Incompetent Attorney

GaryM15 (North Carolina)
Posts: 63

Posted:

We, the executive committee, are trying to determine what kind of organization we are, and if we are a true HOA. I've read the applicable documents and statues, and I'm confident that I know the answers.

However, they didn't want to take my findings at face value. Instead they decided to contact an attorney.

The problem is, the attorney is incompetent! Some of her statements are blatantly false. The committee realizes that her answers are confusing but don't share my outrage.

Here is an example.

Attorney: "Because the association is not incorporated, the members have no responsibility to each other to abide by those covenants, so the enforcement of the covenants goes only as far as the individual member allows."

What can I do?

P.S. If you take this post as more of a rant than a question, you may be right.

AugustinD
Posts: 5,144

Posted:

Quote:

Posted By GaryM15 on 12/04/2017 8:05 AM
We, the executive committee, are trying to determine what kind of organization we are, and if we are a true HOA. I've read the applicable documents and statues, and I'm confident that I know the answers.

However, they didn't want to take my findings at face value. Instead they decided to contact an attorney.

The problem is, the attorney is incompetent! Some of her statements are blatantly false. The committee realizes that her answers are confusing but don't share my outrage.

Here is an example.

Attorney: "Because the association is not incorporated, the members have no responsibility to each other to abide by those covenants, so the enforcement of the covenants goes only as far as the individual member allows."

What can I do?

P.S. If you take this post as more of a rant than a question, you may be right.

May I ask: What is your experience in reading HOA declarations, bylaws, covenants, and the applicable HOA statutes in North Carolina?

Else I feel that about half the HOA attorneys I have come across are out to promote discontent so as to maximize billable hours. Some are not well-versed in the law.

JanetB2 (Colorado)
Posts: 4,219

Posted:

When was your HOA created?

http://www.lawfirmcarolinas.com/FAQs-About-NC-HOA-Condo-Associations-Part-I.cfm

2. Are Common Interest Communities required to incorporate? Can they be incorporated? Advantages/Disadvantages?
Planned communities created on or after January 1, 1999, and governed by the NC Planned Community Act must incorporate no later than the date the first lot is conveyed. (NCGS § 47F-3-101) There is no comparable condominium statute. However, any condominium or older planned community may incorporate as a nonprofit and most do.

If you are not incorporated ... then you can now incorporate as a non-profit as long as you get your members to agree.

GaryM15 (North Carolina)
Posts: 63

Posted:

Quote:

Posted By AugustinD on 12/04/2017 8:24 AM

Posted By GaryM15 on 12/04/2017 8:05 AM
We, the executive committee, are trying to determine what kind of organization we are, and if we are a true HOA. I've read the applicable documents and statues, and I'm confident that I know the answers.

However, they didn't want to take my findings at face value. Instead they decided to contact an attorney.

The problem is, the attorney is incompetent! Some of her statements are blatantly false. The committee realizes that her answers are confusing but don't share my outrage.

Here is an example.

Attorney: "Because the association is not incorporated, the members have no responsibility to each other to abide by those covenants, so the enforcement of the covenants goes only as far as the individual member allows."

What can I do?

P.S. If you take this post as more of a rant than a question, you may be right.

May I ask: What is your experience in reading HOA declarations, bylaws, covenants, and the applicable HOA statutes in North Carolina?

Else I feel that about half the HOA attorneys I have come across are out to promote discontent so as to maximize billable hours. Some are not well-versed in the law.

Agustin, Concerning the HOA declarations, bylaws, covenants, and the applicable HOA statutes, I have studied all of them in detail. As an development engineer, I know how to read technical documents and pick apart the critical facts. I have also studied the NC statues concerning unincorporated and incorporated organizations.

A case in point; Technically, the covenants are the only declarations. There is normally no such thing as a HOA declaration as a separate document. Whatever verbiage is used to generate (declare) the HOA is generally included as part of the covenants. I've done my homework!

GaryM15 (North Carolina)
Posts: 63

Posted:

Quote:

Posted By JanetB2 on 12/04/2017 11:05 AM
When was your HOA created?

http://www.lawfirmcarolinas.com/FAQs-About-NC-HOA-Condo-Associations-Part-I.cfm

2. Are Common Interest Communities required to incorporate? Can they be incorporated? Advantages/Disadvantages?
Planned communities created on or after January 1, 1999, and governed by the NC Planned Community Act must incorporate no later than the date the first lot is conveyed. (NCGS § 47F-3-101) There is no comparable condominium statute. However, any condominium or older planned community may incorporate as a nonprofit and most do.

If you are not incorporated ... then you can now incorporate as a non-profit as long as you get your members to agree.

Janet,

Thanks for the link, but nothing in that article applies to us. We are not an HOA. We are not a "Planned Community" as defined in 47F. I'm not familiar with the legal definition of a "Common Interest Community" as it applies to NC statues, but it may be common name for "Planned Community".

We are a Unincorporated Nonprofit Association.

https://www.thebalance.com/what-is-an-unincorporated-nonprofit-association-2501895

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By GaryM15 on 12/04/2017 8:05 AM

Attorney: "Because the association is not incorporated, the members have no responsibility to each other to abide by those covenants, so the enforcement of the covenants goes only as far as the individual member allows."

Gary,

This answer is partially correct.
I don't like the wording but I think it is fairly close to reality.

To go to court there needs to be a legal entity. Some States will not recgonize unincorporated Associations as a legal entity. Hence, being unincorporated in those States prevents the Association from bringing legal action in the courts.

If this is the case in your State, then only individual members may bring enforcement actions to the courts. Hence enforcement of the covenants goes only as far as the individual member allows (or can afford - in both time and money).

Now the section you provided about owners having a responsibility to abide by the deed restrictions would be incorrect.

SheliaH (Indiana)
Posts: 6,964

Posted:

It's good that you've read your documents and you may be right that you aren't a true HOA according to state laws concerning the subject, but it's not a bad idea to consult an attorney. Perhaps your committee simply consulted the wrong one - she might not have a lot of experience with HOAs and that could be why her response sounded like gobbdygook, and a second opinion is warranted.

That said, some people consult attorneys when they've already made up their mind about the issue and are really looking for someone to agree. When they hear the opposite, they assume the person is incompetent. You might want to keep that in mind the next time you accuse someone of being incompetent - you're not an attorney either. Ranting's ok, but after you've said your piece, what have you accomplished? If you're concerned your colleagues are accepting whatever the attorney said because she's an attorney and therefore she is, why not say that? Did you suggest getting a second opinion and were shot down and now you're pissed off?

I often talk about the Community Association Institute (CAI) as they do publish good educational materials for HOA boards and residents on a variety of issues, and I believe they have some providing tips on how to pick one for your organization. Or you can google it - actually, if you go to the News section of this website, you may be able to search for articles that may also be helpful to you.

But before you begin, start with what you want to accomplish. I know you're trying to check if you'are a true HOA, but why? Are there issues regarding CCR enforcement or what the association is responsible for vs. the homeowner? Are there any long time owners who served on the board (committee) and might remember what the developer said about the community being a HOA or not? If you're not a true HOA, are you looking to become one and need help on getting the right documents written and approved by the rest of the homeowners before they're filed with the appropriate agency? If you have bylaws and CCRs for your community are they filed anywhere? If so, that agency may have additional paperwork filed by the developer that can help answer some of your questions.

Once you figure out what your end game is, you can start looking for an attorney. You didn't say where you found this one, but you might want to contact your local bar association to get referrals on a few - make sure you specify people who specialize in HOAs (real estate is too broad and regular business law may not help either). Before you hire anyone, ask for references and check them. Good luck!

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

JeffT2 (Iowa)
Posts: 880

Posted:

NC has an unincorporated nonprofit laws. They generally do apply to homeowner associations, although I did not read the specific applicability section, and the association can hold property and can sue and be sued.

http://www.brookspierce.com/news-insights/north-carolina-has-rewritten-its-warpy-law-unincorporated-associations

https://www.ncleg.net/gascript
s/statutes/StatutesTOC.pl?Chapter=0059B

AugustinD
Posts: 5,144

Posted:

Quote:

Posted By GaryM15 on 12/04/2017 11:54 AM

A case in point; Technically, the covenants are the only declarations. There is normally no such thing as a HOA declaration as a separate document. Whatever verbiage is used to generate (declare) the HOA is generally included as part of the covenants. I've done my homework!

My former HOA had both a very densely written Declaration and a set of far more read-able CC&Rs.Of course the Declaration made reference to the CC&Rs and vice versa. Both were prepared by the developer and duly recorded with the County decades ago, but as separate instruments, with a separate CC&R section for each section of the development, as it was completed.

GaryM15 (North Carolina)
Posts: 63

Posted:

Quote:

Posted By TimB4 on 12/04/2017 12:24 PM

Posted By GaryM15 on 12/04/2017 8:05 AM

Attorney: "Because the association is not incorporated, the members have no responsibility to each other to abide by those covenants, so the enforcement of the covenants goes only as far as the individual member allows."

Gary,

This answer is partially correct.
I don't like the wording but I think it is fairly close to reality.

To go to court there needs to be a legal entity. Some States will not recgonize unincorporated Associations as a legal entity. Hence, being unincorporated in those States prevents the Association from bringing legal action in the courts.

