As north Carolina becomes an increasingly
urban state, more and more people are purchasing
homes and lots in residential subdivisions and planned
communities. in these subdivisions and communities,
there is usually a homeowners association that may
be responsible for maintaining the common areas
of the development and the enforcement of restrictive
covenants. many purchasers seek residential
subdivisions and planned communities with restrictive
covenants (sometimes referred to as restrictions)
because they believe the covenants will help assure
consistency in the neighborhood and the preservation
of property value. Restrictive covenants may address
everything from whether single or multi-family housing
is permitted to the type, size and color of construction.
This page is intended as an introduction
to issues affecting residential subdivisions and
planned communities (other than condominiums) that
are subject to restrictive covenants. (For information
on condominium ownership and townhouse properties,
see the Commission publication, Questions and Answers
on: Condos & Townhouses, or contact your attorney.)
What is a Homeowners Association (HOA)?
It is an association of owners, typically
in a residential subdivision or planned community,
whose properties are subject to restrictive covenants
limiting their use. the association may be responsible
for the maintenance and control of the common areas
in the development and enforcement of the restrictive
Do I have to join the association?
It depends on whether it is voluntary
or mandatory. membership in an association
is typically mandatory if the restrictive covenants
are recorded in a propertys chain of title.
but some neighborhoods have less formal voluntary
associations, generally with less power than mandatory
associations. Regardless of whether it is mandatory
or voluntary, if you are a member of the association,
typically you will have a voice in its operation.
Do I have to pay association dues?
If your association is voluntary,
then any payments necessary to maintain membership
are also voluntary. However, if membership in the
association is mandatory, you must pay all lawful
assessments, dues or charges.
Is there any limit on what an owner has to pay to
Not so long as the dues, charges
and/or assessments are lawfully imposed in accordance
with procedures established by the restrictive covenants.
sometimes, when assessments are for substantial
undertakings (road maintenance, utility services,
building maintenance, etc.) they can be costly;
therefore, prospective purchasers should consider
the amount of any current or pending dues, charges
and assessments when determining whether they can
afford the property. if an existing owner believes
an association has improperly imposed a charge of
some kind, only a court can determine whether it
What is the developers role in a mandatory
association? must it pay dues, charges and assessments?
Under north Carolina law, the developer
of any real estate project is the owner of all unsold
lots or units in the project. as long as the developer
owns a majority of them, it controls the votes and
therefore the association itself. the developer
(or its successors) may have the power to amend
the covenants and restrictions so long as it acts
in accordance with the legal documents creating
the association. the developer has a fiduciary obligation
to act in good faith, in accord with law, and in
the best interest of the association. [Note: Residential
developments created on or after January 1, 1999
are covered by the North Carolina Planned Community
Act if they have more than 20 lots or units and
a covenant in their chain of title requiring owners
to pay the expenses for common property.* Smaller
projects created after that date and older properties
that meet the definition of a planned community
may, under certain circumstances, be brought under
the Act so long as they have covenants requiring
payment of common expenses].
covers creation, alteration and management of planned
What happens if an owner (or the developer) fails
to pay funds claimed by the association?
The association must use the
rights granted in the restrictive covenants to collect
them. in developments subject to the Planned Community
Act, liens and foreclosures are permitted.
What is the role of local government in HOA administration?
Generally, residential subdivisions
and planned communities must be approved by a local
government zoning authority city or county,
depending upon the location of the property. When
subdivision approval is required, a developer may
offer lots for sale and enter into contracts once
preliminary plat approval has been obtained so ong
as the contracts (1) incorporate a copy of the preliminary
plat and obligate the owner to deliver a copy of
the recorded plat to the buyer before closing; (2)
plainly and conspicuously notify the buyer that
final subdivision approval has not been obtained,
that the city or county may not grant approval,
that changes between the preliminary and final plat
are possible and that the contract can be terminated
without the buyer being in breach if the final plat
is materially different from the preliminary plat;
(3) provide that even if the final approved plat
is not materially different from the preliminary
plat, the buyer may not be required to close earlier
than five days after delivery of a copy of the final
recorded plat; and (4) provide that if the final
approved plat is materially different from the preliminary
plat, the buyer may not be required to close any
earlier than 15 days after the delivery of the final
recorded plat, and during that 15-day period, may
terminate the contract and receive a refund of the
earnest money or prepaid purchase price, without
breach or further obligation. (see nCGs § 160a-375.)
typically, after plat approval and inspection of
construction, the local government has no further
role in administering the homeowner association
except to assure compliance with local ordinances
or state laws (for example, a Health department
permit for a swimming pool operation).
