Homeowner Associations (HOAs) are non-governmental organizations that are created to ensure the betterment of any community that’s created within a specific area or a designated neighborhood. A lot of new construction developments are within HOAs, and right now there are more than 14,000 HOAs in North Carolina. That number is growing, thanks to the increased population in our state and the desirability of neighborhoods that are designed to protect and promote residents and property values.
HOAs are regulated by their own governing documents, which comprise their Bylaws, Articles of Incorporation, and Declaration of Covenants, Conditions, and Restrictions (CC&R), among others. Every HOA needs these documents so that there’s a consistent management of communal spaces. These governing documents also establish and protect community standards. They provide a consistent outline for each homeowner’s responsibilities.
You can look at these as the expectations that the association as a whole has for its individual homeowners.
We’re discussing some of the most common governing documents that HOAs will use. But first, we want to make sure you’re familiar with the laws and legislation that govern HOAs in Winston-Salem and throughout the state of North Carolina.
North Carolina Planned Community Act
Some of the governing documents your HOA will use are legally required. For example, the North Carolina Planned Community Act mandates that planned communities have a declaration and establish bylaws. The declaration serves as the “constitution” of the community, outlining the rights and responsibilities of both the HOA and its members. It typically includes details such as covenants, conditions, and restrictions (CC&Rs) that dictate land use and architectural standards.
The North Carolina Planned Community Act was enacted in 1999, and it provides a legal framework for the creation, management, and dissolution of planned communities within the state. The Act seeks to balance the interests of homeowners, community associations, and real estate developers. Your HOA must abide by this legislation if it was established on or after January 1, 1999.
The Act sets forth guidelines on how HOAs should manage and operate their communities, including provisions for holding meetings, voting procedures, budget approvals, and record-keeping. This ensures transparency and fairness in decision-making processes.
Under the Act, homeowners have certain rights, such as the right to attend meetings, access records, and vote on matters affecting the community. They are also responsible for paying assessments and complying with the community’s CC&Rs.
This isn’t the only law that governs your HOA in North Carolina and the governing documents it produces. Here are a few others you’ll need to know:
| North Carolina Nonprofit Corporation Act
Most HOAs in North Carolina are classified as nonprofit corporations, and therefore must abide by the North Carolina Nonprofit Corporation Act, which is outlined in Chapter 55A of the North Carolina General Statutes. Here, you’ll find the legal framework that’s required and the operational practices that are expected from HOAs. |
North Carolina Condominium Act
The North Carolina Condominium Act, which can be found in Chapter 47C of the North Carolina General Statutes, specifies how a condominium association is to be formed and administered. This law applies to condo associations formed after October 1, 1986. |
| North Carolina Unit Ownership Act
The North Carolina Unit Ownership Act is the second act that deals with condominium associations. It can be found in Chapter 47A of the North Carolina General Statutes and applies to condominium associations that were established before October 1, 1986. The Unit Ownership Act contains more general provisions pertaining to the ownership of condos than the Condominium Act. |
North Carolina Debt Collection Act
Homeowners, who are considered consumers under the act, are protected by this law from unfair, dishonest, or oppressive debt collector practices. It functions like the Fair Debt Collection Practices Act (FDCPA), which is a federal law. However, there is one significant difference between the state and federal laws. While creditors are also considered debt collectors under the NCDCA, the federal law describes debt collectors as third parties who recover debts on behalf of others. |
And, let’s not forget the Fair Housing Act. The North Carolina Fair Housing Act follows the federal law, which prohibits discrimination from homeowners associations on the basis of:
- Religion
- Race
- Familial status
- Color
- National origin
- Sex (including gender identity and gender expression)
- Disability
Now that we’re clear about the legal standing of your HOA and where you can find the laws that require these documents, let’s take a look at what they are.
Articles of Incorporation
One of the key documents to any HOA will be the Articles of Incorporation. The Articles of Incorporation play a significant role in how your association is recognized legally and how it operates within its scope of authority.
The Articles of Incorporation serve as a charter that legally establishes the HOA as a corporation under North Carolina state law. This document is filed with the Secretary of State.
