Real Property – Condominiums – Assessment – Common Expenses – Windows & Doors

In re Proposed Foreclosure Against Johnson (Lawyers Weekly No. 11-07-0617, 19 pp.) (Ann Marie Calabria, J.) (Robert C. Hunter, J., concurring in part & dissenting in part) Appealed from Mecklenburg Superior Court (Richard D. Boner, J.) N.C. App. Click here for the full-text opinion.

Holding: A condominium’s foreclosure action against unit owners who refused to pay for common expenses should not have been dismissed without an analysis of whether the foreclosure action was permissible under Article XVI of the Declaration of Condominium.

Facts

On Nov. 8, 2007, Starboard by the Sea Condominium’s board of directors approved a special assessment for the renovations in the amount of $55,000 per unit for all unit owners in Building 33. Later, the amount for each unit owner in Building 33 was lowered to $54,000 (the assessment). Subsequently, the board adopted a written resolution ratifying the assessment.

On Dec. 15, 2007, respondents paid petitioner $27,000 of the assessment, under protest.

On Aug. 20, 2008, petitioner notified respondents of a notice of hearing prior to foreclosure of claim of lien (the Notice) of respondents’ units. The Notice stated that the foreclosure proceedings were initiated pursuant to G.S. Chapter 47C due to respondents’ alleged “failure to timely pay assessments and other charges levied by [Starboard].”

Respondents claimed they were not in default because the assessment was not uniform and was not included in any annual budget or special assessment budget which was ratified by Starboard Association, as required by the articles, the declaration, the amended by-laws, and G.S. Chapter 47C. Respondents asked the trial court to dismiss the foreclosure proceeding with prejudice and award respondents reasonable attorney’s fees.

The trial court referred to the assessment in its findings as the “alleged assessment,” then concluded that the assessment by the board was unlawful because it was not computed in accordance with respondents’ percentage undivided interest in the common areas and facilities and violated the Unit Ownership Act and the declaration. The court also concluded that the alleged debt which formed the basis for petitioner’s claim of lien and foreclosure of respondents’ unit was invalid.

The trial court entered an order of dismissal and judgment on Dec. 11, 2009 (the 2009 order) dismissing petitioner’s action with prejudice pursuant to N.C.R. Civ. P. 41, and entered another order on May 21, 2010 (the 2010 order), awarding respondents attorney’s fees in the amount of $19,781. Petitioner appeals both the 2009 and the 2010 orders.

Unresolved Issue

In accordance with G.S. §47A-12 and article XXIII of the Starboard declaration, all assessments levied against all unit owners must be uniform and, unless specifically otherwise provided for in the declaration, all assessments made by petitioner must be in such an amount that any assessment levied against the unit owner and its condominium unit “shall bear the same ratio to the total assessment made against all Unit Owners and their Condominium Units as the undivided interest in Common Property appurtenant to all Condominium Units.”

However, article XVI of the declaration (Article XVI) allows for an assessment other than pro rata amongst all unit owners in special circumstances in which a certain unit or units are exclusively benefitted. Therefore, petitioner can show that it had the authority to provide for an assessment against respondents if it can prove that the improvements “exclusively” or “substantially” benefitted the units in Building 33.

Under the provisions of the Unit Ownership Act and the declaration, as amended, the common areas involved in the assessment included the siding, stairways and decks, pylons, the roof, and other exterior renovations and capital improvements to the building. The renovations to Building 33 included new vinyl siding, renovation of the stairways and decks, pylon repairs, and other capital repairs and renovations.

Therefore, under the Unit Ownership Act and the amended declaration, these common areas, which by definition belong to all the unit owners, must be assessed uniformly against all Starboard members according to their pro rata share. The trial court was correct in concluding that petitioner’s assessment against respondents’ unit for the Building 33 renovations was unlawful in that it was not computed in accordance with respondents’ percentage undivided interest in the common areas and facilities, as required by the Unit Ownership Act and the amended declaration.

However, under the articles, exterior windows and doors are not common areas. Therefore, under the Unit Ownership Act and the amended declaration, the improvements to Building 33’s exterior windows and doors were not common area improvements for the benefit of all Starboard unit owners. The exterior windows and doors were “exclusively” for the benefit of the unit owners in Building 33. As a result, petitioner had the authority to assess the cost of the windows and doors for Building 33 solely against the unit owners in Building 33 “in such proportion as may be determined by the Board of Directors of [Starboard].” Article XVI.

The court dismissed the foreclosure action without making separate findings or conclusions for the renovations for the windows and doors that exclusively benefitted the unit owners of Building 33 and the portions of the renovations that were for common areas. Therefore, the trial court’s 2009 order dismissing petitioner’s action with prejudice is vacated and remanded.

Consequently, petitioner must perform a new assessment. The assessment will separate respondents’ windows and doors that exclusively benefitted the unit owners of Building 33 from the portion of the renovations that were for the common areas and facilities.

The 2009 Order was entered Dec. 11, 2009. Petitioner filed notice of appeal from that order on Jan. 6, 2010. The trial court entered its order awarding attorney’s fees on May 21, 2010. Since petitioner had already appealed from the 2009 Order, the trial court lacked jurisdiction under G.S. §1-294 to enter the order awarding attorney’s fees.

Vacated and remanded.

Partial Dissent

(Hunter, J.) I disagree with that part of the majority’s holding that held the trial court correctly concluded that petitioner Starboard Association, Inc.’s assessment was “unlawful” because it was not uniform and not levied on a  pro rata basis.