Are associations and persons who manage them required
to be licensed?
Not unless they engage in acts classified
as real estate brokerage (sales or rental of real
estate for others) or time share development. if
they do, they must be licensed by the north Carolina
Real Estate Commission. although the Commission
cannot referee disputes between an association and
its members, it has disciplined its licensees for
failing to deliver the Subdivision Street Disclosure
Statement, selling lots in unapproved subdivisions,
misrepresenting material facts in a transaction,
and other violations of the Real estate license
law. the Consumer Protection section of the north
Carolina attorney Generals office also has
power to act against legal entities engaged in certain
unlawful practices [Phone: 919/716-6000].
Can property restrictions dictate the style of my
home or the colors I choose for its exterior?
Yes, if the restrictions are properly
drawn and consistently enforced.
Can the developer, through restrictive covenants
or sales contracts, control my choice of builder
or real estate agent?
Not in most cases. However, a developer
may lawfully refuse to sell directly to you and
instead require you to purchase a lot and home from
a particular builder. as to real estate agents,
a developer may include the agents commission
in the homes purchase price.
Dont my constitutional rights to freedom of
speech, freedom of religion and the enjoyment of
my property prevail over the restrictive covenants
or the powers of the association?
Not in all cases. if you choose to
purchase a restricted property, you agree to abide
by the restrictions. display of signs, flags or
banners, certain uses of the property, storage of
personal property (e.g., boats, Rvs, etc.),
keeping of animals, and other practices can lawfully
be controlled by restrictive covenants if they are
properly created and enforced.
What if a purchaser doesnt want to follow
the restrictive covenants affecting the property?
A purchaser who does not abide by
the restrictions on the property can be fined. that
fine can become a lien on the property and collected
by sale of the lot through foreclosure. if the association
is subject to the Planned Community act, it may
impose a fine up to $100.00 per day, after giving
written notice to the owner of the alleged violation
and providing an opportunity to defend against the
charge at a hearing.
What can I as an owner do if the association is
not performing its duties or if other owners violate
restrictive covenants or bylaws?
Your remedy is to sue the association
and/or the offending property owners in court for
an order compelling them to abide by all lawful
covenants and bylaws. but remember, these are private
rights of action that you must assert on your own.
no state agency, other than the court system, can
determine or enforce an owners rights.
Who pays my legal expenses if I am sued by my association?
With only rare exceptions, you will
be responsible for your own attorney fees and other
Roads and Common Areas
Who owns the roads in a residential subdivision
or planned community?
Unless the roads have been dedicated
to public use and formally accepted by the appropriate
government agency, neither the state nor any public
agency owns legal title to the land over which a
street runs. Where the developer has retained title
to the streets (i.e., the lot lines border the edge
of the street), it is liable under state law for
erosion control and possibly civil damages if injuries
result from a lack of maintenance. this is true
even after all lots have been sold.
Who is responsible for road maintenance in a subdivision
or planned community?
Until responsibility for road maintenance
is lawfully transferred to a municipality or the
north Carolina department of transportation, either
the developer or the owners will be responsible.
However, if a developer becomes insolvent, is dissolved
or dies, the owners alone will have to bear the
cost unless a government agency takes control. Since
there is no guarantee that any government agency
will ever take control of the roads in a subdivision,
owners are ultimately called upon to bear the cost
of road maintenance in many situations.
Before I buy, will I know who is responsible for
the road maintenance?
Not necessarily. since october 1, 1975, developers
and sellers of certain residential subdivision lots
have been required by law to give
the first purchaser of each property a subdivision
Street Disclosure Statement containing important
information about road ownership and maintenance
responsibility. However, the application of this
law is quite limited, so it is very important that
you inquire into the status of roads in the subdivision
and find out who is responsible for their maintenance.
How do I know which common areas of
a subdivision or planned community are reserved
for the use of all owners?
They will be specified by the developer
in the recorded map or plat of the property. even
if the developer retains title to the common areas
or conveys them to some other person or entity,
these areas (trail systems, recreation areas, lakes,
roads, etc.) cannot be used for any other purpose,
and all of the owners in the subdivision may use
the property for the specified purpose.