Learn more about our management packages today —
Call toll free (888) 565-1226

NC Community Association Legislative Update – May 14, 2015

Thursday, April 30, 2015 was the all-important “crossover deadline” in the North Carolina General Assembly. Without getting too much into the weeds, bills that are “non-budget” must generally have passed one chamber or the other by the crossover deadline to be eligible for consideration during the 2015/2016 session (although House and Senate rules are slightly different when it comes to crossover).  CAVEAT: legislation referred to as “dead” doesn’t always mean “completely dead.”  As the News & Observer noted several years ago: “[Legislative] rules are made to be circumvented, so there are many ways to keep legislation alive.”)

Still, now seems a logical time to look at filed bills that could impact North Carolina 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 of proposals are likely not subject to the crossover deadline due to having an appropriations or finance component.  The final 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.)  Proposals within each set are listed in reverse order, with most recent bills first.

Community Association Bills That Passed One Chamber by Crossover Deadline:

(1) House Bill 513: Real Property/Technical Corrections was filed on April 1, 2015, by Rep. Rob Bryan (R-Mecklenburg) and Sarah Stevens (R-Surry/Wilkes).  The bill has passed the House and is currently in the Senate Judiciary II Committee. The bill is a follow-up to last year’s adopted HB 330: Planned Community Act/Declarant Rights which was intended to clarify language in the Planned Community Act as to successor declarants, whether by transfer or foreclosure. HB 513 would make similar changes to the NC Condominium Act in Chapter 47C. The full bill can be found at http://www.ncleg.net/gascripts/BillLookUp/BillLookUp.pl?Session=2015&BillID=H513  

(2) House Bill 511: Credit Unions/Statutory Changes was filed on April 1, 2015, by Rep. Stephen Ross (R-Alamance), John Bell (R-Craven/Greene/Lenoir/Wayne), John Bradford (R- Mecklenburg), Rick Glazier (D-Cumberland), John Fraley (R-Iredell), Charles Jeter (R-Mecklenburg), Brian Turner (D-Buncombe), and Michael Wray (D-Halifax/Northampton). The bill has passed the House and is currently in the Senate FinanceCommittee. HB 511 would rewrite a section in the “Protection of Purchasers” article of the NC Condominium Act (NCGS § 47C-4-110) that applies to the sale of a unit by persons required to furnish public offering statements by changing the current requirement that any deposit be immediately deposited “in an insured bank or savings and loan association in North Carolina” to “in a federally insured depository institution lawfully doing business in this State . . . .” The full bill can be found at http://www.ncleg.net/gascripts/BillLookUp/BillLookUp.pl?Session=2015&BillID=H511

(3) Senate Bill 581: Study/Subdivision Street Maintenance was filed on March 26, 2015, by Sen. Louis Pate (R-Lenoir/Pitt/Wayne) and Don Davis (D-Greene/Lenoir/Pitt/Wayne). The bill has passed the Senate and is currently in the Committee on Rules, Calendar, and Operations of the House.  The bill would require the Department of Transportation to study the process that must be met for the Department of Transportation to accept subdivision streets dedicated as public on the State highway system for maintenance, including “what the financial impact is on the State and homeowners when subdivision streets are or are not accepted on the State highway system for maintenance. The full bill can be found at http://www.ncleg.net/gascripts/BillLookUp/BillLookUp.pl?Session=2015&BillID=SB+581&submitButton=Go

(4) Senate Bill 332: Register of Deeds-POA Indexing Fees was filed on March 18, 2015, by Sen. Warren Daniel (R-Burke/Cleveland). The bill has passed the Senate and is currently in the Committee on Rules, Calendar, and Operations of the House.  The bill would increase the filing fee at the Register of Deeds for any document “where there are more than 20 distinct entities listed in the instrument, including any attachments and exhibits, that require indexing” (which is often the case with HOA and condominium filings) by $2.00 per entity listed. The full bill can be found at http://www.ncleg.net/gascripts/BillLookUp/BillLookUp.pl?Session=2015&BillID=sb+332&submitButton=Go

(5) House Bill 174: Landlord/Tenant-Foreclosure & Evict. Changes was filed on March 9, 2015, by Rep. John Bradford (R-Mecklenburg) and Skip Stam (R- Wake). The bill has passed the House and is currently in the Committee on Rules and Operations of the Senate.  HB 174 has since passed the House, been forwarded to the Senate, and referred to the Committee on Rules and Operations of the Senate. The bill would incorporate some provisions of the now-expired federal Protecting Tenants at Foreclosure Act of 2009 into state law and provide protections to pre-existing tenants of foreclosed properties. The full bill can be found at http://www.ncleg.net/gascripts/BillLookUp/BillLookUp.pl?Session=2015&BillID=H174

