CHARLOTTE, N.C. — As Wall Street-backed investors buy up thousands of homes and turn them into rentals, some Charlotte neighborhoods are changing their rules in hopes of keeping those companies out, but when homeowners in the Miranda subdivision tried that, they ended up in court.
Mecklenburg County court records show American Homes 4 Rent sued the Miranda Homeowners Association in 2019 after homeowners organized and capped the percentage of rentals in the neighborhood at 10%. Court records reveal the company previously built more than 20 homes in the west Charlotte neighborhood, which accounted for roughly 25% of all houses in Miranda.
"They have, yes, a big chunk of homes," association attorney James Galvin said. "Their big concern was this corporate face coming in and changing the character and culture of the neighborhood into a rental community."
Galvin said the goal was to preserve an owner-occupied culture. American Homes 4 Rent challenged the new rule, among other things, according to court records.
"Since AMH's acquisition, other owners of lots within Miranda have engaged in a systemic scheme to obstruct AMH's use and development of the AMH Property and AMH's property rights," the lawsuit said.
The complaint also said the neighborhood's anti-leasing amendment "renders the AMH property unusable for their intended purpose for which it was acquired and improperly interferes with AMH's bona fide leasing operations and contains provisions that are invasive to the privacy of AMH and its prospective 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 can understand her neighbors' concerns, she said renters deserve a place to live, too.
"Even if you purchase your own home, you can still bring chaos and confusion to your neighborhood," Carter said. "I feel like everyone should have a home if they can afford it."
As part of a settlement last year, Galvin said the company agreed to sell five of its properties and let Miranda cap the number of rentals at 10%, but American Homes 4 Rent maintained the ability to continue renting its other 16 homes as long as the company owns them. He said the company is in the process of selling off those five homes, which will bring AMH's percentage of homes in the neighborhood to just under 20%.
"There was no clear answer to be sure that the court would arrive at," Galvin said of the neighborhood's decision to settle. "(A judge) could have gone either way."
Galvin, who specializes in real estate law, said there's a lesson to learn from the case.
"You're going to want to be very careful how you go about getting that amendment and honestly, be prepared for a legal battle," he said. "My suspicion is if you change the right to rent on a company after they've already bought in, they will not just walk away. They will challenge that and what a court will do is unknown."
With no legal precedent, Galvin believes the most reasonable way forward is to either cap rentals before companies buy in a neighborhood or, in the more likely scenario, exclude existing rentals from any new restrictions, so people are not forced to move.
"The wave is here. It's coming and the sooner you can get an amendment filed, the better grounds you'll have to stop a company coming in," Galvin said. "If you believe you would like to prevent this from happening in your community, you would want to organize now."
Galvin said it's also critical that homeowners associations are created legally and with the proper authority. He said buyers can confirm that by asking their closing attorney if there's a homeowners' association disclosure. Associations, he said, should consult with an attorney if unsure of their authority.
Galvin said homeowners without associations and deed restrictions, meanwhile, have little recourse.
"If they are able to convince some number of adjacent owners to band together and 100% decide to subject contiguous property to restrictions like that, then they could do so," he said. "The effort required and the 100% requirements make it often too difficult to attempt."
Highland Creek and The Avalon at Mallard Creek Townhomes previously amended their neighborhood rules to address single-family rentals.
American Homes 4 Rent owns homes in multiple communities throughout the area. The company declined comment for this story.
The Charlotte Observer, a member of the Charlotte Journalism Collaborative, along with the News & Observer of Raleigh, created an interactive map tracking corporate landlord rental homes in North Carolina. Click here to view that map and find corporate-owned properties in your area.
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