Recent Cases Cause Uncertainly Regarding Residential Restrictions and the N.C. Real Property Marketable Title Act

You may have heard about the recent pair of cases decided by the North Carolina Court of Appeals involving the North Carolina Real Property Marketable Title Act, which is codified at NCGS Chapter 47B.  The two decisions are C Investments 2, LLC v. Auger et al., and C.E. Williams III et al. v. Reardon et al. These decisions will have a significan adverse impact to North Carolina HOAs and condominiums if allowed to stand - but we don't believe that they will be allowed to stand.

The Marketable Title Act was passed almost 50 years ago and was designed to extinguish certain title flaws or encumbrances, if they had not appeared in any recorded documents within a given chain of title within the past 30 years.  The point was to clarify title and remove minor, old or forgotten matters of title if they had not reoccurred, been rerecorded, or been litigated within the past 30 years of when the title was being examined.  The Marketable Title Act has a number of exceptions for things which are not extinguished even though they may be more than 30 years old, including an exception for "covenants applicable to a general or uniform scheme of development which restrict the property to residential use only, provided said covenants are otherwise enforceable."  This exception had always been interpreted by real property and homeowners association lawyers to mean that restrictive covenants for residential subdivisions were excepted from the Marketable Title Act and therefore remain in place in perpetuity, as most covenants specifically provide, even if they are older than 30 years and even if they don't appear in a given chain of title within the past 30 years.

The Court of Appeals unfortunately ruled contrary to the longstanding common opinion and practice, interpreting the above-quoted provision to mean that residential restrictive covenants which have not appeared in a given chain of title within the past 30 years are completely extinguished, other than any provision specifically restricting the property to residential use only.  While the Court of Appeals took the position that this was a plain reading of the plain words of the statute, that reading if allowed to stand would upend every subdivision with restrictive covenants 30 years or more old and cause chaos in the chains of title of thousands of homes and residential subdivisions statewide.

For example, imagine an older subdivision with residential restrictive covenants of the typical sort, which were originally recorded more than 30 years ago.  Mr. and Ms. Jones reside on Lot 1 and have lived in their home for 31 years.  Mr. and Ms. Smith live on Lot 2 and just bought their home last year.  Based on these Court of Appeals rulings, the covenants are now extinguished on Mr. and Ms. Jones' property, other than the restriction that it can only be used for single family residential purposes.  So they can quit paying dues, maintain old junked cars on cinderblocks in their front yard, and allow their home to fall into complete disrepair.  On the other hand, what is the situation next door at the Smiths?  It depends on what the deed they received said, and what the deeds of all the other folks in the chain of title for their lot in the past 30 years said.  If the recorded restrictive covenants were mentioned in any of those deeds, then by the Court of Appeal's reasoning, they have been revived and the Smiths must comply with every provision of those restrictions.  If none of the deeds mentioned the restrictions, then they get to be scofflaws just like their neighbors the Joneses.  What if their deed said something vague like, "This deed is subject to all documents of record"?  Who knows?  The Court of Appeals doesn't tell us.  Thus, chaos.

It is a universal opinion among real property and homeowners association attorneys in the state that these decisions were wrong.  The General Assembly is currently reviewing legislation to make corrections to the Marketable Title Act that will put things back the way they have always been.  The chaos which will result if that does not happen it is a strong assurance that it will. 

Bottom line: We do not believe that this is a situation which should be of concern for North Carolina HOAs or condominiums at this time. We believe the General Assembly will remedy the matter. Of course we will be monitoring the situation and will provide further updates as they occur.

Contact us if we can provide any further information, and thank you for following the NC HOA Law Blog.

When it Rains, it May Pour on Your Homeowners Association

Do you have one of these lovely structures in your yard?

 

It seems like it rained most all of this past winter.  It rained for 4 days straight as this post was being written, and regardless of your beliefs regarding climate change, it is a fact that we in the Carolinas have had more than our fair share of rain over the last few years.

