State government has little power to regulate HOAs. Lawmakers ask: Should that change?

A bipartisan group of state lawmakers is pushing for stricter regulations on homeowners’ associations in North Carolina in what has become an uphill political battle, facing strong opposition from HOA groups and lobbyists. They’re now hearing that state government can do little under the current laws to hold problematic HOAs accountable.

Representatives from multiple state agencies came to a legislative committee Wednesday, to talk about what help they can give homeowners who find themselves struggling with their HOAs.

After two hours of testimony, the answer became clear: There’s not much help to be had.

Some lawmakers have tried to change that, but have had little success, one of them said Wednesday. Eight members of the general public spoke Wednesday, urging the legislature to do more to rein in bad actors and prevent future abuses against homeowners like them. Representatives of the HOA industry also spoke, warning against stricter regulations — and downplaying concerns, saying that most homeowners don’t have any conflicts with their neighborhood associations.

The comments from both sides largely mirrored those at another, similar meeting held earlier this month.

HOA reforms remain a priority for bipartisan group of NC lawmakers

Timothy Hinds, an Oak Island resident who leads a group that advocates for HOA reforms, expressed frustration that people have been asking for stricter rules for years, yet the legislature has done nothing.

One of the committee’s chairs is Rep. Frank Iler, R-Brunswick, who said Wednesday he was part of an effort in 2011, immediately after Republicans took over control of the legislature, to pass stricter rules governing HOAs. They underachieved then, he said, but he’s glad the idea seems to have momentum again now.

“We did a few things, but it was watered down pretty well,” Iler said of that 2011 attempt. “I’m excited, after all these years, to get back into it.”

One thing that hasn’t changed since 2011 is that the industry remains strongly opposed to changes.

The influence of pro-HOA groups at the legislature is strong: Iler’s fellow co-chair Rep. Ya Liu, D-Wake, proposed a bill last year to stop HOAs from foreclosing on people’s homes over just a few dollars in unpaid fines or fees. The idea was that someone shouldn’t lose a property worth hundreds of thousands of dollars because they forgot to pay a fine for not cutting their grass short enough one time, or some similarly minor infraction. Her bill passed the House of Representatives unanimously but was almost entirely gutted and rewritten by the state Senate, and ultimately went nowhere.

HOA bills garner bipartisan support. Critics say they could lead to higher costs, lower property values

Lee Greenwood, a Boston-based lobbyist for Associa, a nationwide HOA management group, intimated that his company would oppose further attempts at regulation.

“Typically a one-size-fits-all approach is going to be a hard way to regulate all these communities,” he told the committee — which is working on a report outlining possible reforms for the legislature to embrace that’s due in March, ahead of the 2024 legislative session starting in April.

Attorney General Josh Stein’s office receives, on average, more than 100 complaints a year about homeowners associations, said Daniel Mosteller, a deputy general counsel for the North Carolina Department of Justice. And while they track all those complaints, he said, Stein’s office largely has its hands tied because of a North Carolina Court of Appeals ruling that made HOAs exempt from the state’s consumer protection rules.

“We understand and appreciate that many homeowners are frustrated with their HOAs,” Mosteller said. “And we are grateful for the committee’s efforts to address these frustrations.”

He highlighted two areas that Stein’s office would support: Stronger protections against foreclosures by HOAs, and pro-transparency rules that would allow people easier access to HOA contracts and other documents.

Harmony Taylor, a Charlotte lawyer who works with the HOA lobbying group Community Association Institute, said Wednesday the group could support some pro-transparency changes.

When it comes to foreclosures, the state courts system gives homeowners limited protections: If a foreclosure effort goes through superior court, then a mediation between the homeowners and the HOA is required before it can go to trial, said Carr McLamb, a lobbyist for the state courts system. But HOAs don’t always have to go through superior court to foreclose on a home, and thus can get around those rules in certain circumstances.

When homeowners try to force mediation in those other circumstances, said Janice Almond of the Mediation Network of North Carolina, her group’s data shows that HOAs sometimes refuse to do mediation, or say they will but then never show up. State law doesn’t require them to, so they’re within their rights to not cooperate.

State lawmakers propose more rules, oversight for HOAs

Many HOAs are run by management companies or the neighborhood developer. If any of the people involved are licensed real estate brokers and are found to have engaged in misconduct, they can potentially lose their real estate license, said Miriam Baer, executive director of the North Carolina Real Estate Commission. But she noted that her board has no power to order any sort of resolution to fix past misdeeds; they can only stop people from being licensed to work in the future.

Sue Hodgin, a Southport resident, was one of several people at the legislature asking for more HOA regulations. She thinks many problems stem from HOAs that are run by big corporations rather than regular people in the neighborhood, which used to be more common.

“Rather than working with the homeowners, HOAs often work against the owners,” she told lawmakers. “Big, corporate management of HOAs removes the personal touch.”