Creek Pointe Homeowner's Ass'n v. Happ

*170 WALKER, Judge,

concurring in part and dissenting in part.

I respectfully dissent from that part of the majority opinion which holds that while the North Carolina Planned Community Act (NCPCA) authorizes homeowners’ associations as a general class to institute, defend or intervene in litigation, the statute does not abrogate the common law by advancing “a new right upon homeowners’ associations” to representative standing. I agree with the position taken by both plaintiffs and third-party defendant Weyerhaeuser Real Estate Company, Inc. (Weyerhaeuser) that the NCPCA confers representative standing upon the Creek Pointe Homeowner’s Association (Creek Pointe) to enforce the easement right of lot owners to Deep Creek Road consistent with its declaration, articles of incorporation and bylaws. See N.C. Gen. Stat. § 47F-3-102(4) (1999).

The NCPCA provides that homeowners’ associations may “[institute, defend, or intervene in litigation or administrative proceedings on matters affecting the planned community.” Id. This section applies retroactively to homeowners’ associations formed prior to the NCPCA’s effective date of 1 January 1999. See N.C. Gen. Stat. § 47F-3-102(4), commentary (1999); see also Patrick K. Hetrick, Of “Private Governments” and the Regulation of Neighborhoods: The North Carolina Planned Community Act, 22 Campbell L. Rev. 1 , 18 (1999). The majority concludes that this language “simply reiterates” the common law rule regarding homeowners’ association standing. However, the language of N.C. Gen. Stat. § 47F-3-102(4) must be considered in conjunction with the overall scheme of planned communities and the objectives of the NCPCA. Admittedly, the statute does not automatically confer representative standing upon a homeowners’ association in every case. 1 Nevertheless, I construe the NCPCA to allow a homeowners’ association, both as a real party in interest and in a representative capacity, to pursue litigation in matters affecting the common areas within the planned community; provided such actions are consistent with its declaration, articles of incorporation and bylaws.

Practically speaking, a homeowners’ association assures lot owners that basic needs such as ground care and street maintenance are fulfilled. However, the association also provides its lot owners with common emotional, psychological, and social advantages. See Harvey Rishikof and Alexander Wohl, Private Communities or Public Gov- *171 emments: “The State Will Mark the Call,” 30 Val. U. L. Rev. 509 , 513 (1996). Agreed to rules regarding the use of common areas and restrictions on what the lot owners are allowed to display or include in their individual units provide a feeling of conformity that many find reassuring. Id. The creation of this sense of commonality requires lot owners, in forming a planned community, to make a collective assignment to the homeowners’ association of certain interests enabling the lot owners to collectively take action in matters affecting the common areas. I believe that, upon the formation of a planned community, the NCPCA envisions that the lot owners collectively assign to the homeowners’ association their real property interests in the common areas. Thus, when a matter arises, as in the case sub judice, affecting the use and control of a common area, the homeowners’ association, in accordance with N.C. Gen. Stat. § 47F-3-102(4) is conferred with representative standing to institute litigation on behalf of the lot owners.

My reading of N.C. Gen. Stat. § 47F-3-102(4) is compatible with other statutory language dealing with real property interests found elsewhere in the NCPCA. For example, under N.C. Gen. Stat. § 47F-3-112, a homeowners’ association, upon approval of eighty percent (80%) of the lot owners, may convey, encumber or otherwise voluntarily transfer portions of any common area within the planned community. See N.C. Gen. Stat. § 47F-3-112(a) (1999). Such transfers become “free and clear of any interest of any lot owner or the association in or to the common [area] conveyed or encumbered, including the power to execute deeds or other instruments.” N.C. Gen. Stat. § 47F-3-112(b) (1999) (emphasis added). The NCPCA’s official commentary notes this section was included to “clarify that if conveyance or encumbrance is authorized by the required percentage of owners, common [areas] may be conveyed or encumbered free and clear of any easements, rights of way or claims which might be asserted by individual lot owners in or to that common area by virtue of their ownership of lots.” N.C. Gen. Stat. § 47F-3-112, commentary (1999).

Other provisions within the NCPCA demonstrate that upon formation the lot owners assign to the homeowners’ association their real property interest in common areas. In an eminent domain proceeding affecting a common area, the NCPCA requires that the portion of an award attributable to the common area taken is to be paid to the association, rather than distributed pro rata to the lot owners. See N.C. Gen. Stat. § 47F-1-107 (1999). This statutory requirement *172 ensures that all the lot owners in a planned community receive compensation for the taking. Consequently, if a body with eminent domain authority seeks to acquire a common area the court would be required to disperse any monetary compensation to the homeowners’ association regardless of the disparate impact the eminent domain might have on the individual lot owners. Therefore, in an eminent domain proceeding, only the homeowners’ association need be named as a party defendant. In such a case the homeowners’ association’s evidence establishing the damages may include testimony from individual lot owners.

The same rationale applies to the case sub judice. In order to receive compensatory or punitive damages, Creek Pointe would have to present evidence demonstrating how Happ’s erection of a fence has damaged the planned community; including all the individual lot owners. Thus, permitting Creek Pointe representative standing ensures the protection of all the lot owners’ interests.

The NCPCA’s recognition of representative standing is also reflected in the statutory language dealing with the termination of a homeowners’ association. In the event the lot owners decide to terminate the planned community, the NCPCA requires that upon termination the remaining common areas vest in the lot owners as tenants in common. See N.C. Gen. Stat. § 47F-2-118(e) (1999). This vesting of remaining common areas results in the return to the lot owners of the real property interest assigned to the homeowner’s association at its inception.

Based on my analysis of the NCPCA, I must disagree with the majority’s conclusion that the third prong of Hunt has not been satisfied. I conclude that neither the claim asserted nor the relief requested requires the participation of the individual lot owners in this lawsuit. See Hunt v. Washington State Apple Advertising Commission, 432 U.S. 333, 343 , 53 L. Ed. 2d 384 , 394 (1977). Weyerhaeuser as a third-party defendant supports the position of the plaintiffs in this action. Additionally, Weyerhaeuser created this subdivision and formed the homeowners’ association. Obviously, evidence from Weyerhaeuser will be crucial in establishing the common areas within Creek Pointe, including Deep Creek Road. Notwithstanding defendant Happ’s contention as to standing, he elected to assert a counterclaim against the homeowners’ association alleging a superior right to this road which enables him to close it. Therefore, the individual lot owners are not pursuing a claim or relief for which their participation would be required.

*173 I concur with the majority opinion that the homeowners’ association has standing to pursue claims for declaratory and injunctive relief.

. For example, a homeowners’ association would not have representative standing to initiate litigation on behalf of a lot owner whose sole cause of action is one for the breach of a contract with a builder.