As homeowners’ association and commercial real estate attorneys, we typically hold our breath when the North Carolina Court of Appeals issues new opinions (“opinions” is the term it uses to refer to its case decisions). While the judges are all smart, accomplished and well-meaning former attorneys, most are former litigators who unfortunately have little if any real estate or community association law experience.
For this reason, they seem to miss the point or simply get it wrong in a lot of the cases they hear involving real estate or HOA issues. In the most recent HOA cases, they have said very little, so in our mind that’s a small positive – at least they did not make something up or get something wrong altogether.
In the interest of keeping you up to date, and because there are still some “teachable moments” involved, we’ll review them anyway. The cases are Radcliffe v. Avenel Homeowners Association, Inc. and Kimler v. The Crossings at Sugar Hill Property Owner’s Association, Inc.
Radcliffe v. Avenel Homeowners Association, Inc.
The only exciting thing about the Radcliffe case is its facts. The Avenel HOA is an upscale community located in Wilmington. If you think that you have bad neighbors, then you should read the allegations of Ms. Radcliffe in this case to feel much better about your circumstances.
Allegedly, members of the HOA’s board of directors made it their personal missions in life to cause Ms. Radcliffe to move out of the neighborhood. Not only that, but they also tried their hardest to derail her career in the local Methodist Church. According to the Court’s opinion, their alleged reign of terror included threatening her, chasing her, assaulting her, and driving their cars at her. Her lawsuit was a textbook case for the legal cause of action known as “Intentional Infliction of Emotional Distress,” which involves a victim being subject to actions that no person living in a civilized society should have to endure.
The legal issue in the case affecting HOAs was whether the HOA corporation could be liable on these claims, or whether they were only the responsibility of the individual defendants and board members who performed these acts. Could their individual misdeeds be ascribed to the HOA?
The Court ruled that Ms. Radcliffe’s causes of action against the HOA were barred by the three-year statute of limitations applicable to these types of claims, and for that reason the Court did not explore the extent to which the individual defendants’ egregious actions were attributable to the HOA corporation, which actually would have been interesting had the Court gotten to it.
To what extent an HOA is responsible for the actions of board members is interesting legally because, generally, a company is liable for the actions of its employees and officers which are made in the course and scope of their duties. And in the case of an HOA, the HOA’s insurance will usually come in and defend a case brought against the HOA and/or its officers. But certain types of egregious actions, like fraud, intentional infliction of emotional distress, or overtly criminal acts, are typically held to be outside the course and scope of an officer’s or employee’s duties, since they are not usually part of the job description. Therefore, those types of actions usually are not ascribed to the HOA itself, the HOA would not be liable for them, and the HOA’s insurance often will not step in to defend the HOA or the individuals at fault. But the HOA could be responsible if it is found to have permitted, encouraged or facilitated such bad behavior.
Bottom line: Unless you want to find out exactly which bad actions your HOA can be held legally responsible for, and to do so potentially on your own dime with no insurance coverage, try to be nice to the members of your HOA, and don’t let board members treat members disrespectfully. Unpredictable, irresponsible or offensive people should not serve on an HOA board or committee.
Kimler v. The Crossings at Sugar Hill Property Owner’s Association, Inc.
The Kimler case dealt with the issue of amendments to a community’s declaration of covenants, conditions and restrictions. The original CCRs here were filed in 1996 and they did not include a provision that allowed the documents to be amended by anyone but the declarant. Since the HOA was created prior to the Planned Community Act (which became effective January 1, 1999), the question arose as to how the CCRs could be amended by the members.
The most intriguing thing about this case is the fact that it made it all the way to the Court of Appeals in the first place, because all of the questions that it presented can be answered by reading the statutes. Section1-102 of the Planned Community Act states that certain provisions of it apply to all HOAs, even communities that were created prior to 1999. One of these provisions isSection 2-117, which allows declarations to be amended by a vote of 67% or more of the lot owners in the community, “unless the Declaration or the Articles of Incorporation expressly provide otherwise.”
The Court ruled that because The Crossings at Sugar Hill’s CCRs were silent altogether as to any amendment process, they did not “expressly provide otherwise”; therefore, the Planned Community Act provisions applied and the members could amend the CCRs with a 67% vote.
Bottom line: Silence in CCRs as to a particular issue will not be construed in the negative. The provisions of the Planned Community Act which specifically apply to all HOAs, even those created prior to January 1, 1999, will apply when CCRs are silent as to a particular issue.
Please give us a call or drop us an email if our HOA law team can assist your HOA or management company with interpretation of your HOA’s governing documents, or if we can be of assistance in any other way regarding legal issues facing your community. Please be aware that we represent HOAs only – we do not represent homeowners in disputes against their HOAs. We appreciate your reading our HOA law blog and encourage you to share it with others who may be interested. Thank you!