(6) Senate Bill 119: General Statutes Commission Technical Corrections 2015 was filed on February 27, 2015, by Senator Fletcher Hartsell (R-Cabarrus/Union).  The bill has passed the Senate and is currently in the Committee on Rules, Calendar, and Operations of the House.  The bill would attempt to clarify NCGS § 39A-4 pertaining to transfer fee covenants. The original bill in 2010 contained enactment language that did not make it into the final statute and has led to confusion as to whether older transfer fee provisions are still valid.  SB 199 would add language to 39A-4 that the prohibition on transfer fees would apply to “(i) any transfer fee covenant that is recorded after July 1, 2010; (ii) any lien that is filed to enforce a transfer fee covenant that is recorded after July 1, 2010, or purposes to secure payment of a transfer fee that is recorded after July 1, 2010; and (iii) any agreement imposing a private transfer fee obligation entered into after July 1, 2010.”  The full bill can be found at http://www.ncleg.net/gascripts/BillLookUp/BillLookUp.pl?Session=2015&BillID=S119

Community Association Bills Likely Not Subject to Crossover Deadline:

(7) House Bill 882: Community Manager Licensing & Planned Community Act Changes was filed on April 14, 2015, by Rep. Jonathan Jordan (R-Ashe/Watauga), Rodney Moore (D-Mecklenburg), and Frank Iler (R-Brunswick) and was referred to the House Committee on Judiciary II, and if favorable, to Finance. The bill would require that any “Licensed Community Association Property Manager” first obtain a real estate broker license from the NC Real Estate Commission.  The bill also requires that (1) community association property managers be covered by a fidelity bond of at least $20,000; (2) that association property manager contracts not exceed one year and be cancellable with 60 days’ notice; (3) that all associations register with the Real Estate Commission by paying $100; and (4) that all association board members complete four hours of education presented by the Commission at a cost of $75 (failure to complete the training could lead to disciplinary proceedings and a fine).  There are also a host of unrelated amendments to the NC Planned Community Act governing HOA’s, including

  • what must be in a Declaration
  • that common expense payments and votes must be equal
  • that no Declaration amendment process can require more than an 80% vote
  • restrictions on master associations
  • associations may be unincorporated
  • board member positions would be phased in with the sales of lots by the developer
  • surplus funds each year would have to be returned to members without regard for reasonable operating expense surpluses
  • records that must be maintained by the association are detailed, and a requesting owner would be entitled to $10 per day for each day records are denied
  • associations could not foreclose on a lot for failure to pay assessments in the event the lot is the primary residence of an owner

The full bill can be found at http://www.ncleg.net/gascripts/BillLookUp/BillLookUp.pl?Session=2015&BillID=H882

(8) House Bill 731: Community Assn. Commission/Fidelity Bonds was filed on April 14, 2015, by Rep. Jason Saine (R-Lincoln) and Charles Jeter (R-Mecklenburg) and was referred to the House Committee on Finance. The bill is in some ways similar to House Bill 793: HOA’s Fidelity Bonds filed by Rep. Jason Saine, Rodney Moore, and Jonathan Jordan in the last legislative session. The bill would require that HOA and condo associations with annual assessments of $100,000 or more maintain a fidelity bond insuring against theft or dishonesty equal to the annual operating budget, but not more than $1 million. Any management agent or company would have to be covered by a fidelity bond equal to the annual operating budget, but not more than $2 million.  In addition, HB 793 would require an audit in the event: (1) the governing documents require an audit; (2) the associations has annual assessments of $250,000 or more; or (3) an audit is requested by majority vote of the board or by a vote of a majority of the unit owners present at a special or annual meeting. Both the fidelity bond and audit language would also be retroactive to older associations. However, the current bill goes further and includes the creation of a “North Carolina Community Association Commission” that associations register with annually. Also, any person or business must obtain “a community association manager license issued by the Commission” to be licensed as a community association manager. The bill provides $250,000 in nonrecurring funds to establish the Commission. The full bill can be found at http://www.ncleg.net/gascripts/BillLookUp/BillLookUp.pl?Session=2015&BillID=H731

