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NC Law affects foreclosures

The N.C. General Assembly recently passed, and the governor signed, House Bill 165. The final bill is a stripped-down version of the original bill, which would have placed enormous administrative burdens on volunteer HOA boards and their managers.

Two sections of the bill will change how HOAs (both condominiums and planned communities) proceed with the foreclosure process. Beginning Oct. 1, HOA boards must specifically vote to authorize the foreclosure of a lien, and they cannot do so unless the balance owed is 90 days or more past due.

I generally recommend that HOAs not file a lien (much less a foreclosure) unless an account is at least 90 days past due, so this provision of the bill shouldn’t have much impact.

But by requiring HOA boards to specifically authorize each foreclosure filing, the legislature is trying to force the boards to take more responsibility for that important decision, rather than delegating it a committee or their management company.

Other provisions in the bill (which become effective Jan. 1) will substantially increase the types of disclosure required of sellers and their real estate agents when selling a home in a community governed by an HOA.

Too often in my practice I encounter homeowners who don’t understand what their HOA is or does, or who claim that they weren’t even aware that their community had a mandatory HOA. The new disclosure requirements should eliminate most or all that confusion.

Under the bill, the N.C. Real Estate Commission is required to develop a new disclosure form to be used in residential real estate transactions, which the bill refers to as the “owners association and mandatory covenants disclosure statement.” Those disclosures include:

 Whether the property is subject to mandatory covenants, conditions and restrictions, including but not limited to the obligation to pay assessments.

 Contact information for the HOA president or the HOA’s manager.

 The amount of the regular (monthly, quarterly, annual) assessments.

 Whether there are any services provided by the HOA that are paid for through assessments.

 Whether any assessments have been approved by the HOA as to the property but not yet paid.

 Whether there are any unpaid judgments against the HOA or any pending lawsuits involving the HOA.

 Any fees charged by the HOA or its management company payable upon the sale of a lot (i.e., “transfer fees”).

The new bill also requires the N.C. Real Estate Commission to develop a brochure explaining to potential purchasers what restrictive covenants are, and warning that unpaid assessments can result in a foreclosure against the home.

The full text of the bill can be found at:



Authors: CharlotteObserver.com: Michael Hunter

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“Ask The Experts” Articles have been Reprinted with permission from the Charlotte Observer

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