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Association Answers

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Can N.C. HOAs charge interest on late payments?

By Michael Hunter By Michael Hunter
Michael Hunter
Charlotte attorney Michael Hunter focuses on community and condominium association law for the firm of Horack Talley. E-mail questions.

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Q: I am a homeowners’ association manager. I regularly encounter board members who assume they are entitled to a “lame duck” period. Many directors feel that although the elections are held in the fall, their term doesn’t expire until Dec. 31. Could you clarify?

Unless the HOA’s bylaws provide for a delay between the dates a new director is elected and when he takes office, there is no “lame duck” period.

The bylaws generally state how long each director’s term is. If the term is two years, then it will run for two years from the date of his election, or until his successor is elected.

The North Carolina Nonprofit Corporation Act does not provide for any period that a director may remain in office after his successor is elected. HOA directors need not be “sworn into office” like many government officials. So their terms begin immediately upon certification of the election results by the corporation’s secretary, unless there is a specific provision in the HOA’s bylaws that provides for a transition period.

On a related issue: If a director resigns and the remaining board members appoint someone to fill the vacancy, the newly appointed board member generally holds office only until the next election.

He does not serve the full remaining term of the position filled if that term originally extended beyond the next election unless the bylaws explicitly provide that the replacement director will serve the full remaining term of the director he replaced.

Interest on late assessments

Q: I am a director for our HOA in western North Carolina. We have three lot owners who have been in arrears for a number of years with the annual HOA dues. The past boards have been filing liens against these properties and have been including interest and late fees. Are we allowed to charge interest and late fees even though there is no such provision in our covenants or bylaws? Does the North Carolina Planned Community Act (PCA) cover us even though we have not adopted the whole PCA into our covenants?

First, if your HOA was created on or after Jan. 1, 1999, and contains more than 20 lots, it is automatically covered by the PCA. Even if your HOA was created prior to 1999, there are certain provisions that are “retroactive” and do apply.

One of the retroactive provisions allows the HOA to charge late fees. It reads: “Unless the articles of incorporation or the declaration expressly provides to the contrary, the association may… impose reasonable charges for late payment of assessments, not to exceed the greater of twenty dollars ($20.00) per month or ten percent (10%) of any assessment installment unpaid and, after notice and an opportunity to be heard, suspend privileges or services provided by the association (except rights of access to lots) during any period that assessments or other amounts due and owing to the association remain unpaid for a period of 30 days or longer.”

Thus, unless your Declaration of Covenants, Conditions and Restrictions (CCRs) or your HOA’s articles of incorporation specifically prohibit late fees, you can charge them within the limits dictated by the law cited above.

However, there is no similar provision in the PCA for interest on unpaid assessments, so unless your HOA’s governing documents allow the HOA to charge interest, it is not entitled to do so.

Charlotte attorney Michael Hunter represents community and condominium associations for the firm of Horack Talley. Email questions to home@charlotteobserver.com. Find his blog at www.CarolinaCommonElements.com
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