Rain, and the flow of it across the ground that we call storm water management, is probably the most common issue we face regularly as homeowners association attorneys.  I've certainly been fielding a lot of calls lately about it. 

The general rule regarding storm water is that a property owner is not liable to neighboring property owners for storm water flowing across his or her property onto their property, unless the property owner has changed the natural flow of storm water across his or her property in a way that adversely affects the neighbor by directing more water onto the neighbor's property than would otherwise naturally occur.  

Thus, in general, each homeowner in a homeowners association is responsible for storm water flow across his or her property and cannot blame his or her uphill neighbor for storm water naturally flowing downhill onto his lot, unless he can show that the neighbor made changes to his lot which are directing an unnatural amount of water onto him/her.  It is important to keep this common law concept in mind if you are having grading work done on your property or putting in an in-ground swimming pool, for example.  You must do so in a way in which manages the storm water on your own property and does not direct additional storm water onto your neighbors.

We often hear from our homeowners association clients when property owners in the neighborhood demand that the association step in to correct adverse drainage across the owner's lot.  Take a look at this awful situation:

Unfortunately in almost all cases, the homeowner's wish to make poor drainage the association’s responsibility is headed down the drain.  Unless the restrictive covenants provide otherwise, storm water pipes, drains, swales, ditches, and the like on a homeowner's lot are that homeowner's responsibility to maintain, and an individual homeowner rarely has recourse against any other parties for excessive storm water coursing across the surface of his or her lot, or for the maintenance and repair of storm water pipes installed within their lot. That bell tolls for him or her and no one else.

In general, homeowmers own their lots down to the center of the earth and up into the sky as far as the eye can see, and everything in between.  This includes any storm water pipes installed on or under the property, even though the storm water pipe was probably installed by the developer or the home builder, not the homeowner, and even though the storm water pipe may drain water from other lots, common areas, or roads of the neighborhood and not just from the homeowner's own lot.  

From the prospective of the homeowner's association, this is the correct result.  The primary purposes of a homeowner's association are to maintain property values and maintain the common elements.  It is not a police force, nor is it a public works department.  The association did not design, approve, or construct the lots or the roads, nor does it usually have the right to go upon lots to correct topography or drainage, nor does it typically have the financial resources to do so.  The homeowner must generally look to his or her own resources or confer with their neighbors to address storm water problems.  

Occasionally, storm water apparatus may be maintained by the local municipality, and if so that municipality should always be the first recourse to assist with storm water issues.  Most cities and counties have storm water engineers on staff due to the increasing requirements of the federal government under the Clean Water Act and most are more than willing to come out and meet on site to examine issues.  Occasionally, there may also be issues with storm water catch basins or drains constructed within city streets or state-maintained roads, so the city transportation department or North Carolina Department of Transportation, if a state road, are often good resources.  Remember that in North Carolina, counties do not maintain roads, so do not call your local county government with street or road related issues in most cases.

 The only instances where a homeowner's association might have liability for storm water issues are where the association owns adjacent common area.  If the association itself has made topographic changes to common area it owns and which is causing adverse drainage onto a neighbor's lots, then it of course may be liable.  And in some case, the restrictive covenants for the neighborhood specifically provide that the association is to maintain the storm water management structures throughout the neighborhood.  (This would occur more often in a commercial property owners association, or sometimes in a condominium or townhome situation – almost never in a single-family detached subdivision.) 

 If the subdivision has private roads which are maintained by the association, the same situation as described above with city or state roads might apply, so the association needs to make sure any catch basins or storm drains within its privately-maintained roads are properly maintained so that they are draining the roads as originally designed.  But again, the association did not design, approve, or construct the roads, so it generally cannot be held liable for inadequate design, but only for failing to reasonably and properly maintain those specific storm water management devices which are within its private roads, or any catch basins or similar devices it owns or maintains.  Storm water pipes, ditches, drains, and swales on individual lots generally do not fall within this area of responsibility.

