Q: A small group of homeowners in our HOA is proposing to build a tennis court on community property. In exchange, they will charge other members to play for a certain number of years, after which use of the court will become free to all members and the HOA will be responsible for the maintenance. Is this legal? If so, what form of vote would be needed to take over common property?
As the saying goes, “the devil’s in the details.” It sounds like this group of owners is proposing to pay for construction of the tennis court out of their own pockets. They would recoup the cost by charging other owners to use the court, and then open the court up to all for free after a period of time, ostensibly after they have recouped the construction cost.
While I can appreciate their good intentions, this is not the proper way to go.
Common areas and amenities are typically available for use by all members of the HOA. While the HOA board can adopt reasonable rules and regulations for the use of common areas and amenities, the board cannot grant some owners the right to use the amenities and deny use to others, or allow a select group of members to charge and keep user fees from other homeowners for using HOA-owned property.
I know of at least one community that has leased its swimming pool during specific hours (usually early morning) to a private competitive swim league for practices. In return, the swim league is constructing improvements to the pool and surrounding area. While such an arrangement may slightly restrict the times that homeowners can use the pool, no homeowners are being denied use of it.
The better way to handle this would be for the HOA to pay for construction of the tennis court either through a bank loan or a special assessment, then to charge user fees to all members using the court to recoup the cost.
If the HOA’s directors (or homeowners) are opposed to a loan or special assessment, it might be acceptable for the board to enter into a license agreement with the group of homeowners (who should form a limited-liability company, or LLC, for this purpose) to construct and maintain the tennis court.
The LLC should charge uniform fees to all who use the court, including the homeowners who formed and invested in the LLC. However, because the court is a common area, the HOA should retain some control over the court by adopting rules and regulations for its use, and by retaining the right to terminate the license agreement after a fixed period of time or upon the occurrence of certain events (such as the LLC recovering the cost of construction through the user fees).
Any time an HOA contracts with a director or homeowner, or an LLC which has directors or homeowners as its members, there is the potential for conflicts of interest to arise, so I recommend that you consult with an attorney and fully disclose all details of any agreement to the members.
Charlotte attorney Michael Hunter represents community and condominium associations for the firm of Horack Talley. Email questions to firstname.lastname@example.org.
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