Charlotte HOA files lawsuit to get landlords out of business

The Miranda neighborhood and American Homes 4 Rent settled last year. HOA’s experience could point to future challenges for neighborhoods hoping to turn off investors.

CHARLOTTE, NC — While Wall Street-backed investors are buying thousands of homes and converting them to rents, some Charlotte neighborhoods are changing their rules in hopes of keeping those businesses out, but when homeowners in the Miranda division tried, they ended up on a tennis court.

Mecklenburg County court records show that American Homes 4 Rent sued the Miranda Homeowners Association in 2019 after homeowners regulated and capped the percentage of rents in the neighborhood at 10%. Court records reveal that the company previously built more than 20 homes in the West Charlotte neighborhood, which accounts for nearly 25% of all homes in Miranda.

“Yes, they have a large portion of the homes,” said association attorney James Galvin. “Their biggest concern was entering this face of the company and changing the character and culture of the neighborhood into a rental community.”

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Galvin said the goal was to preserve a culture occupied by the owner. American Homes 4 Rent has challenged the new rule, among other things, according to court records.

“Since the AMH acquisition, other plot owners within Miranda have engaged in a systematic scheme to impede AMH’s use and development of AMH property and AMH equity,” the lawsuit said.

The complaint also said that the neighborhood’s anti-leasing amendment “makes AMH property unusable for the intended purpose for which it was acquired and improperly conflicts with AMH’s bona fide leases and contains provisions that violate the privacy of AMH and its potential tenants…”

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Elizabeth Carter has lived in an American Homes 4 Rent property for two years. She’s now moving out of the Miranda neighborhood to downsize. And while Carter understands her neighbors’ concerns, she said tenants deserve a place to live, too.

“Even if you buy your own home, you can still bring chaos and disorder into your neighborhood,” Carter said. “I feel everyone should have a home if they can afford it.”

As part of last year’s settlement, Galvin said the company agreed to sell five of its properties and let Miranda set the number of rents at 10%, but that American Homes 4 Rent maintained the ability to continue to rent out its 16 homes for as long as the company owns them. He said the company is in the process of selling those five homes, which would bring the percentage of AMH homes in the neighborhood to less than 20%.

“There was no clear answer to be sure that the court would come,” Galvin said of the neighborhood settlement decision. “(A judge) could have gone either way.”

Galvin, who specializes in real estate law, said there is a lesson to be learned from the case.

“You’re going to want to be very careful about how that adjustment goes, and be frankly prepared for a legal battle,” he said. “My suspicion is that if you change the lease right to a company after you’ve already bought, they won’t just pull out. They will appeal on that and what the court will do is unknown.”

With no legal precedent, Galvin believes the most logical way forward is to either cap rents before businesses buy into the neighborhood or, in the most likely scenario, exclude existing rents from any new restrictions, so people don’t have to move.

“The wave is here. It’s coming, and the sooner you file an amendment, the better reasons you have to prevent a company from coming in,” Galvin said. “If you think you want to prevent this from happening in your community, you want to organize now.”

It’s also important that homeowners’ associations are set up legally and with the appropriate authority, Galvin said. He said buyers can confirm this by asking their closing attorney if there has been a disclosure from the Homeowners Association. He said that associations should consult a lawyer if they were unsure of their authority.

At the same time, homeowners with no bonds and bond restrictions, Galvin said, have few remedies.

“If they are able to persuade a number of neighboring owners to work together and they 100% decide to subject the neighboring property to such restrictions, then they can do so,” he said. “The effort required and the 100% requirement often make trying very difficult.”

Highland Creek and The Avalon at Mallard Creek Townhomes have modified their neighborhood rules to address single-family rentals.

American Homes 4 Rent owns homes in multiple communities across the region. The company declined to comment for this story.

The Charlotte Observer, a member of the Charlotte Press Cooperative, along with the News & Observer of Raleigh, have created an interactive map to track corporate rental homes in North Carolina. Click here to view that map and find corporate-owned properties in your area.

Charlotte Collaborative Press will host the Local News Impact Summit on Friday to discuss affordable housing solutions. Sessions include a look at the impact of investment firms on Charlotte’s residential stock.

Attending the summit is free, either in person or virtually. You can register here.

The CJC is also hosting the Community Housing Information Fair Thursday night. You can register here.

Contact Nate Morabito at [email protected] and follow him FacebookAnd Twitter And Instagram.

WCNC Charlotte is part of six major media companies and other local organizations that produce I Can’t Afford to Live Here, a collaborative reporting project focused on solutions to Charlotte’s affordable housing crisis. It is a project of the Charlotte Journalism Collaborative, with support from the Local Media Project, an initiative of the Solutions Journalism Network with the support of the Knight Foundation to strengthen and revitalize local media ecosystems. See all of our reports at charlottejournalism.org.

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