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The North Carolina Court of Appeals recently decided a case involving several homeowners’ claims that their condominium association, through its management company, was charging excessively high fees and late charges that were not permitted by the condominium’s governing documents. We want to point out that these were simply allegations – the only part of this case that matters from a legal perspective is that the homeowners asked for class-action status, which was denied.
For discussion purposes, there is not much distinction between the laws that govern condominiums and homeowners associations. All condominiums and HOAs are governed by declarations that specify the particular restrictions for the condominium or subdivision. The rule of law is that the declaration (in conjunction with the bylaws, the association’s policies and rules and regulations), specifies the fines and late fees that can be assessed against homeowners for delinquent assessments, and the laws step in to fill legal gaps in the declaration or to place limits on the association’s discretion to levy fines and late fees.
In this case, the plaintiff homeowners alleged that the condominium association permitted its management company to assess fees that exceeded the statutory limits.It should be mentioned that this is an older condominium association, meaning that an amalgam of laws control the fees and charges. The plaintiffs also asked the court to allow the case to proceed as a class-action lawsuit against the management company and the association. The class-action status was rightfully rejected by the lower court in our opinion. The plaintiffs appealed the court’s denial of class-action status, and this decision upheld the denial. This was not a final decision on the merits of the case, so the case goes on, albeit without class-action status.
From a purely legal perspective, this case did not say a lot that was new. However, we believe that this case is important to remind associations and their management companies to periodically take stock of the fees and fines that are assessed against homeowners to determine that all charges are compliant with the governing documents and within the bounds set by the law. The fees and fines should be set forth either in the association’s governing documents or by a properly approved resolution or policy. The maximum amount of late fees that can be assessed, for any particular month, is $20.00 or 10% of the amount overdue, and this amount can be charged only once per month. The laws do allow the association to assess attorneys’ fees in many circumstances, although the association must provide the homeowner with proper notice beforehand. These are only a few examples of charges that should be considered, so be sure to check with your management company or attorney to confirm that your HOA’s charges are authorized by law.