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In general, homeowners’ associations for both planned communities with single family homes or town-homes and condominium developments have the right to collect assessments from owners. The amount collected and what the assessments are used for will depend on the governing documents of the association but they are typically used to maintain common elements. Due to the fact that condominium developments maintain a significant amount of property included in the common elements their dues will often be significantly higher than those in a planned community. Some planned communities will collect assessment only for the purpose of maintaining  storm water ponds while others have numerous amenities such as a clubhouse or swimming pool. The more the community offers, the higher the assessments will be.

There are several ways a homeowners association can collect assessments from owners. For most communities, the collection of assessments is governed by either the Planned Community Act (N.C. General Statute § 47F) or the Condominium Act (N.C. General Statute § 47C) in addition to the governing documents such as the recorded restrictive covenants and the bylaws. The association can collect the dues by either filing a claim of lien and then foreclosing on that claim of lien or filing a lawsuit against the owner personally. N.C. General Statute 47F/C-3-116 governs the specific requirements:

N.C. Gen. Stat. § 47C-3-116 (Condominiums)

N.C. Gen. Stat. § 47F-3-116 (Planned Communities)

A claim of lien is filed with the county clerk of court and is public record. It is technically an action against the property, not the owner personally. In the event the owner tries to sell the property, the lien will be found in a title  search and must be paid before the property can be sold. It may also affect the owner’s ability to refinance. Prior to filing the claim of lien, the association must send notice of the intent to file the lien and collect attorney fees, an account statement, and notice of the right to contact an association representative regarding a payment plan. The notice need only be sent by first class mail. The owner will be given a minimum of fifteen (15) days to pay the debt in full without incurring attorney fees. In addition the owner can contact the designated association representative to propose a payment plan but the  association has no obligation to accept.

In the event the owner does not pay the assessments owed, the association can file an action to foreclose on the claim of lien. This is the same process a bank uses to foreclose on a property when the owner does not pay  heir mortgage. In order for an association to foreclose on a claim of lien North Carolina statutes require the assessments owed be delinquent for at least ninety (90) days and the board of directors of the association vote to proceed with foreclosure.

The association can also file a civil action against the delinquent owner. This involves filing a lawsuit and suing the owner personally for the amount owed. The suit can be brought in small  claims court, district court, or superior court depending on the amount owed. Many counties, including New Hanover and Pender, have mandatory arbitration for lawsuits involving an amount less than $15,000. If the owner files an answer, the case will be heard initially in front of an arbitrator instead of a judge. The arbitration hearing is less formal than a trial in front of a judge. If the association is successful in winning the suit, whether through a judge or an arbitrator, a  judgment for money owed will be entered against the owner. The judgment is public record, can affect the owner’s credit rating, and can be transferred to other counties or states. The judgment is a lien against not only the property located in the neighborhood with the association but also the homeowner’s other property located wherever the judgment has been filed. Ultimately the judgment can be sent to the sheriff who will then search for property that can be seized and sold to satisfy the judgment.

Ultimately most matters do not result in the delinquent owner losing property to pay assessments. It is beneficial to both the association and the delinquent owner to work out payments in some manner. Most importantly, the  owner should respond early in the process. It is much more difficult to come to a mutually agreeable arrangement when the owner waits until the property is being sold on the courthouse steps to come forward.

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