Q. The president of our HOA is also a property manager and rental agent in his “day job,” as well as a mortgage broker. He manages many rental properties in our community. A group of owners in our subdivision have asked for a cap on the allowed percentage of rental homes in our community, which is now nearly 40 percent. In response to this request, the president of our HOA formed a committee of possibly two other people, and is now saying that the committee does not agree with a rental cap. In my opinion, all decisions by the board are influenced by the president’s other businesses, including stretching rules for his tenants. I and others believe that his other businesses constitute a conflict of interest, and that he should resign as a board member. I presented a written complaint to the board recently, and I am scheduled to appear before the board this week. Do you agree that he has a conflict of interest and should step down? He also voted himself onto the board by canvassing door to door and collecting the majority of proxies prior to our annual meeting. In our estimation, his control of our neighborhood is decreasing property values due to the high number of rentals.If your HOA is a nonprofit corporation (as most are), your HOA and your board of directors are governed by the N.C. Non-Profit Corporations Act. This act holds directors to the following standards: “A director shall discharge his duties as a director, including his duties as a member of a committee: (1) In good faith; (2) With the care an ordinarily prudent person in a like position would exercise under similar circumstances; and (3) In a manner the director reasonably believes to be in the best interests of the corporation.” The section of the act that addresses director conflicts of interest pertains primarily to “transactions” with the corporation in which a director has a direct or indirect interest.
Q. I need guidance on the new law dealing with transfer fees. I am a real estate agent and I have a home listed in a community whose covenants, conditions and restrictions state that a fee of 6 percent of the sales price of every home is to be paid to the developer at closing. With the new law banning transfer fees, is this seller obligated to pay the 6 percent to the developer at closing?
The governing documents of many communities, often called Covenants, Conditions, and Restrictions (CCRs), require the payment of a fee to the HOA upon the sale of a home.Such fees can be helpful for a fledgling HOA trying to build its capital reserves. These transfer fees typically were imposed only on the initial sale of a home, but not on subsequent resales.
Q. My home sits next to a common area. According to the HOA covenants, it is the responsibility of the HOA to maintain the common areas. As it stands now I mow most of the common area beside my home (the HOA’s landscaper only mows about 10 to 15 feet back from the road).
However, the common area behind my home, which consists of thick, heavy brush, is not maintained by anyone. Over the last few months the brush has grown rapidly and is now encroaching into my yard. I contacted the HOA, and they informed me that it is not in the budget for them to maintain this area, and that others within the community with common areas around their homes maintain those areas themselves. I find this in direct contradiction of what the covenants state. Am I correct in my interpretation and assumption that this is the HOA responsibility?The two basic functions of most HOAs are to enforce the community’s restrictive covenants and maintain the common areas.
Q. Our HOA’s bylaws state that the only way a board director may be removed from the HOA board is by a majority vote of our HOA members. Recently, three of our five board members voted into effect and implemented a “Code of Ethics” for our board members to abide by. The final section of this code states that any board member who violates these ethics provisions “will be subject to potential ramifications and/or expulsion from the board of directors.” This expulsion power seems to be in violation of our bylaw that gives this authority only to our HOA members. Can this expulsion be enforced?Most HOA bylaws require a vote of the homeowners to remove a director from office. In fact, the requirement is usually a two-thirds or three-fourths “supermajority” vote of the owners.
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