowners associations near Wilmington founded in 1999. (Lane is patterning his alliance on Brunswick’s.) “We’re all volunteers and I’m aware of some bad apples, but I’d like to think the majority of HOAs are trying to do the right thing,” Bittenberger said.

Bittenberger doesn’t see the need for reform to the foreclosure bill.  He sees it as an enforcement mechanism. “When people stop paying their dues, other people in the community have to pick up the cost.”

Moore counters that forcing foreclosure on an owner for failure to pay dues hurts everyone by “driving down property values.”

There are approximately 18,000 homeowners associations in North Carolina, according to Jim Laumann, president of the Home Owners Association of North Carolina, a for-profit corporation near Raleigh. Fifty-three percent of all owner-occupied homes have HOAs.

Laumann said that less than one-tenth of 1% of foreclosure proceedings are actually filed by HOAs against delinquent homeowners.

“Who is going to sacrifice their home over a fine?” he said. Laumann sees the regulation as a necessary tool for the industry: “It’s hard to enforce otherwise.”

Laumann said there are well-run, well-managed associations that residents love, but there are a few rogue boards: “The guys who’ll measure your lawn with a ruler.”

But that’s the exception, he said, not the rule.

He also discounted the idea that property managers have a vested interest in litigation. “They have a vested interest in best practices. Is a person breaching covenants or not paying fees?”

Areas where Laumann would like to see reform is in outreach to homeowners associations when changes occur in laws affecting HOAs, and in presenting covenant documents to new owners prior to the actual closing so residents might actually read them.