If this is the case in your State, then only individual members may bring enforcement actions to the courts. Hence enforcement of the covenants goes only as far as the individual member allows (or can afford - in both time and money).

Now the section you provided about owners having a responsibility to abide by the deed restrictions would be incorrect.

Tim, Thanks for your response. I value your opinion and appreciate your contribution to this forum.

I believe that any member that is bound by the covenants can bring court action against any other member for an alleged covenant violation. No association is needed. After all, some neighborhoods have covenants only, and don't have any association whatsoever.

We are a Unincorporated Nonprofit Association, and as such are a legal entity.

NCGS 59B-2. Definitions
In this chapter, "Nonprofit association" means an unincorporated organization, ..., consisting of two
or more members joined by mutual consent for a common, nonprofit purpose.

NCGS 59B-8. Capacity to assert and defend; standing.
(a) A nonprofit association, in its name, may institute, defend, intervene, or participate in
a judicial, administrative, or other governmental proceeding or in an arbitration, mediation, or
any other form of alternative dispute resolution.
(b) A nonprofit association may assert a claim in its name on behalf of its members or
persons referred to as "members" by the nonprofit association if one or more of them have
standing to assert a claim in their own right, the interests the nonprofit association seeks to
protect are germane to its purposes, and neither the claim asserted nor the relief requested
requires the participation of a member or a person referred to as a "member" by the nonprofit
association. (2006-226, s. 1.)

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Gary

Are you still leaning toward the lawyer is incompetent or have other posting explained her response to your satisfaction?

GaryM15 (North Carolina)
Posts: 63

Posted:

Quote:

Posted By SheliaH on 12/04/2017 12:31 PM
It's good that you've read your documents and you may be right that you aren't a true HOA according to state laws concerning the subject, but it's not a bad idea to consult an attorney. Perhaps your committee simply consulted the wrong one - she might not have a lot of experience with HOAs and that could be why her response sounded like gobbdygook, and a second opinion is warranted.

That said, some people consult attorneys when they've already made up their mind about the issue and are really looking for someone to agree. When they hear the opposite, they assume the person is incompetent. You might want to keep that in mind the next time you accuse someone of being incompetent - you're not an attorney either. Ranting's ok, but after you've said your piece, what have you accomplished? If you're concerned your colleagues are accepting whatever the attorney said because she's an attorney and therefore she is, why not say that? Did you suggest getting a second opinion and were shot down and now you're pissed off?

I often talk about the Community Association Institute (CAI) as they do publish good educational materials for HOA boards and residents on a variety of issues, and I believe they have some providing tips on how to pick one for your organization. Or you can google it - actually, if you go to the News section of this website, you may be able to search for articles that may also be helpful to you.

But before you begin, start with what you want to accomplish. I know you're trying to check if you'are a true HOA, but why? Are there issues regarding CCR enforcement or what the association is responsible for vs. the homeowner? Are there any long time owners who served on the board (committee) and might remember what the developer said about the community being a HOA or not? If you're not a true HOA, are you looking to become one and need help on getting the right documents written and approved by the rest of the homeowners before they're filed with the appropriate agency? If you have bylaws and CCRs for your community are they filed anywhere? If so, that agency may have additional paperwork filed by the developer that can help answer some of your questions.

Once you figure out what your end game is, you can start looking for an attorney. You didn't say where you found this one, but you might want to contact your local bar association to get referrals on a few - make sure you specify people who specialize in HOAs (real estate is too broad and regular business law may not help either). Before you hire anyone, ask for references and check them. Good luck!

Shelia, Thanks for your carefully worded response. Perhaps I need some self analysis.

Yes, I'm ranting. Yes, I'm pissed off.

I am one of four officers in a so called HOA. I claim that although the covenants are mandatory, the membership and assessments are voluntary. The other officers agree about the covenants, but they think that membership and assessments are mandatory.

I've read the applicable documents and statues. The covenants are recorded, but nothing in them speaks to a HOA. The by-laws are not recorded. I'm confident that I know what I doing.

However, they didn't want to take my findings at face value, and they didn't want to discuss them with me in detail. Instead they wanted to contact an attorney.

That's great! I figured that the attorney would come to the same conclusion that I did, and everything would be settled. How wrong can I be?

First there was a meeting with the attorney and two of the officers. I wasn't included.
They reported that the attorney said that the assessments were not mandatory,
but they weren't sure what the attorney said about whether becoming incorporated would make us mandatory or not.

We put together a list of questions for the attorney, and got back answers in a letter from the attorney.
I believe that the answers showed that the attorney lacked the fundamental understanding of covenants and mandatory membership of any organization. My original question is how should I handle this.

This whole conflict started when the other officers wanted to add articles to the covenants that were applicable only to a mandatory HOA. I insisted that we are not mandatory.

My initial objective was to convince the other officers that I have the information that they need. That hasn't worked.

GaryM15 (North Carolina)
Posts: 63

Posted:

Quote:

Posted By AugustinD on 12/04/2017 1:41 PM

Posted By GaryM15 on 12/04/2017 11:54 AM

A case in point; Technically, the covenants are the only declarations. There is normally no such thing as a HOA declaration as a separate document. Whatever verbiage is used to generate (declare) the HOA is generally included as part of the covenants. I've done my homework!

My former HOA had both a very densely written Declaration and a set of far more read-able CC&Rs.Of course the Declaration made reference to the CC&Rs and vice versa. Both were prepared by the developer and duly recorded with the County decades ago, but as separate instruments, with a separate CC&R section for each section of the development, as it was completed.

I can understand that there many different ways that an HOA can be established, many that I have never heard of. I was careful include the words "normally" and "generally" for that very reason.

Technically, the CC&Rs are a declaration. I know that is a nit, but I'm trying to show that I know the details.

Our declaration is only the covenants, with no mention of any HOA, organization, or payments of any kind.

GaryM15 (North Carolina)
Posts: 63

Posted:

Quote:

Posted By JohnC46 on 12/04/2017 2:37 PM
Gary

Are you still leaning toward the lawyer is incompetent or have other posting explained her response to your satisfaction?

No, I still think she is incompetent. However, I appreciate all responses. If I'm wrong, I want to find it out in this forum rather in front of all the other homeowners at a general meeting.

GaryM15 (North Carolina)
Posts: 63

Posted:

Quote:

Posted By JeffT2 on 12/04/2017 12:59 PM
NC has an unincorporated nonprofit laws. They generally do apply to homeowner associations, although I did not read the specific applicability section, and the association can hold property and can sue and be sued.

http://www.brookspierce.com/news-insights/north-carolina-has-rewritten-its-warpy-law-unincorporated-associations

https://www.ncleg.net/gascript
s/statutes/StatutesTOC.pl?Chapter=0059B

Jeff, Thanks. I am familiar with both of those links.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

What kind of lawyer is this? A real estate attorney? If so, those are NOT the kind recommended for handling HOA business. A general business oriented lawyer or corporate lawyer is what you need.

By-laws do not have to be filed typically. CC&R's and Articles of Incorporations do. The CC&R's at County level and the Articles of Incorporation at State. What makes you a "HOA" isn't written exactly in those words in some cases. It may reference you as a development, community, or other like terms. HomeOwner's associations I best akin to Girl/Boy Scout type organizations. Your a club that is put together based on home ownership.

Now dealing with lawyers is difficult I agree 100%. However, one needs to understand many aspects of lawyer/client relationship. They aren't a sounding board for your issues. They are to be professionals which are licensed. I hire lawyers like I would a plumber or electrician. It is for a specific purpose. Like if I need a lien, foreclosure, or to redraft/file documentation. It's rarely for "advice".

My rule of thumb is if a lawyer tells me "I will do what you tell me to do" then that should raise a red flag. Not to say this is wrong. It's just that there is probably another solution available one should weigh or research. This is when I start asking questions.

Former HOA President

JanetB2 (Colorado)
Posts: 4,219

Posted:

Quote:

Posted By GaryM15 on 12/04/2017 12:09 PM

Posted By JanetB2 on 12/04/2017 11:05 AM
When was your HOA created?

http://www.lawfirmcarolinas.com/FAQs-About-NC-HOA-Condo-Associations-Part-I.cfm

2. Are Common Interest Communities required to incorporate? Can they be incorporated? Advantages/Disadvantages?
Planned communities created on or after January 1, 1999, and governed by the NC Planned Community Act must incorporate no later than the date the first lot is conveyed. (NCGS § 47F-3-101) There is no comparable condominium statute. However, any condominium or older planned community may incorporate as a nonprofit and most do.

If you are not incorporated ... then you can now incorporate as a non-profit as long as you get your members to agree.

Janet,

Thanks for the link, but nothing in that article applies to us. We are not an HOA. We are not a "Planned Community" as defined in 47F. I'm not familiar with the legal definition of a "Common Interest Community" as it applies to NC statues, but it may be common name for "Planned Community".

We are a Unincorporated Nonprofit Association.

https://www.thebalance.com/what-is-an-unincorporated-nonprofit-association-2501895

I would be willing to bet a lot of money the attorney probably stated you are an Unincorporated Planned Community (also sometimes referred to as HOA, Common Interest Community (CIC), Property Owners Association (POA), etc. depending on how your state defines). Essentially if you have CCR’s attached to your property titles regarding the building and construction of the homes in a specified area as noted on a Plat ... you are a Planned Community as defined and constructed per your Local Government Ordinances and your State Statute. Most local governments anymore are requiring developers to establish “Planned Community” or “HOA” when they file for their development permits.

