Chapter 16 ENFORCEMENT

• Jurisdiction: North Carolina

16 ENFORCEMENT

§ 16.01. In General

Restrictive covenants are meaningless without the ability to enforce them. Use restrictions and architectural control provisions both are an important part of preserving the plan and scheme of development and maintaining the character of the community that all owner's bought into when they purchased their property. As such, it is important for either the association or owners to be able to enforce them. Enforcement is generally the process whereby the association or an owner gets injunctive relief from the courts or monetary fines from the owner for violating the covenants. With respect to the latter, the manner in which planned communities and condominiums can enforce their covenants is regulated by statute in North Carolina. With respect to the former, the rules related to injunctive relief are a product of years of case law in North Carolina. Associations have been successful in enforcing covenants in a variety of circumstances, including the collection of assessments, enforcement of use restrictions and architectural control provisions, as well as obtaining injunctive relief for various owner violations.¹

As indicated in Chapter 7, enforcing the covenants is one of the responsibilities of the association; however, this responsibility is not absolute.² The manner in which the association enforces the covenants is almost as important as the question of whether the association enforces the covenants in the first place. There are generally two theories on enforcement: complaint-driven enforcement and inspection-driven enforcement. With complaint-driven enforcement, the board generally enforces the covenants when violations are brought to its attention. With inspection-driven enforcement, the board or a property manager periodically canvasses the neighborhood to determine whether there are any overt violations. Both, to a degree, are reasonable ways of determining whether to enforce covenants.³ As a general rule, in North Carolina, a developer is free to craft whatever enforcement mechanisms he wishes into the declaration.⁴ While these provisions in the declaration may not specify how the board identifies violations, they may very well speak to the procedures for enforcing them, which procedures must be followed. Commentators have advocated for the legislature to insert various alternative dispute procedures in the PCA and the Condominium Act prior to litigation, and finally, in 2013, the legislature acted.⁵ Even with such legislation, to the extent the association is required to participate in such alternative dispute procedures prior to filing suit, this is strictly a product of the association's declaration and not a statutory requirement.⁶

Assuming the association has decided to enforce, the association must then identify the manner it will seek to enforce the covenant. In addition to injunctive relief, self-help is also normally an available remedy for the association to abate a condition on a lot that is in violation of recorded covenants. However, while self-help may be appropriate in some circumstances, it may be inappropriate in others. Injunctive relief is the main remedy available to associations and increasingly fines have become an import part of the association's enforcement arsenal. Collectively, fines, suspension of membership privileges, injunctive relief and self-help provide sufficient means for an association to enforce its covenants and preserve the plan and scheme of development of the community. With the exception of fines, suspension of membership privileges and self-help, an association usually need not give notice to an owner before commencing litigation to seek enforcement of covenants.⁷ However, common courtesy and practice requires the association to notify the owner before resorting to the courts for injunctive relief. How much time the association will give the owner to respond will depend on the urgency of the situation. In situations where the foundation for a home or addition to a home is being erected, that time period will generally be a short one, justifying, in some cases, a temporary restraining order by the association. In other cases, patience is a virtue, but at some point, if the association has made the decision to enforce, it must take the often uncomfortable next steps to bring about compliance.

§ 16.02. Who May Enforce

It is a misconception that the association is the only entity capable of enforcing the restrictive covenants of a particular community. In the vast majority of cases, this perception is false. Instead, most covenants allow both an owner and the association the right to enforce the covenants. This makes sense, because covenants have been described as a "contract" in which the owners are a party. In other words, when purchasing their property, the owners contract with other owners to use their property subject to the restrictions and limitations in the recorded covenants.⁸ Even if the covenants do not specifically grant owners the right to enforce covenants, owners have the power to enforce most restrictions, with the exception of architectural committee decisions.⁹

Most modern-day covenants specifically provide that an association has standing to enforce the covenants. Developers have made this clear in covenants because of older cases where the Court of Appeals held that there is no automatic right for an association to bring an action to enforce the covenants independent of the powers granted in the declaration. In Beech Mountain Property Owners' Ass'n v. Current, 35 N.C. App. 135, 240 S.E.2d 503 (1978), for instance, an association brought suit to collect assessments from an owner. The trial court dismissed the case and the Court of Appeals affirmed, holding the association had no standing to bring the action. The reason for the decision was because the covenants stated,

In the event of a violation or breach of any of these restrictions by any property owner, or agent, or agent of such owner, the owners of lots in the neighborhood or subdivision, or any of them jointly or severally, shall have the right to proceed at law or in equity to compel a compliance to the terms hereof or to prevent the violation or breach in any event.¹⁰

Since the association owned no property in the subdivision, the association was not entitled to enforce the covenants. Today, the pitfalls that plagued the association in the Beech Mountain case are avoided in two ways. First, most associations today own property — the common areas.¹¹ This is oftentimes encouraged, if not required, by various local North Carolina ordinances.¹² Second, most covenants today expressly grant the right to an association to enforce the covenants. Based on modern real estate practice, most associations have standing to enforce the covenants.

In short, both owners and community associations have concurrent jurisdiction to enforce covenants. And, even when owners sue to enforce covenants, their settlement or dismissal of their claims would not prejudice the association's right to pursue the claims on behalf of the corporation.¹³ A separate, but related question is whether the association has the duty to enforce the covenants, which has also been addressed by our intermediate appellate court.¹⁴

Section 1 - Enforcement Example 16-1

Each Owner and Occupant shall comply strictly with the Bylaws, the rules and regulations, the use restrictions, as they may be lawfully amended or modified from time to time, and with the covenants, conditions, and restrictions set forth in this Declaration and in the deed to such Owner's Lot, if any. The Board of Directors may impose fines or other sanctions, which shall be collected as provided herein for the collection of assessments. Failure to comply with this Declaration, the Bylaws, or any applicable rules and regulations shall be grounds for an action to recover sums due for damages or injunctive relief, or both, maintainable by the Association, or, by an Owner. In any such action for damages or injunctive relief brought by the Association, the Association shall be entitled to recover reasonable attorney's fees actually incurred and court costs incurred by the Association in bringing such action. Failure by the Association or any Owner to enforce any of the foregoing shall in no event be deemed a waiver of the right to do so thereafter. The Association shall also have the right to suspend the voting rights of a Lot Owner for any period during which any assessment against such Owner's Lot remains unpaid; and, for an infraction of the Declaration, the Bylaws or any rules and regulations applicable to such Owner for a period no longer than 60 days after the infraction has been corrected.

§ 16.02.01. Enforcement of Architectural Committee Decisions

While it is common practice for owners to have the power to enforce covenants, this right is not without limitation in North Carolina. For example, owners alone cannot sue to enforce an architectural committee's decisions in North Carolina. Instead, the Court of Appeals has held that this is the province of the architectural committee itself, and all members of the committee must be named as individual plaintiffs in a case to enforce the committee's decision.¹⁵ In McCraw v. Aux, 696 S.E.2d 739 (N.C. App. 2010), review dismissed, 364 N.C. 617, 705 S.E.2d 361 (2010), and review denied, 364 N.C. 617, 705 S.E.2d 362 (2010), an owner erected a green metal roof after the metal roof was rejected by the association's architectural committee. The association refused to enforce the decision, so a group of homeowners enforced the violation. In addition to giving the owners the right to enforce the covenants, the covenants also provided:

There shall be an Architectural Control Committee that shall have full responsibility for regulating any requirement of these restrictive covenants . . . no . . . structure shall be erected, altered, placed or allowed to remain on any premises in the subdivision

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