North Carolina HOAs could face new hurdles to foreclosures

North Carolina homeowners’ associations could soon face new hurdles to approving larger budgets and seizing property as a means to enforce their rules.

The House Select Committee on Homeowners’ Associations have been meeting this year to address voter claims that HOAs have abused their power in the state. Committee members have welcomed input from homeowners as well as HOA representatives.

The committee is expected to publish a list of recommended changes to HOA-related laws in March, and then introduce their ideas as legislation in April. Committee members are still in the process of finalizing their recommendations, but on Tuesday they offered tentative support for several proposals.

“The purpose of today’s meeting is to review the findings and recommendations we’ve accumulated so far,” state Rep. Frank Iler, R-Brunswick, told committee members.

Iler co-chairs the group with state Rep. Ya Liu, D-Wake. Liu, of Cary, proposed a bill last year to stop HOAs from foreclosing on people’s homes over just a few dollars in unpaid fines or fees. Her bill passed the House of Representatives unanimously but was almost entirely gutted and rewritten by the state Senate, and ultimately went nowhere.

“Today, this is planting the seeds of what may happen in session,” Iler said.

A pair of proposals, if enacted into law, would slow the foreclosure process significantly. Under one proposal, HOAs would be required to enter mediation with homeowners before filing a civil action.

Another proposal would limit HOAs' ability to foreclose on properties of members with unpaid dues or fees. HOAs would be prohibited from foreclosing on a house to enforce a lien for unpaid assessments unless all of the following conditions are met:

• The amount of the lien is equal to or greater than six months of assessments or $2,500, whichever is less.
• The association offered the owner a reasonable opportunity to cure the default by making payments under an installment schedule.
• The owner either didn't accept the offered repayment plan or failed to make payments as required under the plan.

Committee members also want to ensure that big increases in HOA dues don’t catch homeowners by surprise.

Many HOAs empower their boards to raise dues, often as part of the annual budget. Another committee proposal would give homeowners more control over those due hikes. Under the preliminary recommendations: If an HOA wants to pass a budget that would raise dues by more than 10%, it would need a majority of all owners to approve it. And if an HOA wants to raise dues outside of the budget process, it would need a majority of owners to approve hikes of more than 5%.

Additionally, committee members hope to provide more clear direction for HOAs receiving records requests. Under a draft proposal, HOAs wouldn’t be required to produce records that are three years old, but would need to fulfill an HOA member’s valid request within 30 days.

No HOA representatives spoke at Tuesday's meeting.

Community Association Institute of North Carolina, a lobbying group for HOA board members and management companies, has previously argued that many concerns about HOA powers could be addressed under existing laws. “We do feel very strongly that there are certain elements of homeowner disputes that can be resolved by better education for board members and homeowners,” Weldon Jones, a spokesman for the group, told the committee last month.

Jones didn't immediately respond to a request for comment Tuesday.