Key Components of the Articles of Incorporation
These are some common sections found in most Articles of Incorporation for an HOA:
|
The Name of the HOA This is the official name of the association and often includes phrases like “Homeowners’ Association,” “Community Association,” or similar designations |
Principal Office
The principal address of the HOA, which may or may not be within the actual community. |
Purpose This section outlines the reason for the HOA’s existence, which generally includes managing and maintaining common areas and enforcing the community’s rules and regulations. |
| Duration
Some Articles of Incorporation may specify the duration of the HOA’s existence, which can be perpetual. |
Director and Membership Information
The names and addresses of the initial board of directors or incorporators and information on how one becomes a member. This is often tied to property ownership. |
Non-Profit Status Most HOAs are non-profit entities, and this will be declared in the Articles of Incorporation. |
Why are the Articles of Incorporation Important to your HOA?
The Articles of Incorporation are vital for a handful of reasons:
- Legal Status
They provide the HOA with a distinct legal identity, separate from the members themselves. This is important for entering into contracts, managing funds, and owning property.
- Liability Protection
Because the HOA is a corporation, it helps protect individual members from personal liability for the association’s debts and legal obligations.
- Guiding Framework
The articles, along with Bylaws and Covenants, Conditions & Restrictions (CC&Rs), shape the operating framework of the HOA.
Over time, you can expect that your association’s Articles of Incorporation may need updating. To make changes, typically, a vote from the HOA’s board of directors or its members is required, depending on the regulations within the organization’s bylaws and state laws. Any amendments must then be filed with the state.
The Articles of Incorporation are a primary legal document that every HOA board member should be familiar with. They not only establish the association’s existence but also serve as the fundamental backbone supporting its legal and operational procedures.
HOA Bylaws
HOA Bylaws are the guiding principles that outline how your homeowners association will be run.
You can think of them as the constitution of the community, providing the framework for its government. Bylaws detail the procedures for electing the board of directors, their powers and duties, how meetings are conducted, and how decisions are made. This structure is crucial for maintaining order and ensuring that the collective interests of homeowners are protected and advanced.
Your HOA needs bylaws for four very important reasons.
|
Consistency and Fairness One of the chief reasons bylaws are necessary is that they ensure consistency. Without a clear set of rules, decisions might be made in the moment and without a process, which can lead to inconsistent outcomes that may unfairly benefit some residents over others. Bylaws provide a roadmap for the HOA’s operation, ensuring that all actions are taken according to a pre-arranged plan that was agreed upon by the community. |
Legal Standing and Enforcement HOA Bylaws also provide legal grounding for the association. They set out the rights and obligations of the HOA and its members, which means they can be referred to in legal disputes. Should a conflict arise within your community, bylaws serve as a definitive reference point for resolving the issue. In many ways, they are a protective tool that ensures the HOA’s decisions and actions have a legal basis. |
|
Clarity and Guidance You’ll provide a copy of the bylaws to all new members. This is important because for new members or those unfamiliar with communal living, the bylaws can serve as a valuable source of information and guidance. They clarify what is expected of the homeowners and what they can expect from the board. Understanding the bylaws can help prevent common misunderstandings that arise from unclear or unspoken rules. |
Community Goals and Values HOA Bylaws reflect the values and goals of the community. They lay out the vision for what residents working together hope to achieve, be it maintaining property values, ensuring a safe neighborhood, or creating a harmonious living environment. They inform new and existing members about what is important in the community and serve as a reminder that while individual rights are respected, there is also a collective interest that must be balanced. |
Challenges Without Bylaws
Without bylaws, an HOA lacks the structure to make decisions effectively.
This can lead to confusion, as there would be no agreed upon decision-making process or authoritative body to guide the community. Inefficiency and inequity are common byproducts of such a situation, and without bylaws, there is little recourse for members who feel aggrieved.
Read Your Bylaws!
HOA Bylaws may seem like nothing more than dry legal text, but they deserve your attention as a board member in an HOA or even a homeowner who lives within the community. They are the blueprint for a harmonious community and the backbone of effective governance. Bylaws ensure fairness, provide clarity, uphold legal standards, and reflect the values and aspirations of the community.
