Community associations in North and South Carolina face important decisions about how to structure their management operations. Whether your association is considering self-management, professional management, or a hybrid approach, understanding the legal framework, benefits, and limitations of each option is essential for making informed decisions. This guide explores the key considerations for HOA and condo boards navigating management structure decisions.
Contents:
- Committee Operations and Compensation
- Self-Managed Community Associations
- Professional Community Management Partnerships
- Changing Management Structures
- Working with Legal Counsel
Understanding Committee Operations and Compensation
One of the first questions many associations face involves committee structures and whether members can be compensated for their service. This question touches on both legal requirements and practical governance considerations.
Committee Compensation: Legal Framework
In North Carolina, both the Condominium Act and the Planned Community Act explicitly prohibit HOA officers and directors from receiving compensation for their service unless the bylaws specifically authorize it. Interestingly, these laws don’t directly address committee members or chairs, creating some ambiguity in this area.
While many associations operate with entirely volunteer committees, some bylaws do provide compensation mechanisms such as:
- Waiving annual assessments for committee chairs
- Providing modest stipends or gift cards
- Offering credits toward association fees
From a legal perspective, there’s no specific prohibition against compensating committee members in North Carolina, but associations should approach this area carefully. Any compensation structure should be:
- Clearly documented in the association’s bylaws
- Consistently applied across similar positions
- Reasonable in relation to the work performed
- Transparently communicated to all members
Changing Compensation Structures
Associations considering changes to committee compensation should be aware of both legal and practical considerations. From a contractual perspective, reducing previously promised compensation near the end of a service term could potentially create legal issues. Board members should consider:
- Whether the change should be prospective rather than retroactive
- If bylaw amendments require member votes (most do require a “super-majority”)
- How changes might affect volunteer recruitment
- The potential impact on community relations
Best practice suggests implementing any compensation reductions for future terms rather than current ones, providing clear communication about the reasons for changes, and ensuring all bylaw modification procedures are strictly followed.
Self-Managed Community Associations: Benefits and Challenges
Many smaller communities in the Carolinas opt for self-management, where board members and volunteers handle all aspects of association operations without professional management support. This approach offers distinct advantages and disadvantages.
Advantages of Self-Management
Financial Benefits: Self-managed associations typically enjoy lower monthly operational costs. Without professional management fees, these savings can be substantial – often ranging from $20-50 per unit monthly depending on community size and services required. These savings may allow for:
- Lower assessment amounts
- Enhanced funding for capital improvements
- Larger reserve fund contributions
- Greater flexibility for emergency expenses
Direct Financial Control: With self-management, the association’s treasurer directly oversees all financial operations. This arrangement provides:
- Immediate access to financial information
- Elimination of third-party processing delays
- Direct oversight of vendor payments
- Streamlined decision-making for expenditures
Community Autonomy: Self-managed associations maintain complete control over their governance processes, including:
- Setting their own meeting agendas without external influence
- Establishing community-specific priorities
- Developing governance procedures tailored to resident needs
- Fostering leadership development from within the community
Challenges of Self-Management
Volunteer Burden: Perhaps the most significant challenge is the substantial time commitment required from volunteers. Board members in self-managed communities often find themselves handling tasks that would otherwise be performed by professional managers, including:
- Responding to owner inquiries and complaints
- Coordinating with vendors and contractors
- Processing payments and financial records
- Enforcing covenant violations
- Organizing meetings and maintaining records
These responsibilities can create volunteer burnout, particularly in larger communities where the workload may approach that of a part-time or even full-time job.
Expertise Limitations: While well-intentioned, volunteer boards may lack specialized knowledge in:
- State-specific HOA laws (which differ significantly between North and South Carolina)
- Financial management best practices
- Vendor contract negotiations
- Reserve planning methodologies
- Legal compliance requirements
Without professional training through organizations like the Community Associations Institute, these knowledge gaps can sometimes lead to costly mistakes.
Legal Compliance Challenges: Self-managed communities must navigate complex legal requirements independently. Specific challenges include:
- Filing required state and federal tax returns
- Submitting required documentation to state authorities
- Maintaining compliant meeting minutes and records
- Following proper collections procedures
- Avoiding unauthorized practice of law issues (particularly in South Carolina)
Professional Community Management Partnerships: Scope and Limitations
Many communities in the Carolinas choose to work with professional management companies to handle day-to-day operations. Understanding the appropriate scope of these partnerships is essential for effective governance.
Appropriate Management Company Responsibilities
Professional management companies typically provide:
- Assessment collection and financial record-keeping
- Assistance with budget preparation and financial reporting
- Administrative support for meetings and communications
- Coordination with vendors and contractors
- Assistance with rule enforcement
- Maintenance oversight and emergency response
These core services help relieve volunteer burden while providing professional expertise in association operations.
Legal Limitations for Community Management Companies
While management companies provide valuable services, certain activities must remain outside their scope – particularly legal matters. In South Carolina, the state Supreme Court has specifically identified activities that constitute unauthorized practice of law when performed by management companies:
- Representing associations in court proceedings (including magistrate’s court)
- Filing judgments in circuit court
- Preparing and recording lien documents
- Advertising legal services
Management companies, boards, and individual directors could face both civil and criminal penalties for engaging in these activities. In South Carolina, unauthorized practice of law is considered a felony with penalties up to five years in prison and/or $5,000 for each violation.
North Carolina has similar restrictions, though the specific court precedents differ. Generally, North Carolina community management companies should avoid:
- Providing legal advice or interpretations
- Preparing legal documents beyond standardized forms
- Representing associations in legal proceedings
- Filing liens or other court documents
These activities should be handled exclusively by licensed attorneys in both states.
When to Consider Changing Management Structures
Communities may need to revisit their management approach as circumstances change. Several factors should trigger reconsideration of your management structure:
Signs a Self-Managed Association Should Consider Professional Management
- Volunteer burnout and difficulty recruiting new board members
- Growing community size (generally over 25-50 units)
- Increasing legal and compliance challenges
- Financial management becoming too complex
- Recurring issues with vendor management
- Rising assessment delinquencies
- Significant discord among residents
Signs a Professionally Managed Association Might Consider Self-Management
- Small community size with engaged volunteers
- Strong internal expertise among board members
- Desire to reduce monthly expenses
- Dissatisfaction with current management company
- Simple operational requirements
- Strong community consensus on priorities
- Excellent volunteer participation
Working with Legal Counsel
Regardless of management structure, all associations in the Carolinas should maintain relationships with qualified legal counsel. Attorneys play critical roles in:
- Reviewing and updating governing documents
- Providing guidance on legal compliance issues
- Handling collections and enforcement actions
- Representing the association in legal proceedings
- Advising on contractual matters
- Addressing liability concerns
Both North and South Carolina have specialized attorneys who focus on community association law and understand the nuances of state-specific requirements. These relationships help associations navigate complex legal matters while avoiding unauthorized practice of law concerns.
Partner with HOA Management Experts
Navigating HOA management structures requires careful consideration of your community’s specific needs, legal requirements, and volunteer resources. As a leading provider of HOA management services in North and South Carolina, Community Association Management helps boards develop effective management solutions tailored to their communities.
Ready to enhance your community’s management approach? Contact Community Association Management online or call us at 888-565-1226 to learn more about our HOA management solutions.
The content on this website is provided without any warranty and does not constitute legal advice. For legal advice specific to your community or issue, please consult an attorney specializing in Association Management.
