4th Cir.: Carpenter v. Douglas Management- HOA Fees are Not Transfer Fees under NCGS 39A

Summary:

The Fourth Circuit affirmed the dismissal of a class action complaint filed by a North Carolina homeowner who alleged that fees charged by an HOA management company and its software provider for real estate closing documents violated the state’s transfer fee statute and constituted unfair and deceptive trade practices.

Plaintiff Susan Carpenter, acting as trustee for the H. Joe King, Jr. Revocable Trust, sold two properties subject to homeowners’ associations. To complete the closings, she was required to obtain “statements of unpaid assessments” from the management company, William Douglas Management, through the HomeWiseDocs.com platform. Carpenter was charged fees ranging from $175 to $255 for those documents. Alleging these charges were unreasonable, she brought a putative class action asserting violations of North Carolina’s “transfer fee covenant” ban (N.C. Gen. Stat. § 39A-1 et seq.), the Unfair and Deceptive Trade Practices Act (UDTPA), and other related claims.

The Fourth Circuit, applying North Carolina law, held that these charges did not qualify as “transfer fees” under N.C. Gen. Stat. § 39A-2(2), because they were “payable upon the preparation” of the assessment statements—not “upon the transfer” of the property or “for the right to make or accept” such transfer. The court noted that the statute’s exclusion for “reasonable fees” to prepare such statements did not imply that unreasonable ones were automatically unlawful. The court also found no violation of the UDTPA, emphasizing that allegations of excessive pricing, absent more, do not establish a claim under the statute. Other claims—unjust enrichment, negligent misrepresentation, civil conspiracy, and violation of the North Carolina Debt Collection Act—were deemed derivative and likewise dismissed.

Commentary:

Importantly, the court sidestepped broader equitable considerations, including the fact that these fees are often unavoidable for sellers, who are functionally compelled to pay them in order to satisfy closing requirements set by lenders and title insurers. Though the North Carolina General Assembly amended the HOA statutes in 2020 to cap such fees going forward (N.C. Gen. Stat. § 47F-3-102(13a)), this case illustrates how difficult it is to retroactively challenge those charged before the amendment.

With proper attribution,  please share this post.