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Top Amendments for an HOA or Condo in North Carolina & South Carolina – Part Two

(Blog co-authored by David Wilson & Harmony Taylor. This is a continuation of the earlier blog, “Top Amendments for an HOA or Condo in North Carolina or South Carolina.”)

We
are often asked by board members for HOA and condominium associations to review
their community’s documents and “update” them or “make them more modern.”  While there is no one-size fits all solution
for any community association, we have noticed that some amendments are a good
idea for most communities.  Over the next
few articles, David
Wilson
and Harmony
Taylor
will be exploring some of the amendments that we frequently
recommend to the associations that we represent. 

Whether
you are a single family, townhome or condominium community, you may want to
think about some of the amendments that we describe and see if you and your
community would benefit from one of these changes.

In
part two of our series we look at a simple amendment that prevents delinquent
homeowners from saying that payments have been misapplied or wrongfully
rejected.

Part Two:  Add Provision That Requires Payments on
Delinquent Accounts to be Applied First to Late Charges and Then to Assessments

One of the most frequent
complaints that we hear from delinquent homeowners is that “I have been paying
my dues but you applied them to late charges and not to my dues.”  The classic example is where a homeowner
writes on a check to the association something like “for April HOA dues
only.”  If the association accepts the
payment and applies it to delinquent charges first, has it misapplied the
payment?  Or, if it rejects the payment
because the check attempts to direct how the payment must be applied, does that
open the door for liability?

Although this argument does not
garner a lot of attention, it has led to lawsuits under various theories by
imaginative plaintiffs.  In the business
world there is nothing surprising about a party who is delinquent in making
payments being liable for late charges, interest, and eventually attorney’s
fees as well.  It is the industry
standard and courts have no problem with it. 
In the world of homeowners associations, though, making a covenant
change can save the community time, energy, and money when this issue comes up. 

In a recent case out of Ohio, a
condominium was protected from this type of homeowner argument by the fact that
it had amended its covenants to specifically require that payments on
delinquent accounts would be applied first to late charges, interest,
attorney’s fees, and other costs of collection and then to assessments.  In that case the court easily rejected the
homeowner’s argument because of the amendment, pointing out that the
association was not required to violate the covenants and accept payments with
stipulations attached to them. 

We have seen these types of cases
in North Carolina and South Carolina and having language like this in the
association’s governing documents would have been a protection for these
communities. 

If your community would like to
find out more about amending your documents to clarify how payments are applied
contact our community association attorneys in one of our Charlotte,
Greensboro, Triangle, or Coastal offices. 

Author: David Wilson
Articles have been Reprinted with permission from Black, Slaughter, Black.

* These articles and related content on this website are provided without warranty of any kind and in no way constitute or provide legal advice. You are advised to contact an attorney specializing in Association Management for legal advice related to your specific issue and community. Some articles are provided by thrid parties and online services. Display of these articles does in no way endorse the products or services of Community Association Management by the author(s).