North Carolina Wallach v. Linville Owners (2014): Amendments

Quick Answer

In Wallach v. Linville Owners Association, the North Carolina Court of Appeals held on July 1, 2014 that an amendment ending reduced assessments and payment deferrals for builder-owned lots was unreasonable, invalid and unenforceable, because it reversed benefits that were "essential to the original bargain." The court applied Armstrong v. Ledges and vacated the judgment and attorneys' fees for the association. It also held that later-purchasing lot owners were not necessary parties.

At a Glance

The Dispute

Linville is a gated 44-lot subdivision in north Raleigh. The original declaration let builders pay only 25 percent of the assessment on lots they owned, with payment deferred until the lot was sold or rented to a consumer-occupant. In late 2011, an amendment recorded November 7, 2011 eliminated these benefits, effective January 1, 2012, and required owners of unsold or undeveloped lots to pay accrued assessments in full by January 31, 2012. The declaration allowed amendment during the first 20 years by signatures of at least 75 percent of lot owners (33 of 44 lots).

Three lot owners, including a builder, sued for a declaration that the amendments were invalid. The association counterclaimed for unpaid assessments and foreclosure. The trial court upheld the assessment amendment, entered judgment of $5,010 against two plaintiffs and $2,345 against a builder, ordered the lots sold, and awarded $5,000 in fees.

What the Court Held

Later buyers were not necessary parties

The association argued the case should be dismissed because an owner who bought after suit was filed was not named. The court held that owner was a proper but not necessary party, distinguishing cases where invalidating a restriction would strip other owners of a property right to enforce it. Here, invalidating the amendment would not.

Signatures were not decisive

The owners challenged whether three lots' signatures were valid. The court said the recorded amendment appeared to carry 33 signatures and a certification, the owners did not bring forward specific facts to rebut it, and it was unnecessary to decide each signature.

The amendment was unreasonable

Quoting Armstrong, the court repeated that an amendment "should not exceed the purpose of the original declaration" and must be reasonable in light of the original bargain, considering both the association's legitimate needs and owners' legitimate expectations. It distinguished Armstrong and Emerson, where amendments created broad new assessments, but found this amendment worse for the builders: it "eliminates benefits afforded builders; benefits that likely persuaded builders to purchase lots in the first place and were essential to the original bargain." It said allowing it would let associations amend such provisions "whenever they acquire the requisite number of votes." It also rejected the association's reliance on builder agreements requiring prompt construction. The court held the amendment unreasonable, invalid and unenforceable, and vacated the judgment and fee award built on it.

Why It Matters for Associations

• Vote counts are not the whole test. Even a properly signed amendment must be reasonable in light of the original declaration. See Armstrong v. Ledges.
• Builder and declarant benefits. Amendments that remove benefits that attracted early buyers are risky.
• Fees can be lost. The association's fee award fell with the amendment.
• Statute note. The opinion we read does not discuss G.S. 47F-2-117 or any statutory presumption that amendments are valid, and it does not say whether the Planned Community Act applied to Linville. Our reading: check current law with counsel. See our page on that section.

Related North Carolina Law

• Armstrong v. Ledges (2006)
• SEJAC v. Emerson (2009)
• G.S. 47F-2-117: declaration amendments
• Bryan v. Kittinger (2022)
• North Carolina HOA laws complete guide

Board Checklist

• Before amending assessment provisions, read the original declaration for the bargain made with early buyers.
• Identify any group, such as builders, whose benefits would change.
• Document the unanticipated circumstance the amendment addresses.
• Verify each signature and keep the certification with the recorded amendment.
• Check the amendment procedure and challenge period in G.S. 47F-2-117.
• Ask counsel to assess reasonableness before circulating the amendment.

Frequently Asked Questions

Can an HOA remove builder discounts by amendment?

In Wallach, the court held this amendment was unreasonable and unenforceable because it removed benefits essential to the original bargain.

Does 75 percent approval make an amendment valid?

Not by itself. The court said every amendment must also be reasonable in light of the original declaration.

Did the court decide the signatures were valid?

It found it unnecessary to decide each signature because the owners did not rebut the recorded amendment with specific facts.

What happened to the association's judgment?

The final judgment and attorneys' fee award were vacated.

Were owners who bought after the suit necessary parties?

No. The court held such an owner was a proper, not necessary, party.

Does this case reflect current law?

We did not research later history or later statutory changes. Confirm with counsel.

Where This Comes From

This page is based on the full text of the opinion in No. COA13-1116 (filed July 1, 2014), as published on Justia. The reporter citation was taken from a case-law index and was not confirmed in the opinion text. We did not research later history.

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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.