Question:
I was an HOA president for ten years in California. I have since moved to North Carolina, and I don’t know if HOA laws are that different. Our CC&Rs are very broad on the use of money: “Section 2. Purpose of Assessments. The assessments levied by the Association shall be used exclusively to promote the recreation, enjoyment, health, safety, and welfare of the residents in the Property. ” It goes on to outline financial obligations as they relate to Common areas and only says that we must have “adequate reserves for capital improvements”.
There are no restrictions on the amount of discretionary spending by the Board in a calendar year, and the Treasurer has said that we have a general fund and no funds are restricted to pay for any capital improvements.
I do understand that a Board wants access to all the funds in case of emergencies; however, this presents the possibility of gross misuse of funds. Example: If the Board decided to build a Bocce Ball Court because it could be used for homeowner recreation, enjoyment, and health, and it was good for resale value, this could be done without an HOA vote – correct?
We are paying large amounts into the reserves for future roof repair and painting, but since we have no “designated” funds, there is no guarantee that the money will be there when we need it. Using funds for a different community project might be ill-advised but it doesn’t appear to be illegal.
Thank you so much for any insights you can provide
– Cy
Answer:
California’s laws on homeowners associations are much more comprehensive than North Carolina’s. The powers of an HOA are outlined under Section 47F-3-102 of the North Carolina Planned Community Act, though there are no restrictions on spending by the board. You may also find information on the board’s powers under Section 47F-3-103. There is no statutory requirement to conduct a reserve study and no statutory requirement to fund reserves in North Carolina.
You might find more specific requirements, procedures, and restrictions within the governing documents of your association. If you would like to enact stricter limitations, you will likely need to amend the association’s governing documents. It is also worth consulting a lawyer for further guidance.
Here is a page you might find helpful: https://www.
Disclaimer: We are not lawyers. The information provided on this website does not constitute legal advice.
