NC Community Association Legislative Update – May 10, 2019

Community Association Legislation

Yesterday, May 9, 2019 was the “crossover deadline” in the North Carolina General Assembly. In short, that means that bills not related to taxes or spending must have passed one chamber to be eligible for consideration during the two-year legislative session. CAVEAT: In terms of legislation, “dead” doesn’t always mean “completely dead.” A News & Observer story once noted that legislative “rules are made to be circumvented, so there are many ways to keep legislation alive.” (For example, proposals sometimes appear later as “technical corrections” in other bills.)

Still, with the crossover deadline behind us, now is a good time to revisit my last legislative blog (NC Community Association Legislative Update – April 23, 2019) to see which bills are still active that could impact North Carolina’s homeowner or condominium associations.

The first set of proposals below passed at least one chamber by crossover deadline and are still subject to consideration.  The second set is likely not subject to the crossover deadline and could still be considered. The third set of proposals did not cross a chamber by crossover, are likely not exempt from crossover rules, and are likely dead for the two-year session.  (But reread the “dead” caveat above.) 

Community Association Bills
That Passed One Chamber by Crossover Deadline:

(1) House Bill 594: HOAs – Leased Properties was filed on April 3, 2019 by Rep. William Richardson (Cumberland), Rep. Kyle Hall (Rockingham/Stokes, Surry), Rep. Destin Hall (Caldwell), Rep.  George Cleveland (Onslow), Rep. Edward Goodwin (Bertie, Camden, Chowan, Perquimans, Tyrrell, Washington), and Rep. Shelly Willingham (Edgecombe, Martin). The bill does not apply to condominiums, but would place restrictions on the type of rental amendments a planned community can adopt. THE WORDING OF HB 594 HAS BEEN AMENDED SINCE THE LAST UPDATE.

The full bill can be found at https://www.ncleg.gov/BillLookUp/2019/HB%20594

(2) House
Bill 806: HOA/Condo Crime & Fidelity Insurance Policies 
was filed on April 16,
2019 by Rep. Larry Strickland (Harnett, Johnston) and Rep. Jason Saine
(Lincoln). This bill is identical to legislation introduced in the 2017 Session
(see NC
Community Association Legislative Update – Fidelity Coverage & Audits
 for more details)

HB 806 would:

  • Require HOA/Condo Crime and Fidelity Coverage. HOA or condo
    associations with annual assessments for common expenses of at least $25,000 or
    with $25,000 or more total funds invested or on deposit would have to obtain
    and maintain a crime and fidelity insurance policy. The policy would have to
    provide coverage in the amount of 125% of the total funds on deposit or
    invested by the executive board plus 125% of the annual budget of the unit
    owners’ association as of the last day of the association’s last fiscal year,
    but not more than one million dollars. In addition, any management company or
    agent to an HOA or condo association would have to obtain and maintain a crime
    and fidelity insurance policy. The policy would have to provide coverage in the
    amount of the total annual budgets of all clients of the management agent or
    company, but not more than two million dollars.
  • Require HOA/Condo Financial Audits. HOA or condo
    associations with annual revenues or expenditures or total accounts balances of
    $150,000 or more would be required to have an annual independent financial
    audit conducted by a Certified Public Accountant (CPA). The audit would have to
    be completed no later than one year after the end of the fiscal year and made
    available upon request to lot owners within 30 days after completion.

If adopted, HB 806 would take
effect on January 1, 2020. The crime and fidelity bond provisions would apply
to all planned communities and condominiums, whenever created. The audit
provisions would apply to all planned communities whenever created and to all
condominium associations created on or after October 1, 1986 (older condominiums
already have statutory audit requirements). The full bill can be found at https://www.ncleg.gov/BillLookUp/2019/HB%20806

(3) House Bill 920: Condominium
Association Changes 
was filed on April 16, 2019 by Rep. Jon Hardister (Guilford),
Rep. Deston Hall (Caldwell), and Rep. Kyle Hall (Rockingham, Stokes,
Surry).  The bill would make several changes
to the NC Condominium Act regarding the creation of condominiums and the
contents and amendment of condominium declarations, including:

  • Condominium plats and
    plans would no longer require the certification by an architect or engineer
  • If no time limit is placed
    on developer or special declarant rights, those would expire 7 years from when
    the declaration was recorded; however, if the declaration so provides, a 67%
    vote of the association (excluding the Declarant) could extend such development
    or special declarant rights for up to 10 years
  • Any amendments proposed
    by the board that are subsequently adopted to (a) cure ambiguity or establish
    marketable title; (b) conform to loan requirements; (c) comply with statutes or
    ordinances; or (d) make reasonable accommodations as to disabilities shall
    relate back and be considered adopted as of the original recording date of the
    declaration.
  • A process is provided by
    which a county clerk where a condominium is located could reform the
    declaration to “resolve ambiguities, errors or inconsistencies” or to correct
    “scrivener’s errors.”