(23) "Planned community" means real estate with respect to which any person, by virtue of that person's ownership of a lot, is expressly obligated by a declaration to pay real property taxes, insurance premiums, or other expenses to maintain, improve, or benefit other lots or other real estate described in the declaration. For purposes of this act, neither a cooperative nor a condominium is a planned community, but real estate comprising a condominium or cooperative may be part of a planned community. "Ownership of a lot" does not include holding a leasehold interest of less that [than] 20 years in a lot, including renewal options.

The reason the attorney made the statement you noted (which is potentially not the exact verbiage):

Attorney: "Because the association is not incorporated, the members have no responsibility to each other to abide by those covenants, so the enforcement of the covenants goes only as far as the individual member allows."

Is because of as noted in your article you researched and posted which states:

“Members of an unincorporated nonprofit association may be exposed to personal liability for the obligations of the association if state laws do not explicitly provide for limited liability (for example, California provides for limited liability for members of an unincorporated nonprofit association).

Regardless, the law is still less certain regarding personal liability as compared to corporations. Therefore, an unincorporated association may not be ideal if the group's activities might create concerns about contract or tort liability (two common areas where liability issues arise), or if potential members, board members, and supporters might be deterred by such concerns.”

The attorney essentially was noting that the unincorporated association only has “personal liability” between the members to enforce the covenants. An incorporated association has “corporate liability” on behalf of its members to enforce the covenants and can pursue violations via a Corporate level vs members doing so at a personal level. And which is why the site I noted above states that an association can incorporate if they choose to do so.

Your State Statute notes:

§ 47F-1-102. Applicability.
(a) This Chapter applies to all planned communities created within this State on or after January 1, 1999, except as otherwise provided in this section.
(b) This Chapter does not apply to a planned community created within this State on or after January 1, 1999:
(1) Which contains no more than 20 lots (including all lots which may be added or created by the exercise of development rights) unless the declaration provides or is amended to provide that this Chapter does apply to that planned community; or
(2) In which all lots are restricted exclusively to nonresidential purposes, unless the declaration provides or is amended to provide that this Chapter does apply to that planned community.
(c) Notwithstanding the provisions of subsection (a) of this section, G.S. 47F-1-104 (Variation), G.S. 47F-2-103 (Construction and validity of declaration and bylaws), G.S. 47F-2-117 (Amendment of declaration), G.S. 47F-3-102(1) through (6) and (11) through (17) (Powers of owners' association), G.S. 47F-3-103(f) (Executive board members and officers), G.S. 47F-3-107(a), (b), and (c) (Upkeep of planned community; responsibility and assessments for damages), G.S. 47F-3-107.1 (Procedures for fines and suspension of planned community privileges or services), G.S. 47F-3-108 (Meetings), G.S. 47F-3-115 (Assessments for common expenses), G.S. 47F-3-116 (Lien for assessments), G.S. 47F-3-118 (Association records), and G.S. 47F-3-121 (American and State flags and political sign displays), and G.S. 47F-3-104 (Transfer of Special Declarant Rights) apply to all planned communities created in this State before January 1, 1999, unless the articles of incorporation or the declaration expressly provides to the contrary, and G.S. 47F-3-120 (Declaration limits on attorneys' fees) applies to all planned communities created in this State before January 1, 1999. These sections apply only with respect to events and circumstances occurring on or after January 1, 1999, and do not invalidate existing provisions of the declaration, bylaws, or plats and plans of those planned communities. G.S. 47F-1-103 (Definitions) also applies to all planned communities created in this State before January 1, 1999, to the extent necessary in construing any of the preceding sections.

Which is why I asked you:

When were your Original CCR’s filed with your County Records???

Also would need to know:

How many lots are noted in your CCR’s and Plat?

Depending on that answer you need to clarify items with your attorney such as:

1. If the CCR’s were filed on or after January 1, 1999, did the developer make a mistake and make the association unincorporated when it should have been incorporated? If so, what steps do we need to take to fix the developer’s snafu?

2. Does our Declaration expressly provide that the sections under 47-F-102(c) do not apply to our planned community which was created before January 1, 1999?

JanetB2 (Colorado)
Posts: 4,219

Posted:

Quote:

Posted By GaryM15 on 12/04/2017 2:27 PM

Posted By TimB4 on 12/04/2017 12:24 PM

Posted By GaryM15 on 12/04/2017 8:05 AM

Attorney: "Because the association is not incorporated, the members have no responsibility to each other to abide by those covenants, so the enforcement of the covenants goes only as far as the individual member allows."

Gary,

This answer is partially correct.
I don't like the wording but I think it is fairly close to reality.

To go to court there needs to be a legal entity. Some States will not recgonize unincorporated Associations as a legal entity. Hence, being unincorporated in those States prevents the Association from bringing legal action in the courts.

If this is the case in your State, then only individual members may bring enforcement actions to the courts. Hence enforcement of the covenants goes only as far as the individual member allows (or can afford - in both time and money).

Now the section you provided about owners having a responsibility to abide by the deed restrictions would be incorrect.

Tim, Thanks for your response. I value your opinion and appreciate your contribution to this forum.

I believe that any member that is bound by the covenants can bring court action against any other member for an alleged covenant violation. No association is needed. After all, some neighborhoods have covenants only, and don't have any association whatsoever.

We are a Unincorporated Nonprofit Association, and as such are a legal entity.

NCGS 59B-2. Definitions
In this chapter, "Nonprofit association" means an unincorporated organization, ..., consisting of two
or more members joined by mutual consent for a common, nonprofit purpose.

NCGS 59B-8. Capacity to assert and defend; standing.
(a) A nonprofit association, in its name, may institute, defend, intervene, or participate in
a judicial, administrative, or other governmental proceeding or in an arbitration, mediation, or
any other form of alternative dispute resolution.
(b) A nonprofit association may assert a claim in its name on behalf of its members or
persons referred to as "members" by the nonprofit association if one or more of them have
standing to assert a claim in their own right, the interests the nonprofit association seeks to
protect are germane to its purposes, and neither the claim asserted nor the relief requested
requires the participation of a member or a person referred to as a "member" by the nonprofit
association. (2006-226, s. 1.)

You need to be aware of this part of which you posted:

NCGS 59B-8. Capacity to assert and defend; standing.
(a) A nonprofit association, in its name, may institute, defend, intervene, or participate in
a judicial, administrative, or other governmental proceeding or in an arbitration, mediation, or
any other form of alternative dispute resolution.
(b) A nonprofit association may assert a claim in its name on behalf of its members or
persons referred to as "members" by the nonprofit association if one or more of them have
standing to assert a claim in their own right, the interests the nonprofit association seeks to
protect are germane to its purposes, and neither the claim asserted nor the relief requested
requires the participation of a member or a person referred to as a "member" by the nonprofit
association. (2006-226, s. 1.)

Thus why your attorney made the statement they did ... The nonprofit cannot assert a claim which requires participation of a member or another person regarding any such claim ... which enforcing CCR’s would need. Therefore, members can only pursue other members vs the nonprofit pursuing members for the CCR’s.

GaryM15 (North Carolina)
Posts: 63

Posted:

Quote:

Posted By JanetB2 on 12/05/2017 12:27 PM

You need to be aware of this part of which you posted:

NCGS 59B-8. Capacity to assert and defend; standing.
(a) A nonprofit association, in its name, may institute, defend, intervene, or participate in
a judicial, administrative, or other governmental proceeding or in an arbitration, mediation, or
any other form of alternative dispute resolution.
(b) A nonprofit association may assert a claim in its name on behalf of its members or
persons referred to as "members" by the nonprofit association if one or more of them have
standing to assert a claim in their own right, the interests the nonprofit association seeks to
protect are germane to its purposes, and neither the claim asserted nor the relief requested
requires the participation of a member or a person referred to as a "member" by the nonprofit
association. (2006-226, s. 1.)

Thus why your attorney made the statement they did ... The nonprofit cannot assert a claim which requires participation of a member or another person regarding any such claim ... which enforcing CCR’s would need. Therefore, members can only pursue other members vs the nonprofit pursuing members for the CCR’s.

Janet,

A super thanks for your response. You have helped me understand this statue better.

My understanding is:

Since the association is not one of the parties that is bound by the covenants, it is in fact a third party, and can't assert a claim for an agreement that it is not part of.

With that understanding, it seems that a claim can be brought by a member or several members, named individually, but not by the association.

Gary

GaryM15 (North Carolina)
Posts: 63

Posted:

Quote:

Posted By JanetB2 on 12/05/2017 12:15 PM

Posted By GaryM15 on 12/04/2017 12:09 PM

Posted By JanetB2 on 12/04/2017 11:05 AM
When was your HOA created?

http://www.lawfirmcarolinas.com/FAQs-About-NC-HOA-Condo-Associations-Part-I.cfm

2. Are Common Interest Communities required to incorporate? Can they be incorporated? Advantages/Disadvantages?
Planned communities created on or after January 1, 1999, and governed by the NC Planned Community Act must incorporate no later than the date the first lot is conveyed. (NCGS § 47F-3-101) There is no comparable condominium statute. However, any condominium or older planned community may incorporate as a nonprofit and most do.