(9) House Bill 514: Community Association Managers Licensure Act was filed on April 1, 2015, by Rep. Rodney Moore (D-Mecklenburg) and was referred to the House Committee on Judiciary IV (and if it receives a favorable recommendation will be referred to the House Finance Committee). HB 514 is a companion bill to SB 563 (see below). The bill would add at least two licensed community association managers to the N.C. Real Estate Commission as well as require after July 1, 2016, that any person, partnership, corporation, LLC, association, firm or other business entity that acts as a community association manager to obtain a community association manager license from the Real Estate Commission. Licensure would require that an applicant (1) be at least 18 years of age; (2) have completed at least 45 hours of classroom instruction from a school approved by the Commission; (3) passed a licensing examination; (4) pay a $200 application fee; (5) submit evidence of a fidelity bond in at least the amount of the budgets of all clients of the manager but not to exceed $2 million dollars; and (6) passed a background check. The bill is quite lengthy and would also require all community associations in North Carolina to register with the state and pay a $100 annual fee (which can increase by $10/year), regardless of whether the association uses a professional manager. Any association that fails to register “shall be prohibited from pursuing any legal remedy otherwise available to it.” NCGS 47C-3-116 (NC Condominium Act) and 47C-3-116 (NC Planned Community Act) would be amended to provide that if “an association fails to maintain registration with the North Carolina Real Estate Commission, then it shall not be able to enforce any liens filed against a lot or lot owner.” The full bill can be found at http://www.ncleg.net/gascripts/BillLookUp/BillLookUp.pl?Session=2015&BillID=H514

(10) Senate Bill 563: Community Association Managers Licensure Act was filed on March 26, 2015, by Sen. Jeff Tarte (R-Mecklenburg) and was referred to the Committee on Rules and Operations of the Senate. Senate Bill 563 is identical to House Bill 514 above.  The full bill can be found at http://www.ncleg.net/gascripts/BillLookUp/BillLookUp.pl?Session=2015&BillID=S563

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

(11) House Bill 931: Const. Amendment/HOA Forecl. & Debt Setoff was filed on April 16, 2015, by Rep. Rodney Moore (D-Mecklenburg), Kelly M. Alexander, Jr. (D-Mecklenburg), and Yvonne Lewis Holley (D-Wake) and was referred to the Committee on Rules, Calendar, and Operations of the House. The bill would provide for a constitutional amendment to be voted on by the citizens of North Carolina to add a new homestead exemption: “A homestead located within a planned community and subject to the governance of a lot owners’ association established by a covenant running with the land is protected from forced sale for the nonpayment of a lien assessed by the association.”  The amendment would also provide that the association could seek an owner’s state income tax refund. HB 931 only impacts planned communities, and not condominiums. The full bill can be found at http://www.ncleg.net/gascripts/BillLookUp/BillLookUp.pl?Session=2015&BillID=HB+931&submitButton=Go

(12) Senate Bill 467: WC/Nonprofit Corp. Volunteers & Officers was filed on March 25, 2015, by Senator Fletcher Hartsell (Cabarrus) and was referred to the Committee on Rules and Operations of the Senate (but the bill was then withdrawn and re-referred to the Senate Committee on Judiciary II. The bill would exclude from the definition of “employee” under the workers’ compensation act “any person performing voluntary service for a nonprofit corporation subject to Chapters 47A [the Unit Ownership Act], 47C [the N.C. Condominium Act], 47F [the N.C. Planned Community Act], 55A [the N.C. Nonprofit Corporation Act], or 59B [Uniform Unincorporated Nonprofit Association Act] of the General Statutes, or any organization exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code, provided that the person receives no remuneration for the voluntary service other than reasonable reimbursement for expenses incurred in connection with the voluntary service.” The bill is intended to resolve some of the questions related to Must North Carolina HOA and Condominium Associations Have Workers’ Compensation Insurance. The full bill can be found at http://www.ncleg.net/gascripts/BillLookUp/BillLookUp.pl?Session=2015&BillID=S467 

May 2015 Update: While SB 467 did not pass either chamber by the crossover deadline, identical language was added to HB 760 (“Regulatory Reform Act of 2015”).  HB 760 passed the House on May 6, 2015, and was referred to the Senate Committee on Agriculture/Environment/Natural Resources and if favorable, re-referred to the Senate Finance Committee.  The full bill can be found at http://www.ncleg.net/gascripts/BillLookUp/BillLookUp.pl?Session=2015&BillID=HB+760&submitButton=Go

(13) House Bill 336: HOA-Joint Legislative Study Committee was filed on March 24, 2015, by Rep. Charles Jeter (R-Mecklenburg), Tricia Ann Cotham (D-Mecklenburg), Jacqueline Michelle Schafer (R-Mecklenburg), and Rodney Moore (D-Mecklenburg) and referred to the Committee on Local Government. The bill would create a Joint Legislative Study Committee on Homeowner’ Associations (6 members appointed by the Speaker of the House and 6 members appointed by the President Pro Tem of the Senate) to study (1) homeowners’ protection and participation in the governance of their homeowners’ associations, particularly as to assessments and record-keeping; and (2) “any other matter reasonably related to subdivision (1) of this section, in the discretion of the committee.” The full bill can be found at http://www.ncleg.net/gascripts/BillLookUp/BillLookUp.pl?Session=2015&BillID=H336

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

Jim Slaughter serves on the North Carolina Chapter Board of the
Community Associations Institute
and served as 2014 national
President of CAI’s College of Community Association Lawyers.

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).