HB 920 would apply to all condominiums created by the filing of a
declaration on or after October 1, 1986.

The full bill can be found at https://www.ncleg.gov/BillLookUp/2019/HB%20920

(4) House Bill 620:
Subdivision Streets/DOT Acceptance
(An Act to Make
Changes to State Law Concerning the Acceptance of Subdivision Streets by the
Department of Transportation, to Require the Department to Compile a County
Public Street Information Database, and to Regularly Update and Publish the
Subdivision Roads Manual) was filed on April 4, 2019. THIS BILL HAS BEEN AMENDED
SIGNIFICANTLY, and is now HB 620/SB 840 and titled “Street
Database/Manual/Public Record Except.” The bill would require a “public street
information database” and the state to update its “Subdivision Roads Minimum
Construction Standards Manual.” The full bill can be found at https://www.ncleg.gov/BillLookUp/2019/H620

Community Association Bills Likely Not Subject to Crossover Deadline (Could Possibly Be Considered in 2019 or 2020):

(1) Senate Bill
362: Annual Report Standardization
was filed on
March 26, 2019 by Sen. Jim Perry (Lenoir, Wayne) and Sen. Andy Wells
(Alexander, Catawba) and, after being reported favorably out of the Committee
on Judiciary, was referred to the Committee on Rules and Operations of the
Senate. The bill would revise the submission of annual reports to the Secretary
of State, including those of nonprofit corporations.

The full bill can be found at https://www.ncleg.gov/BillLookUp/2019/S362

Community Association Bills That Did Not Pass Either Chamber by Crossover Deadline (Likely Dead, But See Caveat at Top):

For more details and the legislative history on any of the following proposals, visit NC Community Association Legislative Update – April 23, 2019.

(1) House Bill 189: Workers’
Comp/Sole Proprietors Must Have Coverage.
The
full bill can be found at https://www.ncleg.gov/BillLookUp/2019/H189

(2) Senate Bill
465: Reduce Speed in Residential Subdivisions.

The
full bill can be found at https://www.ncleg.gov/BillLookUp/2019/S465

(3) House Bill 750: Clarify
Deed Restrictions/Solar Collectors
. The full bill can be found at https://www.ncleg.gov/BillLookUp/2019/H750

(4) House Bill 877: HOA
and Condo Declaration Amendments
. The full bill can be found at https://www.ncleg.gov/BillLookUp/2019/HB%20877

(5) Roads Bills.

  • Senate Bill 480: Subdivision
    Streets/DOT Acceptance
    (An Act to Make Changes to State Law
    Concerning the Acceptance of Subdivision Streets by the Department of
    Transportation, to Require the Department to Compile a County Public Street
    Information Database, and to Regularly Update and Publish the Subdivision Roads
    Manual).
    The full bill can be found at https://www.ncleg.gov/BillLookUp/2019/S480
  • House Bill 448: Planning/Development
    Changes
    (An Act to Reorganize, Consolidate,
    Modernize, and Clarify Statutes Regarding Local Planning and Development
    Regulations).
    The full bill can be found at https://www.ncleg.gov/BillLookUp/2019/H448
  • Senate Bill 422: Planning/Development
    Changes
    (An Act to Reorganize, Consolidate,
    Modernize, and Clarify Statutes Regarding Local Planning and Development
    Regulations).
    The full bill can be found at https://www.ncleg.gov/BillLookUp/2019/S422

FYI, the NC Legislative Action Committee (NC-LAC) is a committee of the Community Associations Institute. The NC-LAC monitors and influences legislation that affects community associations and its members talk with legislators on issues of concern to HOAs and condos. Two of our firm’s attorneys, Steve Black and Harmony Taylor, serve as volunteers on the LAC. To properly do its job, the NC-LAC needs funds for letters, mailings and other costs. Please consider a contribution to the NC-LAC by visiting https://www.cai-nc.org/page/WhyDonate?&hhsearchterms=%22lac%22

If you have specific questions on any of the above bills, feel free to contact me or another attorney at our firm. If there are developments on these or other relevant legislative proposals, additional information will be posted.

Author: Jim Slaughter
Articles have been Reprinted with permission from Black, Slaughter, Black.

* These articles and related content on this website are provided without warranty of any kind and in no way constitute or provide legal advice. You are advised to contact an attorney specializing in Association Management for legal advice related to your specific issue and community. Some articles are provided by thrid parties and online services. Display of these articles does in no way endorse the products or services of Community Association Management by the author(s).