Hope Derby Carmichael has been appointed to the North Carolina Bar Association’s Community Associations Committee, an ad hoc committee of the NCBA’s Real Property Section.  The Community Associations Committee meets regularly to discuss issues related to condominiums and community associations which impact the legal jurisprudence or statutory framework in North Carolina.  The Community Associations Committee assists with education efforts for lawyers and their clients on related issues and also makes recommendations to the Bar Association regarding the support of proposed legislation before the General Assembly.  Most recently, the Committee has offered itself as a resource to the General Assembly’s House Select Committee on Homeowners Associations which is studying issues arising out of the N.C. Condominium Act and Planned Community Act.

Several Jordan Price attorneys will be speaking at CAI-NC’s First Annual Law Day in Chapel Hill on February 27, 2010.  In addition to attorneys from other areas of the State, Henry Jones, Hope Carmichael and Brian Edlin will speak on various issues facing planned communities in North Carolina, including recent legislative developments.  The seminar is scheduled for February 27, 2010 at Extraordinary Adventures in Chapel Hill, North Carolina.  The seminar is designed for volunteer community leaders, as well as, community management professionals.  Topics will range from running meetings, collections, foreclosure of liens, recent legislation and case law and election and removal of officers and board members.  For more information, including registration information, please click here.

Effective October 1, 2009, townhome communities, planned unit developments and condominiums in North Carolina will be subject to several statutory changes in both the Planned Community Act (Chapter 47F) and the Condominium Act (Chapter 47C).  These changes in the law will require some additional procedures on the part of the homeowners association and on the attorney for collection of delinquent assessments.  The General Assembly also enacted legislative changes affecting the use of solar collector devices, but these changes will not affect the current law for any existing planned communities or condominiums – only subdivisions or condos created after December 1, 2009.

The first piece of legislation, House Bill 806, was signed into law on August 26, 2009.  This bill was designed to insure that all owners receive notice of the filing of the claim of lien prior to the institution of foreclosure proceedings.  Generally under the new law, the Association is now required to make “reasonable and diligent efforts” to ensure that its records contain the owner’s current mailing address.”  While there are some specific requirements, this law also imposes a heightened obligation on the Association to act on any information managers, board members or attorneys may have that the mailing address in the Association’s records is not accurate – this would include knowledge of returned mail from the post office, knowledge that the property is vacant or knowledge that there is a tenant occupying the property rather than the owner.  House Bill 806 also imposes new requirements for the claim of lien document that is filed with the Clerk of Court.  Every claim of lien must now contain a statement in boldface, capital letters, on the front page of the lien that essentially states that the document constitutes a lien against the owner’s property and that if not paid, the lien may be foreclosed.  Your attorney handling such liens should be familiar with the new law.  In addition, the person signing the claim of lien must sign a certificate of service, attached to the lien itself, by which that person verifies that he has mailed a copy of the claim of lien both by regular, first-class mail, and by either certified mail, return receipt requested, or by overnight delivery with a qualified carrier (such as Fed Ex, UPS, DHL, etc.)   The second piece of legislation, House Bill 1387, was signed into law on August 28, 2009.  This bill invalidates any new restrictive covenants, created on or after December 1, 2009, which covenants would prohibit the installation of solar collector devices (solar panels, receptors for solar appliances, etc.)  This law does not apply to any existing restrictions contained in Declarations prior to December 1, 2009, and it does not apply in any event to multi-story “stacked” condominiums.  Managers and developers, however, should be aware of these changes in law as they affect new communities created on or after December 1, 2009.   For a copy of House Bill 806 please click h806.pdf. 

Jordan Price lawyers successfully defended a claim brought by owners in a Raleigh subdivision against their homeowners association seeking a ruling from the court that their lot was in compliance with the restrictive covenants of the community and that the homeowners association had unlawfully levied fines against the owners.  The trial court rejected the owners’ arguments and the Court of Appeals recently affirmed the trial court’s ruling.

The covenant at issue in Schwartz v. Banbury Woods was a parking restriction that required boats, trailers, campers and all similar property to be parked in a screened area which is approved by the Architectural Committee in accordance with rules governing such items adopted by the Board of Directors of the homeowners association.  A dispute arose with respect to the owner’s parking of a 2004 Tioga motor home on their lot and eventually the homeowners association levied fines against the owners in accordance with Chapter 47F of the General Statutes.  The owners sued arguing that the fines were invalid and arguing that their 2004 Tioga motor home was not a camper or similar property in accordance with the covenants.  The trial court granted summary judgment for the homeowners association and the Court of Appeals affirmed stating, that it would “defeat the plain and obvious purposes of [the parking] restriction” to adopt the owner’s argument that the 2004 Tioga motor home was not a camper or similar property requiring screening.  The Court of Appeals also affirmed the levying of fines stating that the homeowners association had complied with the procedures of N.C.G.S. § 47F-3-107.1.  You may read the Court of Appeals opinion here. banbury-woods-case.pdf

An article written by Brian Edlin was recently featured in the December 2008 publication of the Real Property Newsletter for the North Carolina Bar Association.  The article traces the highlights of the past 10 years of North Carolina’s Planned Community Act, N.C.G.S. §47F-1-101 et seq. (“Act”) and reviews the legislative changes to the Act since its enactment in 1999.  The article also discusses several of the important cases interpreting the Act over the past 10 years, including cases on fines, standing and the constitutional issues associated with applying portions of the Act to pre-1999 communities.  You may read the article here december-2008-newsletter.pdf.