Don't hesitate to contact us if we can assist your association, whether during rain or shine or sleet or dark of night!

How to Handle HOA/Condo Board Member Resignations

By Chris Gelwicks, Esq.

From time to time we receive questions regarding the resignation of directors, term expiration and what to do in the event of a mass resignation by the existing board.  The North Carolina Planning Community Act, Condominium Act, and the Non-Profit Corporation Act address certain issues with regard to directors’ terms and how to fill vacancies.  Generally, the remaining board members appoint a replacement to serve out a resigning director’s term. But what happens when directors resign and do not appoint their successors, or when there are not enough remaining directors left to appoint replacements? 

Section 55A-08-05(d) of the North Carolina Non-Profit Corporations Act provides that when the term of a director expires, that director continues to serve until his or her successor is appointed or elected and takes office.  This seems to be in contrast with Section 55A-08-07 which indicates that a director’s resignation is effective upon communication of that resignation to the board (unless the resignation sets forth another effective date).  The key difference between the two statutes are the terms “expire” and “resign”.  Normally, in either case, the remaining directors would appoint someone to fill the empty seat unless the bylaws indicate differently. The board could also choose to hold an election for the empty seat(s).

Where we run into problems is where an entire board resigns at once and no successors are appointed.  Pursuant to Section 55A-08-30, directors on boards have a duty to act in good faith, with reasonable care, and in a manner that is in the best interest of the association.  Such fiduciary duties include that directors enforce the declaration of covenants, collect assessments, and ensure that the association is run and continues to be run effectively.  It is a reasonable conclusion that if an entire board resigns at once and appoints no successors to fill vacancies, then the association cannot be effectively run.  Those directors who resigned en masse potentially subject themselves to liability by not finding and appointing replacements; those directors, by basically abandoning their posts, could be construed to have violated their fiduciary duties.

The same could also apply if so many directors resign that the board can no longer reach a quorum to make a decision on appointing replacement directors.  Keep in mind that the bylaws of your homeowners association ultimately control and can provide a different procedure than these North Carolina state statutes.  If you are reading this and are on the board of your association, you may wish to review your bylaws to determine what they say in these situations and whether changes might be necessary to provide better procedures, such as stating that even board members who resign also continue to serve until their successors take office.

The bottom line is this: Resignations, vacancies and the like are not to be taken lightly.  Directors who resign should always find a successor if at all possible and submit those names to the remaining board members.  If an entire board intends to resign – which is an extremely bad idea to begin with and should be avoided at all costs – they should do so in a manner that allows successors to be appointed and the association to continue to function.  For example, the resignations may be staged over time to allow replacements to come aboard.  And remember that, at least in North Carolina, board members whose terms expire continue to serve, and continue to have fiduciary duties to the association and the members, until their replacements take office.

Failure to appoint successors in a way that results in a dysfunctional board can result in personal liability to the resigning directors for breach of fiduciary duty.  As always, don’t hesitate to contact us to discuss strategies, procedures and potential liabilities when dealing with board matters.

Click here for another of our blog posts regarding board of directors matters.

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Failure to Hold Formal Board Votes Dooms Two Charlotte HOAs

Caselaw Update! 

The North Carolina Supreme Court, in a decision filed on March 2, 2018, REVERSED the Court of Appeals' decision discussed below. You can read the Supreme Court's decision here. As we discussed in our blog post below, which we posted on December 14, 2016, we disagreed with the Court of Appeals' reasoning, and thankfully the Supreme Court did also. The Supreme Court confirmed the longstanding rule that only members of an association can contest whether the board properly followed its own internal procedures in making the decision to bring a lawsuit - failure to follow the bylaws or other requirements cannot be used by the defendants to claim that the association did not have standing to bring the lawsuit. In this case, two Charlotte-area homeowners associations can now proceed with their lawsuit against the City of Charlotte for approving a rezoning which would allow lower-income housing next door to the two associations. Of course, our takeaway below still stands -  while it may sometimes be a pain to follow board meeting and voting procedures, a cavalier attitude can come back to bite you.  In this case, years of litigation and many tens of thousands of dollars in legal fees were wasted due to the failure to follow simple procedural steps. Don’t let that happen to your HOA.

