Ward and Smith's Community Associations attorneys have successfully defended a Wilmington area Community Association in the North Carolina Court of Appeals.
On April 21, 2020, the North Carolina Court of Appeals issued its opinion in Martin v. The Landfall Council of Associations, Inc., holding that the Martins violated the governing documents of their Property Owners Association ("POA") by replacing the majority of the grass in their yard with artificial turf without receiving the approval of the Architectural Review Committee ("ARC") of the POA. The Martins argued that extensive shade covering their lawn and the existence of ground pearl made growing grass impossible, causing sod installation to fail six times since 2010. The Martins also argued that artificial turf fit the definition of "sod," which was required by the POA governing documents in the grassy areas of all yards.
In upholding the POA's determination that a violation had occurred, the Court of Appeals cited the language in the governing documents:
Deed restrictions require that the [Architectural Review Committee approves] in advance . . . landscaping and all additions/alterations affecting the outer appearance of a building or a lot. This includes but is not limited to: home landscape renovations . . . Final approval by the ARC must be received in writing prior to the start of any clearing, grading, landscaping or construction.
The Martins did not obtain ARC approval before installation of the artificial turf and, in fact, were denied approval by the ARC before doing so. As a result of the unapproved landscaping, the POA conducted a hearing and began imposing fines of $100 per day in accordance with the provisions of Chapter 47F of the North Carolina General Statutes.
The Martins thereafter brought a lawsuit against the POA seeking a declaration from the Court that the artificial turf met the definition of "sod" as prescribed by the governing documents and that the ARC and the POA acted unreasonably, arbitrarily, capriciously, and with complete absence of good faith in denying approval for the artificial turf and imposing fines. The New Hanover County Trial Court ruled in favor of the POA, and the Martins appealed.
The North Carolina Court of Appeals ruled that the governing documents were clear and unambiguous and required ARC approval before any alterations were made that affected the outward appearance of a lot. The Court stated that the definition of "sod" was irrelevant because the Martins violated the governing documents, "not by installing artificial turf instead of natural sod, but by altering their landscaping without prior approval of the ARC."
The Court reviewed and distinguished the previous North Carolina appellate decision, Hyde v. Chesney Glen Homeowners Ass'n, Inc., in which it was concluded that the ARC in that case unreasonably withheld approval of an above‑ground swimming pool because the ARC did not "make concrete suggestions to the landowners about what was needed" for compliance, did not "communicate to the landowners legitimate reasons" for the ARC's decision, and denied the application "for an invalid reason," by "informing the [landowner] that above‑ground swimming pools could not be approved when in fact the relevant governing documents provided "specific design guidelines for above‑ground pools." The Court of Appeals held that the Landfall POA complied in all respects with the above requirements set forth in the Hyde v. Chesney Glen Homeowners Ass'n, Inc. case by suggesting to the Martins in the ARC's approval denial letter that a landscape plan could be developed that included removal and thinning of some of the trees and requesting that they submit a revised landscape plan.
The Court of Appeals also held that the New Hanover County Trial Court's entry of a Permanent Injunction requiring the Martins to remove the artificial turf, requiring them to restore their yard to the condition it was in prior to installation of the turf, and prohibiting them from installing artificial turf again without prior ARC approval, was an appropriate Order for the Court to enter. The Court of Appeals remanded the case to the New Hanover County Trial Court for further proceedings to determine the amount of fines that should be levied against the Martins and to determine whether judicial foreclosure for collection of the fines could proceed.
The Court of Appeals also addressed attorneys' fees. The New Hanover County Trial Court made the determination that the hours spent and the rates charged by the POA's law firm were reasonable. However, the Trial Court substantially reduced the attorneys' fees award from the amount submitted by the POA attorneys. The Court of Appeals made clear that the attorneys' fees provisions of Chapter 47F of the North Carolina General Statues "do not afford the trial court any discretion with regard to the award of attorneys' fees in such actions beyond the discretion to determine whether the rates and hours were reasonable." Thus, before a trial judge can award a lesser amount than what has been actually incurred by a POA, the trial judge has to conclude that either the rates charged or the hours expended, or both, were unreasonable.
Takeaways from this case include:
- Architectural and landscaping requirements must be followed, and ARC approval obtained if the governing documents are clear and the ARC/POA acts in a reasonable manner.
- When denying approval, the ARC should provide a legitimate reason for the denial, and, where possible, provide concrete suggestions about what is needed for compliance.
- Judges are required to award attorneys' fees, and their ability to reduce the fees incurred by the POA is severely limited.
- Judges have the authority to issue an injunction prohibiting violation of governing documents and requiring compliance in addition to imposing fines of up to $100 per day.
In the event your Property Owners Association, Homeowners Association (HOA), Condominium Association, or Community Association is in need of legal guidance with regard to an architectural review dispute or otherwise, contact our Community Associations Practice Group.
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