If you are not incorporated ... then you can now incorporate as a non-profit as long as you get your members to agree.

Janet,

Thanks for the link, but nothing in that article applies to us. We are not an HOA. We are not a "Planned Community" as defined in 47F. I'm not familiar with the legal definition of a "Common Interest Community" as it applies to NC statues, but it may be common name for "Planned Community".

We are a Unincorporated Nonprofit Association.

https://www.thebalance.com/what-is-an-unincorporated-nonprofit-association-2501895

I would be willing to bet a lot of money the attorney probably stated you are an Unincorporated Planned Community (also sometimes referred to as HOA, Common Interest Community (CIC), Property Owners Association (POA), etc. depending on how your state defines). Essentially if you have CCR’s attached to your property titles regarding the building and construction of the homes in a specified area as noted on a Plat ... you are a Planned Community as defined and constructed per your Local Government Ordinances and your State Statute. Most local governments anymore are requiring developers to establish “Planned Community” or “HOA” when they file for their development permits.

(23) "Planned community" means real estate with respect to which any person, by virtue of that person's ownership of a lot, is expressly obligated by a declaration to pay real property taxes, insurance premiums, or other expenses to maintain, improve, or benefit other lots or other real estate described in the declaration. For purposes of this act, neither a cooperative nor a condominium is a planned community, but real estate comprising a condominium or cooperative may be part of a planned community. "Ownership of a lot" does not include holding a leasehold interest of less that [than] 20 years in a lot, including renewal options.

The reason the attorney made the statement you noted (which is potentially not the exact verbiage):

Attorney: "Because the association is not incorporated, the members have no responsibility to each other to abide by those covenants, so the enforcement of the covenants goes only as far as the individual member allows."

Is because of as noted in your article you researched and posted which states:

“Members of an unincorporated nonprofit association may be exposed to personal liability for the obligations of the association if state laws do not explicitly provide for limited liability (for example, California provides for limited liability for members of an unincorporated nonprofit association).

Regardless, the law is still less certain regarding personal liability as compared to corporations. Therefore, an unincorporated association may not be ideal if the group's activities might create concerns about contract or tort liability (two common areas where liability issues arise), or if potential members, board members, and supporters might be deterred by such concerns.”

The attorney essentially was noting that the unincorporated association only has “personal liability” between the members to enforce the covenants. An incorporated association has “corporate liability” on behalf of its members to enforce the covenants and can pursue violations via a Corporate level vs members doing so at a personal level. And which is why the site I noted above states that an association can incorporate if they choose to do so.

Your State Statute notes:

§ 47F-1-102. Applicability.
(a) This Chapter applies to all planned communities created within this State on or after January 1, 1999, except as otherwise provided in this section.
(b) This Chapter does not apply to a planned community created within this State on or after January 1, 1999:
(1) Which contains no more than 20 lots (including all lots which may be added or created by the exercise of development rights) unless the declaration provides or is amended to provide that this Chapter does apply to that planned community; or
(2) In which all lots are restricted exclusively to nonresidential purposes, unless the declaration provides or is amended to provide that this Chapter does apply to that planned community.
(c) Notwithstanding the provisions of subsection (a) of this section, G.S. 47F-1-104 (Variation), G.S. 47F-2-103 (Construction and validity of declaration and bylaws), G.S. 47F-2-117 (Amendment of declaration), G.S. 47F-3-102(1) through (6) and (11) through (17) (Powers of owners' association), G.S. 47F-3-103(f) (Executive board members and officers), G.S. 47F-3-107(a), (b), and (c) (Upkeep of planned community; responsibility and assessments for damages), G.S. 47F-3-107.1 (Procedures for fines and suspension of planned community privileges or services), G.S. 47F-3-108 (Meetings), G.S. 47F-3-115 (Assessments for common expenses), G.S. 47F-3-116 (Lien for assessments), G.S. 47F-3-118 (Association records), and G.S. 47F-3-121 (American and State flags and political sign displays), and G.S. 47F-3-104 (Transfer of Special Declarant Rights) apply to all planned communities created in this State before January 1, 1999, unless the articles of incorporation or the declaration expressly provides to the contrary, and G.S. 47F-3-120 (Declaration limits on attorneys' fees) applies to all planned communities created in this State before January 1, 1999. These sections apply only with respect to events and circumstances occurring on or after January 1, 1999, and do not invalidate existing provisions of the declaration, bylaws, or plats and plans of those planned communities. G.S. 47F-1-103 (Definitions) also applies to all planned communities created in this State before January 1, 1999, to the extent necessary in construing any of the preceding sections.

Which is why I asked you:

When were your Original CCR’s filed with your County Records???

Also would need to know:

How many lots are noted in your CCR’s and Plat?

Depending on that answer you need to clarify items with your attorney such as:

1. If the CCR’s were filed on or after January 1, 1999, did the developer make a mistake and make the association unincorporated when it should have been incorporated? If so, what steps do we need to take to fix the developer’s snafu?

2. Does our Declaration expressly provide that the sections under 47-F-102(c) do not apply to our planned community which was created before January 1, 1999?

Janet, we are not a planned community!!!

"Planned community" means real estate with respect to which any person, by virtue of that person's ownership of a lot, is expressly obligated by a declaration to pay real property taxes, insurance premiums, or other expenses to maintain, improve, or benefit other lots or other real estate described in the declaration.

The declaration (covenants) do not obligate any person to pay real property taxes, insurance premiums, or other expenses to maintain, improve, or benefit other lots or other real estate.

To answer some of your questions.
The covenants were filed in 1985 with our County Records.
They do not mention 47F
They do not mention any association, incorporated or unincorporated.
They do not mention any payments.
There are 31 lots with 29 homes.
We are not incorporated.

You say:
Essentially if you have CCR’s attached to your property titles regarding the building and construction of the homes in a specified area as noted on a Plat ... you are a Planned Community as defined and constructed per your Local Government Ordinances and your State Statute. Most local governments anymore are requiring developers to establish “Planned Community” or “HOA” when they file for their development permits.

That may be the case in some states, but I can't find anything in our Local Government Ordinances or our State Statutes to indicate this.

SheliaH (Indiana)
Posts: 6,964

Posted:

Quote:

Posted By GaryM15 on 12/04/2017 2:46 PM

Posted By SheliaH on 12/04/2017 12:31 PM
It's good that you've read your documents and you may be right that you aren't a true HOA according to state laws concerning the subject, but it's not a bad idea to consult an attorney. Perhaps your committee simply consulted the wrong one - she might not have a lot of experience with HOAs and that could be why her response sounded like gobbdygook, and a second opinion is warranted.

That said, some people consult attorneys when they've already made up their mind about the issue and are really looking for someone to agree. When they hear the opposite, they assume the person is incompetent. You might want to keep that in mind the next time you accuse someone of being incompetent - you're not an attorney either. Ranting's ok, but after you've said your piece, what have you accomplished? If you're concerned your colleagues are accepting whatever the attorney said because she's an attorney and therefore she is, why not say that? Did you suggest getting a second opinion and were shot down and now you're pissed off?

I often talk about the Community Association Institute (CAI) as they do publish good educational materials for HOA boards and residents on a variety of issues, and I believe they have some providing tips on how to pick one for your organization. Or you can google it - actually, if you go to the News section of this website, you may be able to search for articles that may also be helpful to you.

But before you begin, start with what you want to accomplish. I know you're trying to check if you'are a true HOA, but why? Are there issues regarding CCR enforcement or what the association is responsible for vs. the homeowner? Are there any long time owners who served on the board (committee) and might remember what the developer said about the community being a HOA or not? If you're not a true HOA, are you looking to become one and need help on getting the right documents written and approved by the rest of the homeowners before they're filed with the appropriate agency? If you have bylaws and CCRs for your community are they filed anywhere? If so, that agency may have additional paperwork filed by the developer that can help answer some of your questions.

Once you figure out what your end game is, you can start looking for an attorney. You didn't say where you found this one, but you might want to contact your local bar association to get referrals on a few - make sure you specify people who specialize in HOAs (real estate is too broad and regular business law may not help either). Before you hire anyone, ask for references and check them. Good luck!

Shelia, Thanks for your carefully worded response. Perhaps I need some self analysis.

Yes, I'm ranting. Yes, I'm pissed off.

I am one of four officers in a so called HOA. I claim that although the covenants are mandatory, the membership and assessments are voluntary. The other officers agree about the covenants, but they think that membership and assessments are mandatory.

I've read the applicable documents and statues. The covenants are recorded, but nothing in them speaks to a HOA. The by-laws are not recorded. I'm confident that I know what I doing.

However, they didn't want to take my findings at face value, and they didn't want to discuss them with me in detail. Instead they wanted to contact an attorney.

That's great! I figured that the attorney would come to the same conclusion that I did, and everything would be settled. How wrong can I be?

First there was a meeting with the attorney and two of the officers. I wasn't included.
They reported that the attorney said that the assessments were not mandatory,
but they weren't sure what the attorney said about whether becoming incorporated would make us mandatory or not.

We put together a list of questions for the attorney, and got back answers in a letter from the attorney.
I believe that the answers showed that the attorney lacked the fundamental understanding of covenants and mandatory membership of any organization. My original question is how should I handle this.

