Combining Lots to Reduce Assessments?

A recurring problem we see in restricted communities arises when lots are combined.  Declarations often permit combination of lots without discussing how the combination will effect assessments.  Lot owners and/or associations often assume that language in the declarations permitting combination of lots also permits the owner of the combined lots to pay one assessment.  Under current law, that assumption is not correct.

The North Carolina Court of Appeals held in Clarement Property Owners Association v. Gilboy that in the absence of declaration provisions specifically permitting the reduction of assessments when lots are combined, the owner of the combined lots must continue to pay assessments as if the lots were not combined.  While the decision involved a community that was not subject to the Planned Community Act, the rationale of the decision appears to apply to all restricted communities that impose assessments for maintenance of common areas.

The Court’s reasoning makes good sense.  The opinion states that a person purchasing restricted lots in a community can fairly assume that the cost of maintaining the common areas will be divided evenly between the lot owners unless the declarations clearly indicate otherwise.  That is, a person buying a lot in a community with 100 lots could safely assume that they would pay 1/100 of the maintenance costs.  Permitting other lot owners to combing their lots resulting in only 90, 80, or even fewer lots would reduce the number of persons sharing in the maintenance costs and consequently increase the cost imposed upon those persons who did not combine lots.

The Gilboy decision has been around for a long time but there are very few appellate decisions that have discussed it.  Our firm currently is involved in an appellate case in which we ask the Court of Appeals to provide more guidance for associations in dealing with combined lots.  If your association has questions or concerns about lot combinations and assessments, you can contact either Bill Cannon or Martha Bradley for additional information.