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An unused meeting table does not do your HOA much good.

There are times in the practice of homeowners’ association law when courts make rulings with which we as attorneys disagree but where an underlying principle or best practice is affirmed.  A prime example is the N.C. Court of Appeals’ opinion of November 1, 2016 in the case of Willowmere Community Association Inc. and Nottingham Owner’s Association Inc. v. City of Charlotte and Charlotte-Mecklenburg Housing Partnership. As is generally the case whenever an HOA case reaches the North Carolina appellate courts, the HOAs lost.

The two associations filed suit to challenge the rezoning of land that was approved for the development of moderate-income multifamily housing adjacent to their single-family subdivisions.However, the Mecklenburg County Superior Court never reached the merits of the challenge, instead ruling that the HOAs did not have legal standing to bring the challenge at all.  It stated that the associations “did not have standing to bring the action because they failed to follow the requirements in their respective bylaws with regard to their decisions to initiate this litigation.”

Without “standing”, generally regarded as the plaintiff’s having suffered sufficient individualized harm from the actions of the defendant, the court system does not have jurisdiction to hear the plaintiff’s plea at all.  Standing is designed to ensure that cases are grounded in actual, specific disputes and deter the filing of cases based upon theoretical or conjectural wrongs. Since lack of standing “bars the door to the courthouse” for the plaintiff and can prevent valid legal claims from being adjudicated, courts typically use great care in throwing a case out due to lack of standing. 

In this case, the N.C. Court of Appeals agreed with the trial court, focusing on the failure of the two HOAs’ boards of directors to follow proper procedures in making the decision to sue. Both boards had determined to sue via email or telephone discussions, without formal board meetings or even written and signed consents to action without a meeting by the board members. 

Willowmere HOA argued that its board unanimously authorized the lawsuit through a chain of emails, and that this satisfied the N.C. Nonprofit Corporation Act which allows a board to take action without a meeting through “unanimous consent”, but the Court ruled that even if this were true, the Willowmere bylaws also required “an explanation of the action taken to be posted at a prominent place within the Common Area within three (3) days after the written consents of all the Board members have been obtained.”  Unfortunately for Willowmere, there was no evidence showing that an explanation of the action was posted in the Common Area. 

The Nottingham HOA board did not call a formal board meeting to discuss filing a lawsuit and did not act via unanimous written consent.  Rather, a few of the board members conducted a telephone conversation with the management company and did not refer to the basic requirements of the bylaws regarding the power to initiate a lawsuit.  They did not deliberate and make a decision in a formal meeting or unanimously in writing.

The Superior Court judge inquired into the standing issue on his own motion – neither of the defendants had argued that the HOAs lacked standing to bring the challenge.  But North and South Carolina courts are generally disposed to rule against HOAs, and in this case the failure to follow the basic requirements in the bylaws and statutes for conducting business gave the Superior Court all the ammunition it needed to find that neither association had standing to bring the lawsuit, and the Court of Appeals agreed. 

We question the judges’ reasoning on the standing issue. It would appear that the HOAs could have suffered significant and specific damages had an improper rezoning been approved adjacent to them, which should have been enough to confer standing.  A failure to follow corporate formalities would typically be something for which an association member could sue or take other action to attempt to rescind the decision, but it has not to our knowledge prior to this case been used to actually deny an association its right to be heard in a court of law.

Whether or not a non-HOA member may challenge standing based on the internal procedures of the HOA since the non-member is not subject to those procedures, we can agree that an HOA member may make such challenge to board action if the board does not follow the proper procedures, so certainly the HOA boards here were at fault to some extent. 

