sorry to resurrect an old topic, I've only just realized that this is happening to me.
document root is /var/www/website/html/
/var/www/website/html/.htaccess is checked
/var/www/website/.htaccess is not
ive checked using filesystem inotify, its not even read at all.
also tried adding an explicit AllowOverride All for /var/www/website inside the virtualhost in case something else was disabling overrides.
Ive tested on 4.1.1, 4.1.3 and 4.1.4.
I am very concerned that it is not working some websites are password protected this way, now they are not!
can you tell me how to get this to work?