Questions and
Answers on Residential Subdivisions and
Planned Communities
Taken from the NC
Real Estate Commission Publications:
http://www.ncrec.state.nc.us/publications-bulletins/publications.html
As North Carolina becomes an
increasingly urban state, more and more
people are purchasing homes and lots in
residential subdivisions and planned
communities. In these subdivisions and
communities, there is usually a
homeowner association that may be
responsible for maintaining the common
areas of the development and the
enforcement of "restrictive covenants."
Many purchasers seek residential
subdivisions and planned communities
with restrictive covenants (sometimes
referred to as "restrictions") because
they believe the covenants will help
assure consistency in the neighborhood
and the preservation of property value.
Restrictive covenants may address
everything from whether single or
multi-family housing is permitted to the
type, size and color of construction.
This publication is intended as an
introduction to issues affecting
residential subdivisions and planned
communities (other than condominiums)
that are subject to restrictive
covenants. (For information on
condominium ownership and townhouse
properties, see the Commission
publication, Questions and Answers on:
Condos & Townhouses, or contact your
attorney.)
Questions
Homeowners Associations
Property Restrictions
Roads and Common Areas
Answers
Homeowners Associations
It is an association of
owners, typically in a residential
subdivision or planned community, whose
properties are subject to restrictive
covenants limiting their use. The
association may be responsible for the
maintenance and control of the common
areas in the development and enforcement
of the restrictive covenants.
It depends on whether it
is "voluntary" or "mandatory."
Membership in an association is
typically mandatory if the restrictive
covenants are recorded in a property's
chain of title. But some neighborhoods
have less formal voluntary associations,
generally with less power than mandatory
associations. Regardless of whether it
is mandatory or voluntary, if you are a
member of the association, typically you
will have a voice in its operation.
If your association is
voluntary, then any payments necessary
to maintain membership are also
voluntary. However, if membership in the
association is mandatory, you must pay
all lawful assessments, dues or charges.
Not so long as the dues,
charges and/or assessments are lawfully
imposed in accordance with procedures
established by the restrictive
covenants. Sometimes, when assessments
are for substantial undertakings (road
maintenance, utility services, building
maintenance, etc.) they can be costly;
therefore, prospective purchasers should
consider the amount of any current or
pending dues, charges and assessments
when determining whether they can afford
the property. If an existing owner
believes an association has improperly
imposed a charge of some kind, only a
court can determine whether it is
lawful.
Under North Carolina
law, the developer of any real estate
project is the owner of all unsold lots
or units in the project. As long as the
developer owns a majority of them, it
controls the votes and therefore the
association itself. The developer (or
its successors) may have the power to
amend the covenants and restrictions so
long as it acts in accordance with the
legal documents creating the
association. The developer has a
fiduciary obligation to act in good
faith, in accord with law, and in the
best interest of the association. Since
the adoption of the North Carolina
Planned Community Act (effective January
1, 1999), developers covered by the Act
cannot exempt themselves from paying
their share of the common expenses.
However, the question remains as to
whether they can exempt themselves from
paying assessments in subdivisions
created prior to the Act or in
subdivisions which are not subject to
the Act. [Note: Residential developments
created on or after January 1, 1999 are
covered by the Act if they have more
than 20 lots or units and a covenant in
their chain of title requiring owners to
pay the expenses for common property.
Smaller projects created after that date
and older properties that meet the
definition of a planned community may,
under certain circumstances, be brought
under the Act so long as they have
covenants requiring payment of common
expenses].
The association must use
the rights granted in the restrictive
covenants to collect them. In
developments subject to the Planned
Community Act, liens and foreclosures
are permitted.
Generally, residential
subdivisions and planned communities
must be approved by a local government
zoning authority--city or county,
depending upon the location of the
property. When subdivision approval is
required, it is illegal for a developer
to offer or contract to sell or to
convey an interest in the subdivision
until the final plat of the subdivision
is approved and recorded at the Register
of Deeds. Typically, after plat approval
and inspection of construction, the
local government has no further role in
administering the homeowner association
except to assure compliance with local
ordinances or state laws (for example, a
Health Department permit for a swimming
pool operation).
Not unless they engage
in acts classified as real estate
brokerage (sales or rental of real
estate for others) or time share
development. If they do, they must be
licensed by the North Carolina Real
Estate Commission. Although the
Commission cannot referee disputes
between an association and its members,
it has disciplined its licensees for
failing to deliver the Subdivision
Street Disclosure Statement, selling
lots in unapproved subdivisions,
misrepresenting material facts in a
transaction, and other violations of the
Real Estate License Law. The Consumer
Protection Section of the North Carolina
Attorney General's Office also has power
to act against legal entities engaged in
certain unlawful practices [Phone:
919/716-6000].
Property Restrictions
Yes, if the restrictions
are properly drawn and consistently
enforced.
Not in most cases.
However, a developer may lawfully refuse
to sell directly to you and instead
require you to purchase a lot and home
from a particular builder. As to real
estate agents, a developer may, in
effect, require you to pay its agent by
including the agent's commission in the
home's purchase price.
Not in all cases. If you
choose to purchase a restricted
property, you agree to abide by the
restrictions. Display of signs, flags or
banners, certain uses of the property,
storage of personal property (e.g.,
boats, RV's, etc.), keeping of animals,
and other practices can lawfully be
controlled by restrictive covenants if
they are properly created and enforced.
Purchasers take property
subject to the restrictions and are
bound to follow them, even if they did
not actually know the property was
subject to restrictive covenants. Once
restrictions are properly imposed upon a
property, they "run with the land" and
are binding on the owner and all
subsequent purchasers. No owner or
purchaser can use the property for any
purpose that violates the restrictions.
Your remedy is to sue
the association and/or the offending
property owners in court for an order
compelling them to abide by all lawful
covenants and bylaws. But remember,
these are private rights of action that
you must assert on your own. No state
agency, other than the court system, can
determine or enforce an owner's rights.
With only rare
exceptions, you will be responsible for
your own attorney fees and other legal
expenses.
Roads and Common Areas
Unless the roads have
been dedicated to public use and
formally accepted by the appropriate
government agency, neither the state nor
any public agency owns legal title to
the land over which a street runs. Where
the developer has retained title to the
streets (i.e., the lot lines border the
edge of the street), it is liable under
state law for erosion control and
possibly civil damages if injuries
result from a lack of maintenance. This
is true even after all lots have been
sold.
Until responsibility for
road maintenance is lawfully transferred
to a municipality or the North Carolina
Department of Transportation, either the
developer or the owners will be
responsible. However, if a developer
becomes insolvent, is dissolved or dies,
the owners alone will have to bear the
cost unless a government agency takes
control. Since there is no guarantee
that any government agency will ever
take control of the roads in a
subdivision, owners are ultimately
called upon to bear the cost of road
maintenance in many situations.
Not necessarily. Since
October 1, 1975, developers and sellers
of certain residential subdivision lots
have been required by law to give the
first purchaser of each property a
Subdivision Street Disclosure Statement
containing important information about
road ownership and maintenance
responsibility. However, the application
of this law is quite limited, so it is
very important that you inquire into the
status of roads in the subdivision and
find out who is responsible for their
maintenance.
They will be specified
by the developer in the recorded map or
plat of the property. Even if the
developer retains title to the common
areas or conveys them to some other
person or entity, these areas (trail
systems, recreation areas, lakes, roads,
etc.) cannot be used for any other
purpose, and all of the owners in the
subdivision may use the property for the
specified purpose.