Bottom line:  Don’t get in a hurry when making decisions. HOA boards must follow the requirements of both the governing documents and the statutes when taking action, and avoid taking action by email in any significant matter.  Remember, in general, actions taken without a meeting, like via email, must be unanimous.  (Meetings can be held over the phone provided all board members can clearly hear one another.)  Calling a meeting is almost always the best option for making decisions concerning serious matters.  The use of the unanimous written consent procedure is a useful tool if a board is simply unable to meet, but boards should take great care in preserving the emails documenting the unanimous agreement.  We also recommend that, at the next board meeting following a decision made without a meeting, all items approved via unanimous written consent be formally ratified with such ratification reflected in the written minutes or via formal written resolution.  Finally, adherence to additional procedures such as the posting of an explanation, as with Willowmere, is required to ensure that the action will withstand a subsequent challenge on procedural grounds.

While it may sometimes be a pain to follow these procedures, a cavalier attitude can come back to bite your board.  In this case, years of litigation and many tens of thousands of dollars in legal fees, not to mention the opportunity to challenge an unwanted development next door, were wasted due to the failure to follow simple procedural steps. Don’t let that happen to your HOA.

Please give us a call or drop us an email if our HOA law team can assist your HOA or management company with your corporate procedures, or if we can be of assistance in any other way regarding legal issues facing your community. Please be aware that we represent HOAs only – we do not represent homeowners in disputes against their HOAs. We appreciate your reading our HOA law blog and encourage you to share it with others who may be interested. Thank you!

Your Homeowners Association’s Governing Documents: Please Don’t Call Them Bylaws!

Our HOA Ninjas here at Moretz & Skufca have a little pet peeve when it comes to terminology: folks who refer to the governing documents for their community association as “the bylaws.”  So (to borrow from Shakespeare) what’s in a name?  Turns out that when it comes to homeowners association documents, names mean a lot.  There are articles, bylaws, declarations, CCRs, deed restrictions, board resolutions, policies and procedures, and rules and regulations, among other animals.  Help us stop the malapropism trend by understanding these different documents and how they relate to one another.  (Note that while we use North Carolina nomenclature here, these concepts apply to community associations in virtually every state.)

Articles of Incorporation

An HOA’s articles of incorporation, also known as its “charter”, legally create the corporation when filed with the Secretary of State’s office, and confer upon it all of its legal authority, as well as its non-profit status.  Think of the articles of incorporation as your community association’s Declaration of Independence – the document that creates a new entity out of thin air.  Since a corporation has no legal authority to act in any manner not authorized by its articles of incorporation, the articles are typically very broadly-worded and non-specific in order to avoid inadvertently limiting the corporation’s authority to do business.  Articles for homeowners associations must limit membership to lot owners only and include language specified by the IRS in order to qualify as a non-profit.  Your HOA will almost never deal with its articles once they are filed. 

Bylaws

The bylaws establish a corporation’s internal governance, voting and administrative procedures.  These include details about membership and board meetings, board elections, descriptions of the officers, how they are appointed and their authorities, and other similar matters.  Think of your homeowners association's bylaws as its Constitution – the rules of how the people will elect their representatives and what those representatives can do.  Bylaws need not be filed with the Secretary of State or recorded with the local register of deeds.  (While many HOA declarations have the bylaws attached to them when they are recorded with the register of deeds, this is not legally required.)  You will typically refer to your homeowners association's bylaws only when there are questions regarding elections, special assessments or how other important matters may be voted upon by the membership and/or the board.  Generally, bylaws are fairly boilerplate and should not require a lot of thought or attention by your board or your members unless there are major issues facing your HOA.

This is where our pet peeve comes in.  We often hear folks refer to their declaration of restrictive covenants, or to all of their homeowners association’s governing documents, as “the bylaws” (cringe). Please don’t do this!  The bylaws are a specific document, different from the other documents governing your HOA.  If you need to refer to them all together, the proper term is “governing documents.”  Use the word “bylaws” only when referring to the bylaws themselves.