This whole conflict started when the other officers wanted to add articles to the covenants that were applicable only to a mandatory HOA. I insisted that we are not mandatory.

My initial objective was to convince the other officers that I have the information that they need. That hasn't worked.

Ok, I can see where part of the problem is - if what you say it true, it seems some of your colleagues have already decided what they want to hear and now it's a matter of finding an attorney who will agree with them. Then they can say, "but we hired an attorney and that's what she said!" You, on the other hand, want to apply careful thought to the matter (and you should), so I can see why you're pissed. But that won't fix your problem, either.

Not all the officers needed to attend the meeting with the attorney, but the two who did seem to be acting as if they didn't understand what was going on or didn't pay attention. And yes, the attorney is partially responsible - I work with them in my job and I've always wondered why some of them are incapable of explaining things in plain English - they get paid regardless of what the client does, and maybe if you take the time to do so, they'll really like you, tell their friends about you and you'll get more business. That's why I agree with Melissa when she says to be wary of the attorney who says I'll do whatever you like as long as I get paid.

I think your committee needs to start over with another attorney (a HOA attorney this time). After doing your due diligence, give him or her copies of your documents and then let him/her do what they do. Read the answers and then respond with your follow up questions - a meeting may be good for this (all officers should attend), and go on from there. As long as this has all started with someone wanting to amend the covenants anyway, you may as well take a poll among the homeowners and see what they think - perhaps they're fine with the documents as is or have other suggestions that should be considered. For that matter, ask about rules enforcement - should there be some sort of committee to oversee this? What about fines or alternative dispute resolution? Can you do any of this if you don't have a mandatory association (that one's for the attorney)? You could also ask around and see what others were told about this association when they brought their homes - maybe someone has paperwork with the answers you seek. The attorney may want to look at that as well. Maybe someone else knows where the developer went (if he/she is still around) and you could have a meeting to have that person explain what kind of neighborhood this is supposed to be.

To wit - if your covenants are mandatory, shouldn't there be something written somewhere therein that requires a certain number of homeowners to sign off on any amendments? I don't think any "board" can simply say "ok, you now have to do X". Even if this was a mandatory HOA, amending documents are no small thing and the HOMEOWNERS need to know what's going on and why so they can make informed decisions when THEY decide if the amendments will even fly.

That's why your colleagues need to be told any change to the amendments will have to wait because if it's not done properly, a court will likely throw it out and if someone sues for damages, there may be more drama in figuring out who's responsible. If that turns out to be individual board (committee) members, that won't be good. I wish you well in all this - it's too bad developers seem to cut and paste all sorts of legal mumbo jumbo to HOA documents and then disappear, leaving the homeowners to try and figure out where to do next.

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

JanetB2 (Colorado)
Posts: 4,219

Posted:

Quote:

Posted By GaryM15 on 12/05/2017 2:40 PM

Posted By JanetB2 on 12/05/2017 12:15 PM

Posted By GaryM15 on 12/04/2017 12:09 PM

Posted By JanetB2 on 12/04/2017 11:05 AM
When was your HOA created?

http://www.lawfirmcarolinas.com/FAQs-About-NC-HOA-Condo-Associations-Part-I.cfm

2. Are Common Interest Communities required to incorporate? Can they be incorporated? Advantages/Disadvantages?
Planned communities created on or after January 1, 1999, and governed by the NC Planned Community Act must incorporate no later than the date the first lot is conveyed. (NCGS § 47F-3-101) There is no comparable condominium statute. However, any condominium or older planned community may incorporate as a nonprofit and most do.

If you are not incorporated ... then you can now incorporate as a non-profit as long as you get your members to agree.

Janet,

Thanks for the link, but nothing in that article applies to us. We are not an HOA. We are not a "Planned Community" as defined in 47F. I'm not familiar with the legal definition of a "Common Interest Community" as it applies to NC statues, but it may be common name for "Planned Community".

We are a Unincorporated Nonprofit Association.

https://www.thebalance.com/what-is-an-unincorporated-nonprofit-association-2501895

I would be willing to bet a lot of money the attorney probably stated you are an Unincorporated Planned Community (also sometimes referred to as HOA, Common Interest Community (CIC), Property Owners Association (POA), etc. depending on how your state defines). Essentially if you have CCR’s attached to your property titles regarding the building and construction of the homes in a specified area as noted on a Plat ... you are a Planned Community as defined and constructed per your Local Government Ordinances and your State Statute. Most local governments anymore are requiring developers to establish “Planned Community” or “HOA” when they file for their development permits.

(23) "Planned community" means real estate with respect to which any person, by virtue of that person's ownership of a lot, is expressly obligated by a declaration to pay real property taxes, insurance premiums, or other expenses to maintain, improve, or benefit other lots or other real estate described in the declaration. For purposes of this act, neither a cooperative nor a condominium is a planned community, but real estate comprising a condominium or cooperative may be part of a planned community. "Ownership of a lot" does not include holding a leasehold interest of less that [than] 20 years in a lot, including renewal options.

The reason the attorney made the statement you noted (which is potentially not the exact verbiage):

Attorney: "Because the association is not incorporated, the members have no responsibility to each other to abide by those covenants, so the enforcement of the covenants goes only as far as the individual member allows."

Is because of as noted in your article you researched and posted which states:

“Members of an unincorporated nonprofit association may be exposed to personal liability for the obligations of the association if state laws do not explicitly provide for limited liability (for example, California provides for limited liability for members of an unincorporated nonprofit association).

Regardless, the law is still less certain regarding personal liability as compared to corporations. Therefore, an unincorporated association may not be ideal if the group's activities might create concerns about contract or tort liability (two common areas where liability issues arise), or if potential members, board members, and supporters might be deterred by such concerns.”

The attorney essentially was noting that the unincorporated association only has “personal liability” between the members to enforce the covenants. An incorporated association has “corporate liability” on behalf of its members to enforce the covenants and can pursue violations via a Corporate level vs members doing so at a personal level. And which is why the site I noted above states that an association can incorporate if they choose to do so.

Your State Statute notes:

§ 47F-1-102. Applicability.
(a) This Chapter applies to all planned communities created within this State on or after January 1, 1999, except as otherwise provided in this section.
(b) This Chapter does not apply to a planned community created within this State on or after January 1, 1999:
(1) Which contains no more than 20 lots (including all lots which may be added or created by the exercise of development rights) unless the declaration provides or is amended to provide that this Chapter does apply to that planned community; or
(2) In which all lots are restricted exclusively to nonresidential purposes, unless the declaration provides or is amended to provide that this Chapter does apply to that planned community.
(c) Notwithstanding the provisions of subsection (a) of this section, G.S. 47F-1-104 (Variation), G.S. 47F-2-103 (Construction and validity of declaration and bylaws), G.S. 47F-2-117 (Amendment of declaration), G.S. 47F-3-102(1) through (6) and (11) through (17) (Powers of owners' association), G.S. 47F-3-103(f) (Executive board members and officers), G.S. 47F-3-107(a), (b), and (c) (Upkeep of planned community; responsibility and assessments for damages), G.S. 47F-3-107.1 (Procedures for fines and suspension of planned community privileges or services), G.S. 47F-3-108 (Meetings), G.S. 47F-3-115 (Assessments for common expenses), G.S. 47F-3-116 (Lien for assessments), G.S. 47F-3-118 (Association records), and G.S. 47F-3-121 (American and State flags and political sign displays), and G.S. 47F-3-104 (Transfer of Special Declarant Rights) apply to all planned communities created in this State before January 1, 1999, unless the articles of incorporation or the declaration expressly provides to the contrary, and G.S. 47F-3-120 (Declaration limits on attorneys' fees) applies to all planned communities created in this State before January 1, 1999. These sections apply only with respect to events and circumstances occurring on or after January 1, 1999, and do not invalidate existing provisions of the declaration, bylaws, or plats and plans of those planned communities. G.S. 47F-1-103 (Definitions) also applies to all planned communities created in this State before January 1, 1999, to the extent necessary in construing any of the preceding sections.

Which is why I asked you:

When were your Original CCR’s filed with your County Records???

Also would need to know:

How many lots are noted in your CCR’s and Plat?

Depending on that answer you need to clarify items with your attorney such as:

1. If the CCR’s were filed on or after January 1, 1999, did the developer make a mistake and make the association unincorporated when it should have been incorporated? If so, what steps do we need to take to fix the developer’s snafu?

2. Does our Declaration expressly provide that the sections under 47-F-102(c) do not apply to our planned community which was created before January 1, 1999?

Janet, we are not a planned community!!!

"Planned community" means real estate with respect to which any person, by virtue of that person's ownership of a lot, is expressly obligated by a declaration to pay real property taxes, insurance premiums, or other expenses to maintain, improve, or benefit other lots or other real estate described in the declaration.

The declaration (covenants) do not obligate any person to pay real property taxes, insurance premiums, or other expenses to maintain, improve, or benefit other lots or other real estate.

To answer some of your questions.
The covenants were filed in 1985 with our County Records.
They do not mention 47F
They do not mention any association, incorporated or unincorporated.
They do not mention any payments.
There are 31 lots with 29 homes.
We are not incorporated.

