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Covenant Enforcement Made Easy

Enforcing covenants of an association is one of the most difficult jobs a board of directors must embark upon, while at the same time being one of the most critical functions of the board. Most declarations of common interest communities specifically state that the purpose of the association is to protect and enhance property value within the community, but how do you do that while maintaining good relationships between the neighbors in the community?  All associations are required to have a policy in place setting forth what steps will be taken to enforce an association’s covenants. 

While enforcement of covenants is association specific as each association is permitted to establish its own policy, the anatomy of good covenant enforcement practices should encompass the following:

Warning Notice.  Prior to taking any action to enforce the covenants and or the rules and regulations of the association, the association must first provide notice to the owner or to the alleged violator.  The warning notice should indicate at a minimum, what the alleged violation is, the way the owner or alleged violator may come into compliance and a reasonable amount of time for the owner/alleged violator to come into compliance.  

Hearing Notice.  If the alleged violation is not cured within the time frame set forth in the initial warning letter, the association may then send a second letter to the alleged violator.  This letter should again, clearly explain the violation and explain what the owner can do to cure the violation. If there is a fine associated with this non-compliance, the association must indicate in the letter that a fine may be imposed after this notice and an opportunity for a hearing.  In accordance with North Carolina law, an association may not levy a fine any time prior to giving notice and an opportunity for a hearing.  The association’s fine letter should read something similar to, “The association has attempted to contact you regarding the condition of the paint on your home.  This paint may constitute a violation of the covenants for Happy Acres Owners Association.  You are invited to attend a hearing to discuss this matter on January 1, 2014.  If a violation is found to exist, a fine may be levied for the violation.”  The North Carolina Planned Community Act mandates a certain amount of procedural due process prior to levying a fine.  At the hearing, the person hearing this violation must make a decision based upon the information presented.  

The Hearing.  The North Carolina Planned Community Act requires each owner be given an opportunity for a hearing. If the Owner requests a hearing or attends the hearing that was scheduled, the association representatives conducting the hearing should listen to the evidence presented by both the owner and the person (board member, manager or owner) that first reported the violation. The owner may then address the person conducting the hearing to explain either it is not a violation, or explain any mitigating factors that may impact the decision of the person conducting the hearing. The person conducting the hearing may then rule on the matter as the existence of a violation and if a violation exists, may levy a fine in an amount specified in the association’s covenant enforcement policy.  

It should be noted that the requirement is for an opportunity for a hearing. If the owner fails to attend a scheduled hearing or fails to schedule a hearing, the association should still go through the hearing process and debate, in executive session at a board meeting whether or not a violation exists. The board should not rule on the existence of a violation without noting in the minutes of the meeting that the situation was discussed.  

Who conducts the Hearing?  North Carolina law requires that all hearings be conducted by either the Board or an adjuticatory panel. It should not, however, be anybody that may benefit from either finding a violation to exist or that may benefit from a determination that a violation does not exist.  

The Hearing Results. The North Carolina Planned Community Act requires that you notify the owner in writing, the results of the hearing.  Fines may begin 5 days after the hearing results notification.

While enforcement of the covenants is one of the most contentious issues a board must face, using a consistent approach, following the association’s policies and listening to the owners concerns will establish reasonable expectations and a certain level of fairness that will make the job go smoother.