An Overview of Alabama’s Homeowners Association Laws
Alabama’s Home Owners Association (HOA) laws have become an increasingly relevant topic for both associations and homeowners in the state. These laws govern a wide range of issues from association powers and responsibilities to the rights and obligations of community members.
The Alabama Code Title 35 – Property regulates enforcement by creating legal remedies for homeowners against their HOA for breaches of covenant, state laws or other rules and guidelines. For instance, parties can apply to circuit court for an injunction, which will require the HOA to rectifying the situation or restrain them from continuing the situation. Additionally, if an HOA is found to be in breach of the covenants or regulations, a homeowner could pursue for damages .
A significant aspect of HOA laws in Alabama is the ability to enforce its rules and regulations. The Alabama Code Title 35 – Property grants authorized individuals within the HOA council the right to impose fines on members that violate any of the association’s regulations. The HOA is also allowed to place a lien against the property for unpaid and delinquent fees.
Other relevant HOA laws include statutes pertaining to the Transparency in Government Act. This Act requires the HOA to hold open meetings, allow inspection copy of meeting minutes and financial records for members. North Alabama Appearance Commission, a Huntsville based HOA, [specify] what is required under this act.
Constitution, Formation and Management
The formation of HOAs in Alabama is defined and limited by the legal requirements set forth in state and local laws. The process begins with a developer who files a declaration of covenants and restrictions in the appropriate probate court office. This typically occurs when there is a subdivision plan for a design of homes and associated amenities. In Alabama, this action serves to not only create the association but to also bind all current and future owners to the commitment of the association. For example, if you purchase real estate that is part of an HOA through a foreclosure or other means, it is still subject to the same rights and obligations that any other owner is subject to in the community.
After the association is created, the covenants and restrictions will outline how the association should be run. This will start with regularly scheduled meetings that occur with the board and then from there the owners will elect members to serve on the board during an annual meeting. All of these details will be included in the initial covenants and restrictions that will then outline the bylaws for the association (or the same information could be used in a separate document). Of note, Alabama law requires that associations conduct elections for board members at least every 4 years.
Member Rights and Responsibilities
In Alabama, homeowners associations (HOAs) are governed by several statutory and common law provisions. One primary source is the Alabama Nonprofit Corporation Law, which sets forth the rights and responsibilities of associations and their members. For instance, under Ala. Code § 10A-3-3.01 (2018), every association member and board member has inspection rights with respect to business records of the association.
Since many associations have been incorporated, their bylaws, which are analogous to a corporation’s rules and regulations, may establish additional member rights or responsibilities. In Alabama, members of homeowners associations may have the right to review or copy business records, request a meeting to discuss grievances, vote in elections, run for a position on the board, and/or seek judicial review.
Among these rights, perhaps the most concrete and controversial are those pertaining to the levying of dues, or assessments. When an association is incorporated, it may impose dues on its members, the terms of which are specified in the community’s governing documents. While the amounts levied may vary from community to community, these dues are generally used for upkeep on the common areas of the association, such as clubhouses, parks, and community events located within the boundaries of the HOA.
Regular dues are typically assessed on an annual basis, while special assessments are levied when unforeseen expenses arise or when larger maintenance projects are necessary. While regular dues are fairly predictable, special assessments may come as unwelcome surprises to homeowners.
In Alabama, the amount and frequency of these dues may be limited or determined by the community’s governing documents. Specifically, under Ala. Code § 10A-3-3.02 (2018), no assessment may exceed that specified in the declaration or bylaws. If not so stated, a regular assessment may not be increased by more than 10% of the previous year’s rate unless approved by the association’s members.
Despite these protections, disputes regarding special assessments may arise, particularly when the amount levied under the assessment is not related to the value of the property, goes towards improvements that only benefit a minority of homeowners, or fails to comply with the association’s bylaws. Under Ala. Code § 10A-3-3.02 (2018), an association’s board of directors may propose an assessment for approval by the association’s members. If a proposed special assessment is opposed by a majority of the association’s members, the association may not levy the assessment. This right may be exercised by a petition signed by a majority of the members or during a vote at a meeting at which a quorum is present.
If a member challenges the legality of any assessment, they may have the right to sue their association in Alabama state court to recover any damages incurred by the dispute. Problems frequently arise when an association attempts to enforce a lien upon a homeowner’s property due to nonpayment of dues. Generally, an HOA may not place a lien upon property subject to its community association regulations without prior notice and an opportunity to be heard. If a member fails to pay a due, the association may place a lien upon the member’s property for the amount owed. If, after placing the lien, the assessment remains unpaid, the association may sell the property to satisfy its indebtedness.
This action was originally upheld in the case of Birmingham Country Club v. McVay, 187 Ala. 407 (Ala. 1915); however, the last 100 years of legal precedent have dampened this severity somewhat. Today, associations may voluntarily consent to repayment plans to satisfy association dues other than in court. If a lien is disputed, the association must respond to the homeowner’s legal challenge. If the association refuses to do so, it may be responsible for paying the homeowner’s attorney’s fees.
