Lot Combinations in Homeowners Associations

A frequent question I am currently seeing in association law is whether the owner of adjacent lots in an association can combine her lots so as to pay only one dues assessment.  A related question is what role, if any, the community association has with respect to allowing lot combinations for this purpose.

Background

        To place these questions in legal context, you must keep in mind that any private restrictions upon real property remain disfavored under North Carolina law.  Despite the prevalence of homeowners associations, judges continue to pay homage to the longstanding principle that a landowner in North Carolina is free to use his property as he deems desirable. Put another way, in disputes over property restrictions, judges choose the interpretation which imposes the least restriction on property.

        A second bedrock principle relevant to these questions is that a community association board’s authority to govern the property within the subdivision is contractual in nature.  The board’s powers derive from the association’s governing documents, which are the restrictive covenants contained in the subdivision's declaration, the association’s articles of incorporation, and its bylaws. Thus, if the declaration contains no provision relating to a given issue, the association board should not act or should move very cautiously in trying to address the issue.

        These principles hold true on the issue of lot combination.

Lot Combination

        Unless the declaration expressly addresses whether an owner of multiple lots may combine them, a community association has no authority to prevent the owner from doing so.

        The remaining question, however, is whether the association then must accept just one assessment on the combined lot. In 2001, the North Carolina Supreme Court decided this issue by stating that purchasers of lots in a community association have a reasonable expectation of the maximum pro rata share of the community’s general assessments to which they are obligating themselves.  That is to say, if assessments are on a “per lot” basis, and there are 100 lots in the subdivision, an owner of one lot in the subdivision can reasonably expect to  to pay 1/100th of the costs to maintain the common areas and roads in the community.

         If, however, a board allows an owner of six lots to combine those lots and pay only one assessment on the combined lot, the single-lot owner’s pro rata share of the expenses suddenly increases to 1/95th.  This, the Supreme Court said, has the effect of creating an additional – and impermissible – economic burden on the remaining lot owners in the subdivision.

         Absent a provision in the declaration, therefore, an association does not have authority to accept only one assessment on land from which it previously received multiple assessments.

        In sum, although an owner of multiple lots within the subdivision can combine her lots, she must continue to pay the same pro rata share of assessments as before.