## Facts

- Starboard by the Sea was a North Carolina condominium with 139 residential units in 33 buildings, managed by Starboard Association, Inc. (the association).
- Jeffrey and Donna Johnson (and co-owners Gary and Jo Proffit) owned a unit in Building 33, one of three units in that building.
- Under amendments to the recorded condominium documents, each Building 33 unit had a 1.06160% undivided interest in the condominium’s common areas and facilities.
- The Unit Ownership Act (N.C. Gen. Stat. ch. 47A) and Starboard’s declaration and bylaws governed maintenance of common areas and the allocation of common expenses and assessments.
- In 2005, the association completed renovations for the buildings other than Building 33 and imposed a special assessment on units in Buildings 1–32 only (excluding Building 33).
- In 2007, after Building 33 owners sought similar work, the association approved a special assessment totaling $162,000 for Building 33 renovations.
- The 2007 assessment was charged only to the three Building 33 units and was divided equally, making each unit responsible for $54,000 (one-third of the total), rather than being allocated by each unit’s undivided interest percentage.
- The Johnsons paid $27,000 under protest and then stopped paying.
- The association recorded a claim of lien against the unit and initiated a foreclosure proceeding to collect the unpaid portion of the 2007 assessment.
- After an evidentiary hearing, the trial court concluded the 2007 assessment violated the Unit Ownership Act and the condominium documents because it was not uniform and not computed according to the owners’ percentage undivided interests; the court dismissed the foreclosure action with prejudice under Rule 41.
- A divided Court of Appeals agreed the assessment was unlawful on uniformity and pro rata grounds, and the association appealed to the Supreme Court of North Carolina based on the partial dissent.

## Issues

1. Whether the trial court erred by dismissing the association’s foreclosure action under Rule 41 on the ground that the lien and foreclosure were based on an unlawfully administered special assessment rather than a valid debt.
2. Whether the 2007 special assessment—imposed only on Building 33 and divided equally among its three units—was lawful under the Unit Ownership Act and Starboard’s declaration/bylaws requiring uniform, pro rata allocation based on undivided interests in common areas.
3. Whether the association could avoid the uniform and pro rata requirements by treating the 2007 Building 33 levy as part of a larger renovation effort tied to earlier assessments.

## Decision

- The Supreme Court of North Carolina affirmed the Court of Appeals.
- The Court held the trial court’s unchallenged findings of fact were binding on appeal, and those findings supported the conclusion that the 2007 assessment was improperly administered.
- The Court agreed the Building 33-only assessment was not uniform and was not computed in accordance with the owners’ percentage undivided interests in the common areas and facilities, as required by the Unit Ownership Act and the amended declaration.
- Because the lien and foreclosure claim rested on an improperly administered assessment, the association’s claim was not based on a valid debt; therefore, dismissal of the foreclosure action under Rule 41 was proper.

## Legal Principles

- In a condominium created and operated under the Unit Ownership Act, maintenance, repair, replacement, and improvements to common areas must be carried out as provided in the Act and the condominium’s bylaws and declaration.
- When governing law and condominium documents require assessments to be uniform and allocated pro rata according to each unit’s undivided interest in the common areas, an association may not impose a common-area assessment only on a subset of owners or allocate it by equal shares unless the controlling documents authorize that method.
- A claim of lien and foreclosure proceeding to collect assessments requires a valid underlying debt; if the assessment is unlawfully administered, the lien and foreclosure cannot stand.
- On review of an involuntary dismissal under Rule 41, the appellate court examines whether competent evidence supports the trial court’s findings and whether those findings support the conclusions of law and judgment; unchallenged findings bind the parties on appeal.

## Conclusion

The North Carolina Supreme Court held that Starboard Association’s 2007 special assessment for Building 33 renovations—charged only to Building 33 and split equally among its three units—violated statutory and contractual requirements that common-area assessments be uniform and allocated pro rata based on undivided interests; because the foreclosure was based on that invalid assessment rather than a valid debt, the trial court properly dismissed the foreclosure action under Rule 41, and the Supreme Court affirmed.


In re Johnson, 741 S.E.2d 308 (2012)