The most important document for your homeowners association is the declaration of covenants, conditions and restrictions, or, for condominiums, the declaration of condominium (sometimes called a "master deed" in South Carolina) – what we call the “declaration.”  These are also referred to variously as the “covenants”, the “restrictions”, or the “CCRs.”  These are recorded with the register of deeds where the association is located prior to any lots being sold, which causes the provisions of the declaration to “run with the land” and be binding upon all current and future owners of each lot.  The declaration states what can and cannot be done with a lot owner’s land and the homeowners association’s common areas, and provides details as to how the HOA is to be operated.  In this latter regard there can be substantial overlap between the declaration and the bylaws, and this may be part of the confusion we see in terminology.  In general, the declaration controls over the bylaws if they are in conflict.

Deed Restrictions

An aside about deed restrictions.  Some subdivisions have “deed restrictions” in addition to, or in lieu of, a declaration.  The term generally refers to a document which places limits on what can be done with a lot owner’s land, but which does not create a full homeowners association operational structure like a declaration does.  This type of restriction was used primarily in the old days before homeowners associations with detailed declarations became prevalent, but deed restrictions can also be used now to place additional or special restrictions on a subset of lots within a larger HOA, or for small subdivisions where no formal HOA is required.  We avoid using this term except in these limited situations.  Modern declarations include deed restrictions (specific restrictions on what can be done on the owners’ lots) in addition to lots of other details regarding the operation of the community association, so “declaration” is the proper term for modern, detailed declarations of restrictive covenants as opposed to simple limitations on lots.

Everything Else 

The final category of governing documents is board resolutions, policies and procedures, and rules and regulations.  While these different terms are often used based upon type or level of formality, they are all positions formally adopted by the board of directors setting forth how a particular matter or situation will be handled now and in the future.  We refer to them generally as the homeowners association’s “policies.”  Policies serve to spell out in detail matters that may be addressed more generally in the declaration or the bylaws. 

While the articles of incorporation, the declaration and the bylaws ultimately control the governance of your homeowners association (in that order), the board of directors has the legal authority to adopt policies which are in general accordance with the authority granted by those documents.  For example, an HOA’s declaration may restrict leasing to no more than 15% of the homes in the subdivision, but it may not go into specific detail regarding how the leasing restrictions are to be implemented.  The board has the legal authority to adopt a policy describing how a homeowner may apply to lease his or her home, defining who is considered to be a tenant versus a guest, how a waiting list will be maintained, and other similar details.  Conversely, the board could not adopt a policy restricting leasing if such a restriction were not set forth in the declaration.

Policies can usually be adopted by the board acting alone, and need not be recorded or filed anywhere – although the best practice is to make sure they are made known to the members, usually by mailing, newsletter or website.  The board should be sure that the board meeting minutes reflect the research and consideration underlying the adoption of a particular policy, including the board’s consultation with its management company and professional advisors if necessary, and should take care that the policy is well thought out and written down in clear and specific detail.

We hope this discussion has shed some light on the various common HOA documents and the proper terminology for each.  If we can provide further information to assist your HOA, don’t hesitate to contact us.

Please give us a call or drop us an email if our HOA law team can assist your HOA or management company with your governing documents, or if we can be of assistance in any other way. We appreciate your reading our HOA law blog and encourage you to share it with others who may be interested. Thank you!

What if Fred and Barney lived in your HOA?

And what if Fred and Barney were goats? Fortunately for us, the Court of Appeals had occasion to address this burning issue recently in Steiner v. Windrow Estates HOA.

