North Carolina SEJAC v. Emerson (2009): Reasonable Covenant Amendments

Quick Answer

In Southeastern Jurisdictional Administrative Council, Inc. v. Emerson (N.C. Supreme Court, No. 62A08, decided October 9, 2009), the court held that new annual service charges adopted decades after lots were sold were reasonable and enforceable at Lake Junaluska Assembly. It applied the "reasonable amendments" test from Armstrong v. The Ledges Homeowners Association (2006) but reached the opposite result, because of the community's nearly century-long history of covenant-imposed regulation.

The one thing a board most needs to know: the court stressed the "unique" character of the community. A concurring justice said that in an ordinary subdivision a covenant letting a developer adopt future rules would ordinarily not make later affirmative obligations reasonable. Do not read this case as a general green light for new assessments.

At a Glance

The Dispute

The plaintiff, the Southeastern Jurisdictional Administrative Council, is "a nonprofit, non-stock corporation" that manages, owns, develops and sells land at the Lake Junaluska Assembly in Haywood County and provides services such as street lighting, fire and police protection, and maintenance of roads and common areas. Residential lots there have been sold since the early 1900s, and deeds have always included covenants. The deeds of defendants Huffman (who bought in 1970 and 1974) and Emerson (1992) said the land is held "subject to" the "by-laws and regulations, ordinances and community rules which have been, or hereafter may be, from time to time, adopted" by the Assembly corporation and its successors, which bind owners "as fully ... as if the same were fully set forth in this Deed."

In November 1996 the Council adopted Rules and Regulations that include an "annual service charge in an amount fixed by the SEJ Administrative Council for police protection, street maintenance, street lighting, drainage maintenance, administrative costs and upkeep of the common areas." The defendants Patten bought in the Hickory Hill subdivision in 1996, whose recorded declaration contains a similar service charge covenant.

The defendants refused to pay. They argued their deeds did not provide for the charge, did not describe permitted uses or the facilities to be maintained, that the Council was not a homeowners' association so owners were not represented through elections, and that the money mainly maintained the Council's own property and development. The Council sued for the unpaid charges plus interest.

What the Court Held

Outcome and procedure

The Supreme Court "uphold[] the covenants as enforceable and revers[ed] the Court of Appeals" on the issue before it. The opinion has a majority, a concurrence, and a dissent. We do not attribute authorship beyond what the text shows.

The reasonableness test

The court restated Armstrong: amendments to real covenants are enforceable if reasonable, and "[r]easonableness may be ascertained from the language of the declaration, deeds, and plats, together with other objective circumstances surrounding the parties' bargain, including the nature and character of the community." It treated the 1996 Regulations as functioning like an amendment to the deed covenants, following the Court of Appeals dissent.

Why the result differed from Armstrong

The majority contrasted the two communities. The Ledges was "a fairly typical subdivision" about fifteen years old with "no common areas or amenities" when the plaintiffs bought. The Assembly, by contrast, had existed "for nearly a century," had "purposefully" developed "its unique, religious community character," and had consistently subjected lots to detailed restrictions and a covenant to follow future rules. The court reasoned that buyers knew of the Assembly's extensive amenities and "should have" understood the Council might amend covenants to fund maintenance. It also found the purposes (police protection, street maintenance, upkeep of common areas) "eminently reasonable community expenses."

Enforceability as written

Citing Beech Mountain Property Owner's Ass'n v. Seifart (N.C. Ct. App. 1980), the court said an assessment covenant must be subject to standards courts can measure, identify the properties to be maintained with particularity, and guide courts reviewing which facilities will be maintained. The Regulations (or the Hickory Hill deeds) itemized the permitted purposes, and a Policies and Procedures document explained how property values and the mileage rate were set. The court held that was enough guidance.

The Hickory Hill owners

The Pattens argued their declaration limited use of their payments to the four-lot Section One. The court disagreed: the plat and declaration show Hickory Hill is part of the Assembly, and nothing limits the proceeds to Section One.