You say:
Essentially if you have CCR’s attached to your property titles regarding the building and construction of the homes in a specified area as noted on a Plat ... you are a Planned Community as defined and constructed per your Local Government Ordinances and your State Statute. Most local governments anymore are requiring developers to establish “Planned Community” or “HOA” when they file for their development permits.

That may be the case in some states, but I can't find anything in our Local Government Ordinances or our State Statutes to indicate this.

Are you trying to tell me you do no pay for HOA BOD DOD insurance premiums??? Please inform us what your HOA dues pay for??? Because if you are charging owners to participate in your association ... it must PAY for something???

Keep in mind you were established prior to the State Law taking affect ... however, it does not diminish the fact you potentially fall under certain sections as noted in the statute for any communities filed before January 1, 1999. I already pointed out where you State Law notes the areas whereby if established prior to that date fall under certain sections. If you do not believe me ... ask an attorney.

GaryM15 (North Carolina)
Posts: 63

Posted:

Quote:

Posted By JanetB2 on 12/05/2017 7:08 PM

Are you trying to tell me you do no pay for HOA BOD DOD insurance premiums??? Please inform us what your HOA dues pay for??? Because if you are charging owners to participate in your association ... it must PAY for something???

Keep in mind you were established prior to the State Law taking affect ... however, it does not diminish the fact you potentially fall under certain sections as noted in the statute for any communities filed before January 1, 1999. I already pointed out where you State Law notes the areas whereby if established prior to that date fall under certain sections. If you do not believe me ... ask an attorney.

Janet,

We do pay for some kind of liability insurance for our executive committee. I'm not sure what it is called. However, we are not expressly obligated by the declaration (Covenants) to do so.

We also pay for the maintenance of the entrance decorations (approximately $10,000 total annually, $350 per household annually), but we are not obligated to do so. It's not a charge to participate. That's where the voluntary part comes in.

Gary

JanetB2 (Colorado)
Posts: 4,219

Posted:

Quote:

Posted By GaryM15 on 12/05/2017 2:12 PM

Posted By JanetB2 on 12/05/2017 12:27 PM

You need to be aware of this part of which you posted:

NCGS 59B-8. Capacity to assert and defend; standing.
(a) A nonprofit association, in its name, may institute, defend, intervene, or participate in
a judicial, administrative, or other governmental proceeding or in an arbitration, mediation, or
any other form of alternative dispute resolution.
(b) A nonprofit association may assert a claim in its name on behalf of its members or
persons referred to as "members" by the nonprofit association if one or more of them have
standing to assert a claim in their own right, the interests the nonprofit association seeks to
protect are germane to its purposes, and neither the claim asserted nor the relief requested
requires the participation of a member or a person referred to as a "member" by the nonprofit
association. (2006-226, s. 1.)

Thus why your attorney made the statement they did ... The nonprofit cannot assert a claim which requires participation of a member or another person regarding any such claim ... which enforcing CCR’s would need. Therefore, members can only pursue other members vs the nonprofit pursuing members for the CCR’s.

Janet,

A super thanks for your response. You have helped me understand this statue better.

My understanding is:

Since the association is not one of the parties that is bound by the covenants, it is in fact a third party, and can't assert a claim for an agreement that it is not part of.

With that understanding, it seems that a claim can be brought by a member or several members, named individually, but not by the association.

Gary

I would not necessarily say the association is a third party ... the association can assert claims regarding any common area property the association holds against third party.

PaininyourA
Posts: 215

Posted:

Is there any 'common property'?

Yes = mandatory association of a 'planned unit development'.

No = voluntary membership.

PERIOD - END OF CASE

PaininyourA
Posts: 215

Posted:

whether or not y'all incorporate is a separate issue

the HOA does in fact exist IF y'all have any common property

y'all need to incorporate to provide a 'shield' against PERSONAL liability

a/k/a: the Corporate Shield

CjC
Posts: 210

Posted:

Quote:

Posted By PaininyourA on 12/06/2017 9:20 AM
Is there any 'common property'?

Yes = mandatory association of a 'planned unit development'.

No = voluntary membership.

PERIOD - END OF CASE

I don't totally agree with this. We are a mandatory HOA and own no common property. We have deeded it to a larger HOA that we are a part of. We have kept our mandatory HOA in tact to be able to control aesthetics of the community. We have stricter guidelines than the larger HOA.

PaininyourA
Posts: 215

Posted:

OOOOOKay

You HAD (at one time) common property.

?! You are now members of the MASTER HOA !?

sheeesh

the Nit is now in 1000 pieces

CjC
Posts: 210

Posted:

yes we are members of two HOA's. Some neighbors are members of three if they live in the townhouse community. Really fun when the HOAs disagree. and it happens more often than we care to discuss. Court cases back and forth, Memos of understanding and still one side doesn't abide by it.

GaryM15 (North Carolina)
Posts: 63

Posted:

Quote:

Posted By PaininyourA on 12/06/2017 9:20 AM
Is there any 'common property'?

Yes = mandatory association of a 'planned unit development'.

No = voluntary membership.

PERIOD - END OF CASE

What is the basis for your statement?

The basis for my statement is the NC statue 47F, that says:

"Planned community" means real estate with respect to which any person, by virtue of that person's ownership of a lot, is expressly obligated by a declaration to pay real property taxes, insurance premiums, or other expenses to maintain, improve, or benefit other lots or other real estate described in the declaration. ….

You say "common property" Perhaps you really mean real (real-estate) property.

I agree that if we own any common real property, then we are obligated to pay taxes. In that case, the declaration probably expresses that obligation. However, it is the expressed obligation rather than owning the property that would make us mandatory.

Perhaps we (an unincorporated association) owned some common property such as a storage shed and some tools, or even some Christmas wreaths to be hung on the entrance signs. Since we are not expressly obligated by a declaration to maintain them, then we are not a mandatory association of a 'planned unit development'.

I'm tempted to throw in the statement "PERIOD", but I know that is not the case.

GaryM15 (North Carolina)
Posts: 63

Posted:

Quote:

Posted By SheliaH on 12/05/2017 4:27 PM

To wit - if your covenants are mandatory, shouldn't there be something written somewhere therein that requires a certain number of homeowners to sign off on any amendments? I don't think any "board" can simply say "ok, you now have to do X". Even if this was a mandatory HOA, amending documents are no small thing and the HOMEOWNERS need to know what's going on and why so they can make informed decisions when THEY decide if the amendments will even fly.

Shelia, Thanks for your response.

I should have been more clear. I said that the other members of the executive wanted to make amendments that were appropriate to only a mandatory HOA. I should have noted that they knew the mandatory covenants required a certain number of homeowners to sign off on any amendments.

My concern is that these amendments are inappropriate and should not be in the covenants, no matter what the homeowners decide (assuming less than 100%).

PaininyourA
Posts: 215

Posted:

Quote:

Posted By GaryM15 on 12/06/2017 1:03 PM

Posted By PaininyourA on 12/06/2017 9:20 AM
Is there any 'common property'?

Yes = mandatory association of a 'planned unit development'.

No = voluntary membership.

PERIOD - END OF CASE

What is the basis for your statement?

The basis for my statement is the NC statue 47F, that says:

"Planned community" means real estate with respect to which any person, by virtue of that person's ownership of a lot, is expressly obligated by a declaration to pay real property taxes, insurance premiums, or other expenses to maintain, improve, or benefit other lots or other real estate described in the declaration. ….

You say "common property" Perhaps you really mean real (real-estate) property.

I agree that if we own any common real property, then we are obligated to pay taxes. In that case, the declaration probably expresses that obligation. However, it is the expressed obligation rather than owning the property that would make us mandatory.

Perhaps we (an unincorporated association) owned some common property such as a storage shed and some tools, or even some Christmas wreaths to be hung on the entrance signs. Since we are not expressly obligated by a declaration to maintain them, then we are not a mandatory association of a 'planned unit development'.

I'm tempted to throw in the statement "PERIOD", but I know that is not the case.

Common property = commonly owned real estate = taxes payable = 'planned community'.

Does your 'declaration' mention/reference any 'common elements' ?

However, it is the expressed obligation rather than owning the property that would make us mandatory.

Nope - the mere ownership REQUIRES the payment of taxes, ergo, the existence of a HOA which is mandatory because of the partial ownership of 'community property'.

eg. prove that the shortest distance between two points is a straight line

some things are simply self evident

110%
OUT

PaininyourA
Posts: 215

Posted:

Quote:

Posted By JanetB2 on 12/05/2017 12:15 PM

Posted By GaryM15 on 12/04/2017 12:09 PM

Posted By JanetB2 on 12/04/2017 11:05 AM
When was your HOA created?

http://www.lawfirmcarolinas.com/FAQs-About-NC-HOA-Condo-Associations-Part-I.cfm

2. Are Common Interest Communities required to incorporate? Can they be incorporated? Advantages/Disadvantages?
Planned communities created on or after January 1, 1999, and governed by the NC Planned Community Act must incorporate no later than the date the first lot is conveyed. (NCGS § 47F-3-101) There is no comparable condominium statute. However, any condominium or older planned community may incorporate as a nonprofit and most do.

If you are not incorporated ... then you can now incorporate as a non-profit as long as you get your members to agree.

