Real Property – Condominium Development – Assessments – Uniformity Requirement – Foreclosure

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In re Proposed Foreclosure of Claim of Lien against Johnson (Lawyers Weekly No. 12-06-0994, 19 pp.) (Patricia Timmons-Goodson, J.) (Mark Martin, J., joined by Paul M. Newby & Barbara Jackson, JJ., dissenting) Appealed from Mecklenburg County Superior Court (Richard D. Boner, J.) On appeal from the Court of Appeals. N.C. S. Ct.

Holding: The petitioner-condominium association violated the uniformity requirements of the Unit Ownership Act and the condo development’s declaration when it made renovations and assessments for one building separately from the development’s other 32 buildings.

We affirm the dismissal of petitioner’s foreclosure action.

In 2005, the association’s board of directors contracted to renovate Buildings 1-32 of the condominium development. Owners of units in Buildings 1-32 paid assessments for those renovations.

Unit owners in Building 33 requested renovations, which the board approved in 2007. Unit owners in Building 33 were assessed $54,000 each for the renovations. Respondents paid only $27,000 of the assessment. The association paid the remainder of the assessment and commenced foreclosure proceedings against respondents. The trial court dismissed the lien foreclosure action, and a divided panel of our Court of Appeals affirmed.

The association’s claims are governed by the Unit Ownership Act (G.S. §§ 47A-1 to -28) and by the condominium development’s declaration. Both the Unit

Ownership Act and Article XXIII of the declaration require unit owners to uniformly contribute, pro rata, based on the percentage of their respective undivided interests in the common area and facilities, towards the expenses of the administration and maintenance and repair of the general common areas and facilities, and, in proper cases, of the limited common areas and facilities.

The 2007 special assessment against the unit owners in Building 33 was invalid because it was neither uniform nor levied on a pro rata basis.

No party challenges the findings of fact in the trial court’s dismissal order. The trial judge found that, following the 2005 annual association meeting, the association’s board levied a special assessment for the renovation of 32 of the development’s buildings, but not Building 33. At that time owners of the units in Buildings 1 through 32 were levied a special assessment for those renovations.  Then in 2007, roughly two years later, the board ratified a second assessment – this time against the owners of the three units in Building 33 — of $54,000.00 per unit in Building 33. The 2007 assessment was for repairs and renovations to the exterior of Building 33.

Thus, according to the uncontested findings of fact, there were two assessments here, rather than one, and the assessments were conducted a few years apart (2005 and 2007, respectively). The 2007 special assessment, which was levied against only owners in Building 33, was not uniformly assessed against all members of the association according to their pro rata share as required by the Unit Ownership Act and Article XXIII of the declaration.

The association argues that the 2005 and 2007 assessments were actually just piecemeal phases of a single larger assessment that took place over two years. However, the trial court found that there were two separate assessments. According to the Act, the declaration and the association’s by-laws, each assessment must be levied pro rata and uniformly upon each owner. Such was not the case here.

Affirmed and remanded.

Dissent

(Martin, J.) In reversing an assessment imposed to recoup expenses for common area renovations, the majority unjustifiably excuses respondents from contributing their pro rata share. Respondents’ neighboring owners and the Starboard By the Sea Condominium (Starboard) complex are thus left to bear respondents’ lawful burden.

The majority apparently believes that G.S. § 47A-12 mandates a specific procedure for assessment. Section 47A-12 is concerned not with procedure but with outcome, and it imposes an obligation on all unit owners to pay their pro rata share of expenses for maintenance and repair of common areas. The statute does not include any procedural requirements regarding the timing or manner of assessments.

Moreover, the Act does not provide a remedy for an improperly calculated assessment. Allowing respondents to avoid paying the correct amount of $53,865.54, as the majority does here, allows them to avoid their statutory duty to contribute pro rata for common area expenses under § 47A-12. This result defies the simple logic and obvious fairness that owner-members should not be permitted to demand services for which they can refuse to make payment.

Furthermore, the trial court did not find, as the majority suggests, that there were two discrete and unrelated assessments. The renovations to be made under both contracts were substantially similar: new siding, new windows and doors, new stairways and decks, and other improvements. The $54,000 charged to respondents was the amount Starboard would have billed them if Starboard had charged all owners for the entire project at the outset, though with a .25 percent ($134) discrepancy. These facts tend to show that the assessment levied against the Building 33 unit owners, including respondents, was indeed part of one larger transaction, and that Starboard merely waited to charge the respondents until work began on their building. The facts do not lead to the conclusion that Starboard wrongfully charged respondents, particularly to such an extent that they should be excused from their statutory duty to contribute pro rata under § 47A-12.