Enforcement of Rules and Disputes
HOA communities, including lots and condominiums, deal with a variety of disputes. Common disputes include inspection and approval of construction plans; the design and installation of landscaping and fences; lot maintenance and upkeep; tree and shrub height; fencing; painting; roofing; installation of generators; use of common areas; storage of vehicles and personal property; and maintenance of personal property.
Methods for resolving disputes include informal meetings with the HOA’s board and managers, internal dispute resolution processes, and resorting to alternative dispute resolution through mediation or arbitration.
Section 11-81B-2 of the Alabama Code addresses this issue as follows: "Resolution efforts prior to suit; award to prevailing party Prior to filing any legal action against any association or board of directors of an association, an issue arising out of or in any way related to such members association with the association and such member shall be submitted by the complaining party to the applicable grievance committee of the Alabama Homeowners Association Advocacy Program for resolution pursuant to the provisions of such program. The complaint shall set out the facts of the dispute and offer to submit to resolution by the grievance committee. Such complaint shall be deemed certified upon receipt of a response from the grievance committee to the effect that it has reviewed the complaint and deemed the facts stated therein sufficient to proceed with an award to either party. No later than three days after deemed certified , the member shall make his or her choice known to the grievance committee and the selected resolution officer. Promptly following such choice, a mediation shall be held. Only fees of the selected officer shall be borne by the parties, with the mediation officer to select the person to be assessed. If the matter cannot be resolved by mediation, any party may request arbitration of the matter. The matter shall then be arbitrated, provided the member has paid the association the actual legal or other fees incurred by the association in connection with the grievance. Unless otherwise agreed by the parties, the mediation or arbitration may occur only after the expiration of the thirty-day notice period provided for in Section 11-81B-3, unless such period is waived whenever ordered by a court. Like mediation, the county circuit courts will not enforce arbitration clauses, but arbitration proceedings can be utilized. Arbitration is governed by the Alabama Arbitration Act (Section 6-6-600 et. seq.) Courts may enforce any agreement to arbitrate. The parties agree to be bound by the arbitrators’ decision and may obtain enforcement in a manner similar to that in which a contract award is enforced. However, the doubting party must prove that the arbitrators’ award was reasonable.
When alternative dispute resolution does not provide a satisfactory solution, a complaint for injunctive relief may be prosecuted in the circuit court.
Recent Developments in HOA Laws in Alabama
Recent legislative changes in HOA laws are essential to understand for homeowners and associations alike. Recognizing these amendments is vital for keeping residents informed and involved in the management of their communities.
In 2017, the Alabama Homeowners Association Act (AHAA) underwent several updates that affects all associations across the state. Those changes include:
HOA Fees Transparency
The Alabama legislature passed an amendment in 2017 requiring all associations to comply with the Alabama Liability and Indemnification of Directors and Officers of Nonprofit Corporations Act. This means board members are required to disclose their compensation during formal meetings. This amendment creates transparency between the HOA and the residents, ensuring everyone is aware of board member compensation and expenditures.
HOA Contract Disclosure
Under the 2017 amendment, all contracts between an HOA and a supplier must be disclosed to the members. This applies to all contracts including:
HOA Annual Meetings
Since the 2017 amendment, HOAs are now required to hold an annual meeting within three months after the end of each fiscal year to elect or re-elect board members.
Common Issues for Alabama HOAs
Common issues faced by Alabama HOAs include:
Financial Management
HOAs are tasked with managing their finances. Since most homeowners are required to pay dues, the HOA has a steady source of income; however, it is important for them to be smart about the money they are bringing in. Can the HOA afford the amenities it is providing? Is it able to put aside money into a lump fund for repairs? Financial management is vital to having a successful community. If an HOA isn’t making smart decisions, then they could face large financial issues down the line.
In an effort to alleviate financial issues, the Association should adopt a budget and follow it. The Board should not spend money for repairs that are unnecessary, when a little maintenance every now and then will suffice.
Bylaw Violations
One of the biggest responsibilities of the HOA is to maintain the property . However, if homeowners are not following the bylaws set forth by the HOA, then they could be part of the problem, rather than the solution. New homeowners may not be aware of the rules, or just may not care. In order to maintain the property, the HOA may need to enforce rules and issue fines to homeowners in violation of the bylaws.
Disputes with Residents
Not only can disputes arise with homeowners in violation of the bylaws, but they can also arise between residents even if no laws have been broken. People may dispute the noise level. Is the noise louder than allowed? These disputes can escalate to a level where it causes panic in the community. A high number of calls to law enforcement will give the area a bad reputation. Not only is this not fair to the residents, but to the businesses they support as well. Avoiding these calls is vital to the HOA’s continued success as many families rely on word of mouth advertising to determine where they want to live.