Janet,

Thanks for the link, but nothing in that article applies to us. We are not an HOA. We are not a "Planned Community" as defined in 47F. I'm not familiar with the legal definition of a "Common Interest Community" as it applies to NC statues, but it may be common name for "Planned Community".

We are a Unincorporated Nonprofit Association.

https://www.thebalance.com/what-is-an-unincorporated-nonprofit-association-2501895

I would be willing to bet a lot of money the attorney probably stated you are an Unincorporated Planned Community (also sometimes referred to as HOA, Common Interest Community (CIC), Property Owners Association (POA), etc. depending on how your state defines). Essentially if you have CCR’s attached to your property titles regarding the building and construction of the homes in a specified area as noted on a Plat ... you are a Planned Community as defined and constructed per your Local Government Ordinances and your State Statute. Most local governments anymore are requiring developers to establish “Planned Community” or “HOA” when they file for their development permits.

(23) "Planned community" means real estate with respect to which any person, by virtue of that person's ownership of a lot, is expressly obligated by a declaration to pay real property taxes, insurance premiums, or other expenses to maintain, improve, or benefit other lots or other real estate described in the declaration. For purposes of this act, neither a cooperative nor a condominium is a planned community, but real estate comprising a condominium or cooperative may be part of a planned community. "Ownership of a lot" does not include holding a leasehold interest of less that [than] 20 years in a lot, including renewal options.

The reason the attorney made the statement you noted (which is potentially not the exact verbiage):

Attorney: "Because the association is not incorporated, the members have no responsibility to each other to abide by those covenants, so the enforcement of the covenants goes only as far as the individual member allows."

Is because of as noted in your article you researched and posted which states:

“Members of an unincorporated nonprofit association may be exposed to personal liability for the obligations of the association if state laws do not explicitly provide for limited liability (for example, California provides for limited liability for members of an unincorporated nonprofit association).

Regardless, the law is still less certain regarding personal liability as compared to corporations. Therefore, an unincorporated association may not be ideal if the group's activities might create concerns about contract or tort liability (two common areas where liability issues arise), or if potential members, board members, and supporters might be deterred by such concerns.”

The attorney essentially was noting that the unincorporated association only has “personal liability” between the members to enforce the covenants. An incorporated association has “corporate liability” on behalf of its members to enforce the covenants and can pursue violations via a Corporate level vs members doing so at a personal level. And which is why the site I noted above states that an association can incorporate if they choose to do so.

Your State Statute notes:

§ 47F-1-102. Applicability.
(a) This Chapter applies to all planned communities created within this State on or after January 1, 1999, except as otherwise provided in this section.
(b) This Chapter does not apply to a planned community created within this State on or after January 1, 1999:
(1) Which contains no more than 20 lots (including all lots which may be added or created by the exercise of development rights) unless the declaration provides or is amended to provide that this Chapter does apply to that planned community; or
(2) In which all lots are restricted exclusively to nonresidential purposes, unless the declaration provides or is amended to provide that this Chapter does apply to that planned community.
(c) Notwithstanding the provisions of subsection (a) of this section, G.S. 47F-1-104 (Variation), G.S. 47F-2-103 (Construction and validity of declaration and bylaws), G.S. 47F-2-117 (Amendment of declaration), G.S. 47F-3-102(1) through (6) and (11) through (17) (Powers of owners' association), G.S. 47F-3-103(f) (Executive board members and officers), G.S. 47F-3-107(a), (b), and (c) (Upkeep of planned community; responsibility and assessments for damages), G.S. 47F-3-107.1 (Procedures for fines and suspension of planned community privileges or services), G.S. 47F-3-108 (Meetings), G.S. 47F-3-115 (Assessments for common expenses), G.S. 47F-3-116 (Lien for assessments), G.S. 47F-3-118 (Association records), and G.S. 47F-3-121 (American and State flags and political sign displays), and G.S. 47F-3-104 (Transfer of Special Declarant Rights) apply to all planned communities created in this State before January 1, 1999, unless the articles of incorporation or the declaration expressly provides to the contrary, and G.S. 47F-3-120 (Declaration limits on attorneys' fees) applies to all planned communities created in this State before January 1, 1999. These sections apply only with respect to events and circumstances occurring on or after January 1, 1999, and do not invalidate existing provisions of the declaration, bylaws, or plats and plans of those planned communities. G.S. 47F-1-103 (Definitions) also applies to all planned communities created in this State before January 1, 1999, to the extent necessary in construing any of the preceding sections.

Which is why I asked you:

When were your Original CCR’s filed with your County Records???

Also would need to know:

How many lots are noted in your CCR’s and Plat?

Depending on that answer you need to clarify items with your attorney such as:

1. If the CCR’s were filed on or after January 1, 1999, did the developer make a mistake and make the association unincorporated when it should have been incorporated? If so, what steps do we need to take to fix the developer’s snafu?

2. Does our Declaration expressly provide that the sections under 47-F-102(c) do not apply to our planned community which was created before January 1, 1999?

JanetB2 (Colorado)
Posts: 4,219

Posted:

Quote:

Posted By GaryM15 on 12/06/2017 1:03 PM

Posted By PaininyourA on 12/06/2017 9:20 AM
Is there any 'common property'?

Yes = mandatory association of a 'planned unit development'.

No = voluntary membership.

PERIOD - END OF CASE

What is the basis for your statement?

The basis for my statement is the NC statue 47F, that says:

"Planned community" means real estate with respect to which any person, by virtue of that person's ownership of a lot, is expressly obligated by a declaration to pay real property taxes, insurance premiums, or other expenses to maintain, improve, or benefit other lots or other real estate described in the declaration. ….

You say "common property" Perhaps you really mean real (real-estate) property.

I agree that if we own any common real property, then we are obligated to pay taxes. In that case, the declaration probably expresses that obligation. However, it is the expressed obligation rather than owning the property that would make us mandatory.

Perhaps we (an unincorporated association) owned some common property such as a storage shed and some tools, or even some Christmas wreaths to be hung on the entrance signs. Since we are not expressly obligated by a declaration to maintain them, then we are not a mandatory association of a 'planned unit development'.

I'm tempted to throw in the statement "PERIOD", but I know that is not the case.

What PITA and I have been trying to get across is if your Unincorporated association Owns any property (such as your entrance areas) then you are potentially an HOA. Even if your CCR’s do not necessarily mandate payment ... if certain items are not paid, then what happens to the property??? Potentially your legislators should have taken more care when implementing their statutes in 1999 to consider ramifications of HOA’s who were in place prior to their laws.

PaininyourA
Posts: 215

Posted:

The legislature DID, to wit:

(c) Notwithstanding the provisions of subsection (a) of this section, G.S. 47F-1-104 (Variation), G.S. 47F-2-103 (Construction and validity of declaration and bylaws), G.S. 47F-2-117 (Amendment of declaration), G.S. 47F-3-102(1) through (6) and (11) through (17) (Powers of owners' association), G.S. 47F-3-103(f) (Executive board members and officers), G.S. 47F-3-107(a), (b), and (c) (Upkeep of planned community; responsibility and assessments for damages), G.S. 47F-3-107.1 (Procedures for fines and suspension of planned community privileges or services), G.S. 47F-3-108 (Meetings), G.S. 47F-3-115 (Assessments for common expenses), G.S. 47F-3-116 (Lien for assessments), G.S. 47F-3-118 (Association records), and G.S. 47F-3-121 (American and State flags and political sign displays), and G.S. 47F-3-104 (Transfer of Special Declarant Rights) apply to all planned communities created in this State before January 1, 1999, unless the articles of incorporation or the declaration expressly provides to the contrary

D'OH

GaryM15 (North Carolina)
Posts: 63

Posted:

Quote:

Posted By JanetB2 on 12/06/2017 8:19 PM

Posted By GaryM15 on 12/06/2017 1:03 PM

Posted By PaininyourA on 12/06/2017 9:20 AM
Is there any 'common property'?

Yes = mandatory association of a 'planned unit development'.

No = voluntary membership.

PERIOD - END OF CASE

What is the basis for your statement?

The basis for my statement is the NC statue 47F, that says:

"Planned community" means real estate with respect to which any person, by virtue of that person's ownership of a lot, is expressly obligated by a declaration to pay real property taxes, insurance premiums, or other expenses to maintain, improve, or benefit other lots or other real estate described in the declaration. ….

You say "common property" Perhaps you really mean real (real-estate) property.

I agree that if we own any common real property, then we are obligated to pay taxes. In that case, the declaration probably expresses that obligation. However, it is the expressed obligation rather than owning the property that would make us mandatory.

Perhaps we (an unincorporated association) owned some common property such as a storage shed and some tools, or even some Christmas wreaths to be hung on the entrance signs. Since we are not expressly obligated by a declaration to maintain them, then we are not a mandatory association of a 'planned unit development'.

I'm tempted to throw in the statement "PERIOD", but I know that is not the case.

What PITA and I have been trying to get across is if your Unincorporated association Owns any property (such as your entrance areas) then you are potentially an HOA. Even if your CCR’s do not necessarily mandate payment ... if certain items are not paid, then what happens to the property??? Potentially your legislators should have taken more care when implementing their statutes in 1999 to consider ramifications of HOA’s who were in place prior to their laws.

