Homeowners Face Foreclosure After Developer-Run HOA Raised Monthly Fees to $2.5K

Homeowners in a North Carolina subdivision are worried for the future of their homes, after the community's developer-controlled homeowners association jacked up monthly fees this week to $2,500, up from $158 just a few years ago.

Residents of the Magnolia Cove subdivision in Catawba County are concerned about liens being put on their homes if they are unable to pay, and the possibility of bankruptcy or foreclosure.

After the developer-controlled HOA voted this week to raise dues, homeowners will now see their monthly fee increase to $2,500 on Jan. 1, 2027—and many fear they will lose their homes if they are unable to pay the steep fees on top of their mortgages.

“My concern is that, come January, I may have to walk out of this house and never look back,” a homeowner, who wished to stay anonymous for fear of legal retaliation, tells Realtor.com®. “I'll have to find a new place to live, which will cost money. The equity that I would have in this home would be gone, and I would like to have been able to leave that to my son and his family someday.”

The Magnolia Cove HOA is run by the community’s developer, Aaron Guess, and his company Story Homes. Just four years ago, dues for the 80-home community sat at a reasonable $158 per month, resident Jill Menson told WSOC. Those fees rose first to $350 and then $1,250 earlier this year.

Prior to a meeting held on Monday evening, there was potential for next year’s fee to be even higher.

An email sent to residents reads, “Starting January 1, 2027, the assessment for each lot will be $7,500 per month. That works out to $90,000 per lot for the year, and it’s the figure behind the $2,070,000 in Base Assessments shown in your budget packet.

“The increase is mainly driven by the Association’s legal and collection costs from owner accounts that haven’t been paid,” the email, which residents shared with WSOC, continued. “Owners who stay current help bring those costs down over time.”

The proposed budget shared with residents, which was created around the $7,500 per month figure, showed that $1.1 million of the collected HOA fees—over half of the $2.07 million budget—would be put toward the HOA's legal fees.

Landscaping maintenance and landscaping refresh/install were allotted just $96,000 and $95,500, respectively.

At the HOA meeting on Monday evening, residents were told their fees would increase to $2,500 per month, rather than the $7,500 they were initially informed of.

This is not the first conflict between homeowners at Magnolia Cove and the HOA overseen by Guess.

In 2022, a number of residents told WSOC that Guess had failed to deliver on promises of what they were told their HOA fees would fund, including a community pool and mailboxes that were never built.

Due to these complaints and an alleged lack of transparency regarding HOA finances, more than 20 homeowners sued the HOA in early 2024. However, the claims were either voluntarily dropped by the homeowners or dismissed by the court, and none of them reached a jury, according to a statement from the Magnolia Cove HOA.

The HOA then countersued the homeowners, whom a jury found liable for defamation. The jury awarded monetary and punitive damages, the exact figures for which will be determined at a further trial next year, according to the statement, which was provided to Realtor.com by the HOA's attorney.

The HOA says that  large legal expenses were amassed while defending the claims, which greatly affected the 2027 budget.

“Those legal bills are now the single largest item in the Association’s budget. The responsibility for paying those bills rests with the owners,” the statement reads.

The high budget and monthly fees are additionally caused by a number of homeowners failing to pay assessments, the HOA says.

“Unpaid assessments do not vanish; the cost is carried by the owners who do pay,” the statement continues. “The current assessment level of $2,500 per month is a direct result of those two facts: the cost of defending the lawsuits that owners brought and lost, and years of widespread delinquency.”

The statement concluded by saying that the board does not wish to charge such high monthly fees and aims to bring assessment numbers down once the legal costs and past-due accounts are paid. But, “until then, the bills have to be paid by the owners.”

However, not all residents may be able to afford to remain in their home until the assessments return to normal rates.

According to the Catawba County Register of Deeds, at least one resident in the community is already facing foreclosure after having a lien placed on their home. It is not confirmed that the foreclosure is related to the HOA assessments.

Greta Turillo, founder of the HOA Accountability Project, North Carolina, tells Realtor.com that funding for impact litigation, as well as homeowner education, public awareness, and housing choice are the keys to ensuring fair practices from HOAs across the state.

“That is the only way that North Carolina is going to see meaningful change in the HOA industry,” says Turillo.