                                                                                                    

Mr. and Mrs. Steiner lived in Windrow Estates in southeast Mecklenburg County, and had as their beloved pets two “certified Nigerian Dwarf” goats named Fred and Barney. Of course, the CCRs prohibited “livestock”, as most do, although interestingly, they did allow horses as Windrow Estates is an equestrian community. The case turned on whether Fred and Barney were livestock, as the HOA contended, or household pets as the Steiners argued. The trial court had found in favor of the Steiners on summary judgment.

The drafter of these particular CCRs failed to define the word “livestock”. When that happens, courts typically look to determine the “ordinary meaning” of the word in question, which means they usually simply look it up in the dictionary. Here, the Court referred to Merriam-Webster’s Collegiate Dictionary and determined that “livestock” are “farm animals kept for use or profit” whereas pets are “domesticated animal[s] kept for pleasure rather than utility.”

The Court set forth excerpts from Mrs. Steiner’s affidavit in lengthy and sympathetic detail. Mrs. Steiner had been diagnosed with health problems and her physician recommended pets to speed her recovery. After some research, she determined that Nigerian Dwarf goats made excellent pets and could also live comfortably with the horses that the Steiners already kept on their property. The goats were bought from an outfit (Peach Tree Farms in nearby Oakboro) that sells them solely as pets, she said, and they were neutered and don’t produce milk or meat, so they could not be used for profit. Mrs. Steiner also testified that the goats were “affectionate, gentle, and make great companions.” (Apparently these particular goats don’t eat everything they see like the garden-variety goats I am familiar with – especially the one that once ate my uncle’s dentures. But that is another story.)

Dwarf Nigerian Goat from Peach Tree Farms' website.

Mrs. Steiner also testified that the goats lived outside in the stable with the horses, which to me seems more suggestive of livestock than household pets, but the Court somewhat facilely glossed over this issue by stating that household pets don’t necessarily have to live inside the house to be considered pets.

As often is the case when a court chooses to quote liberally from the one side’s testimony in its opinion, the Court of Appeals decided in favor of the sympathetic plaintiffs Mr. and Mrs. Steiner, holding that Fred and Barney were indeed pets and upholding the decision of the Superior Court. But the bigger question is, why did the Court decide the way it did and what, if anything, can we learn from this opinion? I see at least three takeaways for HOAs:

The first and most obvious takeaway is that it is critically important to define terms in CCRs. Obviously, had the CCRs clearly stated that goats were included in the term “livestock”, it would have helped the HOA’s case, but most likely this wouldn’t have changed the outcome, because it appears that the goats in this case were in fact pets.

Second, the plaintiffs in this case came across very sympathetically, and since judges are people too, this was an important part of why the decision ended up the way it did. HOAs facing litigation should very carefully consider the relative sympathies of the parties involved before incurring the expense of protracted litigation, even if they feel the legalities are on their side. Don’t miss the forest for the trees when deciding whether litigation is warranted.

Finally, it is crucially important for HOAs to be aware that North Carolina courts look upon all CCRs with a jaundiced eye. The Court of Appeals spent a good portion of its opinion harping on this particular doctrine, summarizing it as follows:

“The law looks with disfavor upon covenants restricting the free use of property. As a consequence, the law declares that nothing can be read into a restrictive covenant enlarging its meaning beyond what its language plainly and unmistakably imports.”

This gave the Court the legal support it was looking for to read the term “livestock” very restrictively (even though the careful reader will note that the Merriam-Webster definition states that livestock includes “farm animals”, and I can’t imagine anyone arguing that goats are not generally considered farm animals) and to find in favor of plaintiffs it clearly found to be worthy of its support, even on summary judgment. In addition, and perhaps I am just being paranoid here, this allowed the Court to hand the HOA community another in a fairly consistent string of losses at the North Carolina appellate level on facts that seemingly could have gone either way.

The case is Steiner v. Windrow Estates Home Owners Association, Inc., 713 S.E.2d 518 (July 19, 2011). Read the full text of the opinion here: http://appellate.nccourts.org/opinions/?c=2&pdf=MjAxMS8xMC04NjUtMS5wZGY=