Janet,

I sincerely appreciate the time you've spent to help me, and I do understand that if we own any real property that we may be an HOA. However, we do not own any real property. The entrance areas are part of the individual lots on the corners.

GaryM15 (North Carolina)
Posts: 63

Posted:

Quote:

Posted By PaininyourA on 12/07/2017 7:46 AM
The legislature DID, to wit:

(c) Notwithstanding the provisions of subsection (a) of this section, G.S. 47F-1-104 (Variation), G.S. 47F-2-103 (Construction and validity of declaration and bylaws), G.S. 47F-2-117 (Amendment of declaration), G.S. 47F-3-102(1) through (6) and (11) through (17) (Powers of owners' association), G.S. 47F-3-103(f) (Executive board members and officers), G.S. 47F-3-107(a), (b), and (c) (Upkeep of planned community; responsibility and assessments for damages), G.S. 47F-3-107.1 (Procedures for fines and suspension of planned community privileges or services), G.S. 47F-3-108 (Meetings), G.S. 47F-3-115 (Assessments for common expenses), G.S. 47F-3-116 (Lien for assessments), G.S. 47F-3-118 (Association records), and G.S. 47F-3-121 (American and State flags and political sign displays), and G.S. 47F-3-104 (Transfer of Special Declarant Rights) apply to all planned communities created in this State before January 1, 1999, unless the articles of incorporation or the declaration expressly provides to the contrary

D'OH

Pain,

I understand (mostly) the rules that apply to a planned community. However since we do not own any real property, and since we are not expressly obligated by a declaration to pay real property taxes, insurance premiums, or other expenses, then we don't meet the definition of a planned community.

"Planned community" means real estate with respect to which any person, by virtue of that person's ownership of a lot, is expressly obligated by a declaration to pay real property taxes, insurance premiums, or other expenses to maintain, improve, or benefit other lots or other real estate described in the declaration. ….

This leads me to believe that we are not a planned community, and that none of the provisions of 47F apply to us. If somehow you believe differently, I need something more convincing than "D'OH".

PaininyourA
Posts: 215

Posted:

Have it your way.

Your association is totally voluntary.

You need not pay anything.

You live in an unplanned haphazard community.

Best of luck to you.

PaininyourA
Posts: 215

Posted:

Quote:

Posted By PaininyourA on 12/06/2017 9:20 AM
Is there any 'common property'?

Yes = mandatory association of a 'planned unit development'.

No = voluntary membership.

PERIOD - END OF CASE

PaininyourA
Posts: 215

Posted:

JanetB2 (Colorado)
Posts: 4,219

Posted:

Quote:

Posted By CjC on 12/06/2017 10:36 AM

Posted By PaininyourA on 12/06/2017 9:20 AM
Is there any 'common property'?

Yes = mandatory association of a 'planned unit development'.

No = voluntary membership.

PERIOD - END OF CASE

I don't totally agree with this. We are a mandatory HOA and own no common property. We have deeded it to a larger HOA that we are a part of. We have kept our mandatory HOA in tact to be able to control aesthetics of the community. We have stricter guidelines than the larger HOA.

Ahhh ... When established and owned property you were a Planned Community. Deeding to another HOA which you are a part of still potentially makes you a Planned Community ... as you are part of a master hoa which owns property. Slowly the proper answers from the OP are appearing.

DouglasM6 (Arizona)
Posts: 724

Posted:

Quote:

Posted By JanetB2 on 12/07/2017 11:44 AM

Posted By CjC on 12/06/2017 10:36 AM

Posted By PaininyourA on 12/06/2017 9:20 AM
Is there any 'common property'?

Yes = mandatory association of a 'planned unit development'.

No = voluntary membership.

PERIOD - END OF CASE

I don't totally agree with this. We are a mandatory HOA and own no common property. We have deeded it to a larger HOA that we are a part of. We have kept our mandatory HOA in tact to be able to control aesthetics of the community. We have stricter guidelines than the larger HOA.

Ahhh ... When established and owned property you were a Planned Community. Deeding to another HOA which you are a part of still potentially makes you a Planned Community ... as you are part of a master hoa which owns property. Slowly the proper answers from the OP are appearing.

That's not the OP....

PaininyourA
Posts: 215

Posted:

.... great volley, Doug ....

JanetB2 (Colorado)
Posts: 4,219

Posted:

Quote:

Posted By DouglasM6 on 12/07/2017 11:56 AM

Posted By JanetB2 on 12/07/2017 11:44 AM

Posted By CjC on 12/06/2017 10:36 AM

Posted By PaininyourA on 12/06/2017 9:20 AM
Is there any 'common property'?

Yes = mandatory association of a 'planned unit development'.

No = voluntary membership.

PERIOD - END OF CASE

I don't totally agree with this. We are a mandatory HOA and own no common property. We have deeded it to a larger HOA that we are a part of. We have kept our mandatory HOA in tact to be able to control aesthetics of the community. We have stricter guidelines than the larger HOA.

Ahhh ... When established and owned property you were a Planned Community. Deeding to another HOA which you are a part of still potentially makes you a Planned Community ... as you are part of a master hoa which owns property. Slowly the proper answers from the OP are appearing.

That's not the OP....

Sigh ... sorry missed that when posting in hurry with holidays coming up. My bad ...

DouglasM6 (Arizona)
Posts: 724

Posted:

Quote:

Posted By PaininyourA on 12/07/2017 3:00 PM
.... great volley, Doug ....

When someone lobs one out over the plate, I hit it!

JanetB2 (Colorado)
Posts: 4,219

Posted:

Gary ... What has your attorney stated with regards to you being a Planned Community???

GaryM15 (North Carolina)
Posts: 63

Posted:

Quote:

Posted By JanetB2 on 12/08/2017 7:07 PM
Gary ... What has your attorney stated with regards to you being a Planned Community???

She doesn't mention "Planned Community" She agrees that we are not an HOA.

I was asked whether you were a formal homeowner's association, the answer to that question remains no.

Asked "If we are not an HOA, should we change our name to something other than “Xxx Homeowners Association?"

You may call yourselves anything you wish; however, you are not technically a true HOA.

When asked: Who is legally responsible for and capable of enforcing the covenants?
She says:

Those with the power and responsibility, to enforce the covenants are those given that power and responsibility by an association itself. This information is typically found in the By-Laws. Because the association is not incorporated, the members have no responsibility to each other to abide by those covenants, so the enforcement of the covenants goes only as far as the individual member allows.

She also says:

According to the documents already in existence, the owners of the lots within the neighborhood are members of the association by their ownership of a lot. In that sense, the association is already mandatory. Mandatory membership, however, does not necessarily mean that those members will abide by the rules. When an association is not incorporated, the members do not have a duty to each other. This is different in an incorporated association. Should the association become incorporated, the members would then become responsible to the other members to follow the rules. As it stands, the members are not responsible to each other. The significance of the members not being responsible to each other is that the members have nothing forcing them to abide by the rules aside from their own volition.

And:

Membership in the association is already mandatory. As mentioned above, this does not mean that the members have the responsibility to abide by association rules.

All of this is quite confusing, and I believe some statements are simply wrong.

P.S. I can send you a link to the entire sequence of questions, answers, and my responses. It's probable more than you ever wanted to know.

PaininyourA
Posts: 215

Posted:

..... Membership in the association is already mandatory. .....

This is what the attorney stated AS PER THE OP.

PaininyourA
Posts: 215

Posted:

..... said association merely has not incorporated

BUT

it exists and is mandatory none-the-less

ALBEIT

powerless because NOT incorporated

D'OH

JanetB2 (Colorado)
Posts: 4,219

Posted:

Quote:

Posted By GaryM15 on 12/09/2017 3:14 PM

Posted By JanetB2 on 12/08/2017 7:07 PM
Gary ... What has your attorney stated with regards to you being a Planned Community???

She doesn't mention "Planned Community" She agrees that we are not an HOA.

I was asked whether you were a formal homeowner's association, the answer to that question remains no.

Asked "If we are not an HOA, should we change our name to something other than “Xxx Homeowners Association?"

You may call yourselves anything you wish; however, you are not technically a true HOA.

When asked: Who is legally responsible for and capable of enforcing the covenants?
She says:

Those with the power and responsibility, to enforce the covenants are those given that power and responsibility by an association itself. This information is typically found in the By-Laws. Because the association is not incorporated, the members have no responsibility to each other to abide by those covenants, so the enforcement of the covenants goes only as far as the individual member allows.

She also says:

According to the documents already in existence, the owners of the lots within the neighborhood are members of the association by their ownership of a lot. In that sense, the association is already mandatory. Mandatory membership, however, does not necessarily mean that those members will abide by the rules. When an association is not incorporated, the members do not have a duty to each other. This is different in an incorporated association. Should the association become incorporated, the members would then become responsible to the other members to follow the rules. As it stands, the members are not responsible to each other. The significance of the members not being responsible to each other is that the members have nothing forcing them to abide by the rules aside from their own volition.

And:

Membership in the association is already mandatory. As mentioned above, this does not mean that the members have the responsibility to abide by association rules.

All of this is quite confusing, and I believe some statements are simply wrong.

P.S. I can send you a link to the entire sequence of questions, answers, and my responses. It's probable more than you ever wanted to know.

I would agree some of the statements seen wrong ... I would recommend getting a second opinion.