Under the community documents (declarations/covenants, bylaws, rules and regulations) and under the planned community and condominium acts in North Carolina, an HOA has certain obligations, for example, maintaining or repairing the common elements of the association. Unless it specifically sets forth in the declarations how late the pool can stay open or how many times a year the crape myrtles are pruned, the board of directors makes those day to day management decisions. If homeowner has a problem with the management of the common areas or other obligations like those, does he have standing to file a legal complaint against the HOA and the board and force them to perform?
Theoretically, they do, but the way the law is set up, the facts need to be so extreme, that it is extremely rare. Boards of an HOA have the advantage of the same business judgment rule that other corporations do. Homeowners don’t really consider that they are part of a corporation when they own a home in a planned community with a homeowners association, but they are. The corporate business judgment rule gives a legal presumption to a Board. In any legal action against a Board for failure to perform its duties, a court initially is required to presume, without any additional evidence, that the Board acted due care and on an informed basis for any decision they made. The court further presumes that the Board acted with good faith that the decision was the best for the association, even if later the Board is found to be wrong. The complaining homeowner is the one who must produce evidence showing this was not the case. All the Board has to show is that there was some rational business reason for the decision. The Board doesn’t have to have made the best decision, just have any rational reason for making that decision.
Usually the best way to effect changes in the management of a Board is to run for the Board and elect directors with the change you want. This usually can be done at an annual meeting, or at a special meeting called to remove the present Board.
--Bradley A. Coxe is a practicing attorney in Wilmington, NC with Hodges & Coxe PC who specializes in Personal Injury, Medical Malpractice, Homeowner's Associations, Contract and Real Estate disputes and all forms of Civil Litigation. Please contact him at (910) 772-1678.