Limit on use of the money

The court added that "the proceeds of the service charges must actually be used to fund the particular purposes stated in the restrictions." If the defendants had shown the Council used the money for "specific, targeted projects such as building roads to develop new parts of the Assembly, the assessments would not be enforceable," but the record did not create a genuine factual dispute on that point.

The concurrence and dissent

The concurring opinion agreed with the result but wrote that "the unique nature of Lake Junaluska is fundamental to that outcome," and that in a typical subdivision, obligations adopted under a covenant binding owners to a developer's future regulations "ordinarily would not be reasonable." The dissent would have held the amendments unenforceable as to the Emerson and Huffman defendants because their deeds mentioned no financial obligation, and would have held the Patten covenant too indefinite. It also objected that the majority took judicial notice of facts outside the record (the majority said it did so on its own motion, footnote 1).

Why It Matters for Associations

• Reasonableness is fact-specific. Armstrong and Emerson read together show courts weigh the original documents, the community's age and nature, and owners' expectations.
• Funds must follow the stated purposes. Our reading: an association that collects under a covenant listing police, roads and common areas should be able to show spending that matches.
• Not an HOA case. The assessor was a landowner-developer-operator, not a homeowners' association. Our reading: the decision gives limited help to a typical HOA board proposing a new amendment, and the concurrence signals caution.
• A later statute adds a presumption. Current G.S. 47F-2-117(d) says "[a]ny amendment passed pursuant to the provisions of this section or the procedures provided for in the declaration are presumed valid and enforceable," and subsection (b) allows challenges only within one year after recording. The statute's history lists S.L. 2013-34, s. 5. We did not read that session law, and the opinion does not discuss the presumption. Whether and how the presumption interacts with the reasonableness test is an open question for counsel.

Related North Carolina Law

• Armstrong v. Ledges Homeowners Association (2006)
• G.S. 47F-2-117: declaration amendments
• Wise v. Harrington Grove (2003)
• Bryan v. Kittinger (2022)
• G.S. 47F-3-102: association powers
• North Carolina HOA laws complete guide

Board Checklist

• Before proposing an amendment that adds money obligations, compare it to what the original declaration, deeds and plats said.
• Document the community's expenses and the reasons for the change.
• Make sure any assessment covenant itemizes the purposes and identifies what will be maintained.
• Spend collected money on the stated purposes and keep records.
• Record amendments and note the one-year challenge window in G.S. 47F-2-117(b).
• Ask counsel how Armstrong and Emerson apply to your community before adopting the change.

Frequently Asked Questions

What did Emerson decide?

That service charges adopted in 1996 under covenants allowing future community rules were reasonable and enforceable at Lake Junaluska Assembly, reversing the Court of Appeals.

Is Emerson a homeowners' association case?

No. The plaintiff was a nonprofit corporation that owned and developed the Assembly. The defendants argued it was not an HOA, and the court's analysis rested on covenant principles and the Assembly's history.

Does Emerson overrule Armstrong?

No. The court applied Armstrong's reasonableness test and distinguished that community from the Assembly.

Can an association use assessments for anything?

No. The court said the proceeds must actually fund the purposes stated in the covenants.

Is there a presumption that amendments are valid?

G.S. 47F-2-117(d) presumes valid and enforceable any amendment passed under that section or the declaration's procedures. The opinion does not address it.

What is the citation?

The docket is No. 62A08 and the decision date is October 9, 2009. We have not verified the reporter citation.

Where This Comes From

This page is based on the full text of the opinion as published at FindLaw's North Carolina Supreme Court archive and on the text of G.S. 47F-2-117 on ncleg.gov.

How APM Helps

Association Property Managers provides remote HOA and condo management for associations in North Carolina, starting at a flat $99/month per community with no per-door fees or long-term contracts. See remote management in North Carolina, browse every North Carolina state-law guide, or request a free proposal, delivered within three business days. Laws and licensing rules differ by state, and we confirm the requirements for North Carolina when we build your proposal.

Legal disclaimer: This article is general information, not legal advice. Laws change and associations differ. Confirm the current statute text and how it applies to your governing documents with a licensed North Carolina attorney before acting.