          The North Carolina Supreme Court has recently retained the case of Riverpointe Homeowners Association v. Mallory to consider certain constitutional issues raised with the Planned Community Act.  Specifically, the Supreme Court will consider arguments from the homeowner in this case that the powers granted to communities in Act, including fining, are unconstitutional as applied to communities formed prior to the effective date of the  Act.

          The Supreme Court issued an order on 27 August 2008 in which it retained review of the constitutional issues raised in the homeowners appeal. The issue of retroactive application of the Act has already been decided favorably for homeowners associations by the North Carolina Court of Appeals in the 2007 case of Reidy v. Whitehart. 

The Virginia Graeme Baker Pool and Spa Safety Act (“Act”) was passed by Congress and signed into law in December 2007.  The Act is named after Virginia Graeme Baker, the granddaughter of former Secretary of State James Baker, who died in a hot tub in 2002.  The Act applies to condominium, townhome, and homeowners’ associations who have pools.

The purpose of the Act is to promote safety of pools and spas and help prevent drowning, especially of children.  The Act establishes a federal pool and spa drain cover standard, a state pool safety grant program and an education program to inform the public of methods to prevent drowning and entrapment.  The Act applies to “public pools and spas” which includes those open to the public generally, whether free or for a fee and those open exclusively to: (1) members of an organization and guests, (2) residents of a multi-unit apartment building, apartment complex, residential real estate development, or other multi-family residential area; and (3) patrons of a hotel or other public accommodations facility.  The Act is intended to apply to community association pools and spas.

Under the Act, by 19 December 2008, public pools and spas must be equipped with anti-entrapment devices or systems.  Generally speaking, every “public pool and spa” with a single main drain, other than an unblockable drain, must be equipped with at least one of the following devices:  (1) safety vacuum release system which ceases operation of the pump, reverses the circulation flow, or otherwise provides a vacuum release at a suction outlet when a blockage is detected, (2) suction-limiting vent system with a tamper-resistant atmospheric opening, (3) gravity drainage system that utilizes a collector tank, (4) automatic pump shut-off system, or (5) device or system that disables the drain. 

              For a copy of the new law, please click here.

The Supreme Court recently ruled in the case of Winding Ridge v. Joffe that a single family use restriction in a set of restrictive covenants was a structural limitation as opposed to a restriction on the type of occupancy permitted within a dwelling.  The Supreme Court ruling overturns a July 2007 Court of Appeals case which had held that a group of baseball players were in violation of the usage restriction and prohibited the students from occupying the residence unless they were related by blood or marriage or otherwise structured in the same way as a traditional view of an American family.  Judge Geer dissented in the Court of Appeals case and maintained that the restriction was instead, a structural limitation, as opposed to a usage limitation.  In her dissent, Judge Geer wrote, “I would hold in this case that the restrictive covenant, as drafted, is only a limitation on the type of structure that may be placed on the property and not a restriction on the type of occupancy permitted within the dwelling.”  The case was appealed to the Supreme Court where the Supreme Court reversed the Court of Appeals majority decision and adopted Judge Geer’s dissent.

The Court of Appeals has overturned a judgment in favor of a Haywood County developer who sued property owners for collection of assessments. The plaintiff was a developer in the Lake Junaluska development and brought suit against certain individual lot owners within the Lake Junaluska development. Some of the defendant lot owners’ deeds contained restrictive covenants which granted the developer the right to assess for certain service charges. When the defendants refused to pay the relevant assessments, plaintiff brought suit. The defendant owners argued that the restrictive covenants did not specifically set out an affirmative obligation to pay any money to the developer or anyone else. The trial court disagreed and entered judgment in favor of the developer.

On appeal, the Court of Appeals cited a line of appellate cases dating back to 1980 which held that covenants that impose affirmative obligations on property owners are strictly construed and unenforceable unless the obligations imposed are “in clear and unambiguous language” and “sufficiently definite” to assist courts in their application. Applying this line of cases, the Court of Appeals ruled that the restrictions in this case were not “reasonable” and “sufficiently definite.” As a result, the Court of Appeals reversed the trial court’s ruling in favor of the developer. Unique to this decision was the fact that this case involved a developer and not a homeowners’ association seeking to use the assessments sought to be collected.