Bylaws require periodic review and updating to reflect the changing needs of the community. Make sure there’s a process in place to plan for and address those eventual updates.
Declaration of Covenants, Conditions and Restrictions (CC&Rs)
Have you checked out your HOA’s covenants, conditions, and restrictions lately?
These are also known as CC&Rs, and if you haven’t reviewed them, you should set aside some time to brush up on what you can and cannot do in your community. Usually, these rules are easy to accept, but you have to make sure you’re aware of what they are and when they change.
- CC&Rs Keep a Winston-Salem Association on Track
CC&Rs play a crucial role in keeping the homeowner’s or condo association running smoothly. These are legally binding rules and regulations that each homeowner agrees to when a home or a unit in an association is purchased. When someone buys a property in your HOA community, you must provide them with the CC&Rs before they close on their home.
- CC&Rs and the Association Governance
These rules and regulations are designed to protect the property values in the community. Some of the requirements will be easy to understand and simple to follow. For example, residents will be required to keep their lawn mowed. Or, they won’t be allowed to put your trash bins out days before the trash is scheduled to be collected.
Other things are included in CC&Rs that are not quite as easy to follow, understand, or keep up with. For example, they will include:
- Stipulations on assessments
- Rules about building designs and additions
- Clauses that speak to the governance of the association
Sometimes the expectations and responsibilities can be complex, and when you have homeowners moving into your HOA, members of the board will need to make sure they understand everything they’re agreeing to.
- Violating the CC&Rs or Other HOA Rules
All residents within the community need to understand these rules and regulations and the penalties that are in place if these rules are violated. As a homeowner in an HOA community, you can be fined for violating these rules. In some extreme cases, the association can sue an owner who refuses to comply with the HOA rules and regulations.
Most Winston-Salem HOAs keep their rules current. It’s an important role of the governing body to understand the procedure for changing or amending the rules when those rules are no longer applicable to the community and its owners. While some of these requirements might seem silly, they are legally enforceable and they ensure the association can thrive. Under any HOA CC&Rs, all members should be treated fairly and equally.
Keeping Your Governing Documents Accessible
Managing a homeowners association involves ensuring that all members understand and adhere to the governing documents. These documents must be effectively communicated to and shared with residents. If you’re on the board of your HOA, here are some of our best recommendations on how to keep these important documents accessible to your homeowners.
| Digital Distribution
In today’s digital world, it makes sense to offer electronic access to these critical documents. A well-organized, user-friendly HOA website or mobile app can be invaluable. Create a secure “Members Only” section on your HOA website for document storage. Use a cloud-based service like Dropbox or Google Drive, and share links with members. |
Physical Copies
Most people love technology, but not all residents may be comfortable with it. Thus, physical copies should still be available upon request. Here’s a tip: Keep a few printed copies on hand and make sure residents know where they can obtain one. |
Provide Regular Updates and Communication
Change is a part of life, and your governing documents will need to evolve too. When there’s something that’s been proposed as a change to your governing documents, make sure you ask for your homeowners’ attention. Does your HOA have a newsletter or a bulletin? You can use regular newsletters or e-bulletins to inform members about updates to the documents. If you’re sending out a monthly or quarterly newsletter, include a dedicated section for bylaw updates or reminders.
You can also use annual meetings or even periodic meetings to discuss changes to governing documents and ask for input. Make governing documents a standing item on the agenda for association meetings, using this time to discuss any changes or clarify misunderstandings.
Your HOA might also want to consider the strategy of hosting Q&A sessions or town hall-style meetings to go over complex parts of the governing documents.
It doesn’t matter how you communicate, as long as you’re doing it. The governing documents of your HOA should be easily accessible and available to existing members and new homeowners moving in.
When you work with an HOA management company, these things are streamlined and efficient. We work with HOAs all the time to make their processes and communication more effective. If you’re just getting started on the board of your HOA, or you’re looking for resources to make your community stronger, we can help. Please contact us at Capstone Realty Consultants. We provide HOA property management services in Winston-Salem, North Carolina, and the surrounding areas.
