Homeowners associations (HOAs) play a significant role in managing communities, but many homeowners don’t fully understand the legal and financial implications of living in an HOA-governed property. Whether you're a current homeowner, a board member, or considering buying property within an HOA, it’s essential to know your rights and responsibilities.

This guide covers key aspects of HOA governance, from legal frameworks and financial obligations to dispute resolution and board accountability.

Common Issues in HOAs

HOAs are facing increasing legal challenges, with disputes often arising over:

• Dues and assessments – Homeowners sometimes challenge the fairness or legality of fee increases.
• Asset protection and maintenance – Issues can occur when boards fail to maintain common areas or mismanage funds.
• Litigation – Homeowners and HOAs may end up in legal battles over rule enforcement, voting rights, or financial disputes.

Understanding how an HOA operates can help property owners avoid costly legal entanglements.

Legal Framework Governing HOAs

HOAs are governed by a mix of state and federal laws, as well as their own governing documents. In North Carolina, for example, the key laws include:

• The North Carolina Condominium Act
• The Planned Community Act
• The Non-Profit Corporation Act

These laws regulate financial management, governance structures, and homeowner rights. Because of their complexity, homeowners should seek legal advice when reviewing HOA rules or disputing board decisions.

Transitioning from Developer to Homeowner Control

A critical phase in an HOA’s lifecycle is the transition of control from the developer to the homeowners. During this process:

• Homeowners take over financial and administrative responsibilities.
• The board must ensure the developer has met all obligations.
• Legal counsel is often necessary to protect homeowners from potential financial burdens left by the developer.

Being proactive during this transition ensures long-term stability and accountability.

Why Homeowners Should Stay Involved in Their HOA

Homeowners often assume their HOA board will act in their best interest, but lack of engagement can lead to poor management and unfair decisions. Active participation in meetings and elections allows homeowners to:

• Influence decisions that affect property values and community rules.
• Hold the board accountable for financial transparency.
• Advocate for necessary changes in the community’s governing documents.

Ignoring HOA affairs can lead to costly assessments, unwanted rule changes, or mismanagement of community funds.

The Role of Annual Meetings and Communication

HOAs are typically required to hold annual meetings, providing homeowners the opportunity to:

• Review financial reports.
• Ask questions about rule enforcement.
• Discuss upcoming community projects.

Boards should communicate openly with homeowners, ensuring transparency in budgeting, policy changes, and major decisions.

Amending HOA Covenants: What Homeowners Need to Know

HOA covenants and rules aren’t set in stone—they can be amended. However, homeowners may face challenges when:

• The developer retains control over amendments.
• Rule changes are passed without homeowner input.
• The process for amending covenants is unclear or unfair.

Before purchasing a home in an HOA community, review the governing documents to understand how and when rules can be changed.

Legal Recourse for Homeowners

If homeowners believe their board is overstepping its authority or acting unfairly, they have several legal options:

• Requesting mediation to resolve disputes without litigation.
• Filing complaints with state regulatory bodies if the HOA violates state laws.
• Pursuing a derivative lawsuit if board members are mismanaging funds or making decisions that harm the community.

Taking legal action should be a last resort, but it’s important to know that homeowners have rights when dealing with an uncooperative or negligent HOA board.

Financial Responsibilities and Legal Fees

Legal disputes with an HOA can be expensive, and homeowners may need to cover their own attorney’s fees. However, some HOA covenants allow for fee recovery if the homeowner prevails in court. Before initiating legal action, check your HOA documents and consult with a lawyer to weigh the financial risks.

Board Member Liability and Legal Protections

HOA board members are expected to act in the best interest of the community, but they can be held personally liable if they:

• Engage in fraud or embezzlement.
• Make reckless decisions that harm homeowners financially.
• Fail to uphold fiduciary duties.

While the business judgment rule provides some legal protection for board members acting in good faith, it does not shield them from gross negligence or intentional misconduct.

The Importance of Reviewing HOA Documents Before Buying

Many homebuyers overlook the governing documents of an HOA before purchasing property, only to later discover restrictive rules or unexpected financial obligations. Before buying, always review:

• Covenants, Conditions, and Restrictions (CC&Rs) – These outline the community’s rules and restrictions.
• Bylaws – These detail how the HOA operates, including voting rights and board responsibilities.
• Financial statements – Reviewing the HOA’s budget can reveal potential red flags, such as mismanagement or pending lawsuits.

Seeking legal advice before purchasing can help avoid future conflicts with the HOA.

Final Thoughts

Understanding HOA documents and staying engaged in community governance is essential for homeowners. Whether you’re dealing with fee disputes, rule changes, or board mismanagement, knowing your rights and responsibilities can help you protect your property and financial interests.

If you’re considering buying a home in an HOA community, do your research, review all documents carefully, and seek legal counsel when necessary. Being proactive today can prevent costly disputes down the road.