2013 NC Community Association Legislative Update

Courtesy of my colleague, Greensboro attorney Jim Slaughter, who keeps close tabs on the happenings in Raleigh that affect NC community associations:

With about half of this year’s portion of the 2013-2014 Legislative Session over, now seems a good time to review some of the community association related bills introduced so far.  Most of the following have only been filed and received little discussion, so it’s hard to know where things may head.  Also, things in the General Assembly can be hectic, so I hope everything is accurate (a link is attached at the end of each paragraph to take you to details on any specific bill).

 

If adopted, the bills listed below would in some way impact homeowner or condominium associations in North Carolina (most recently filed bills are listed first):

(1) House Bill 871: Regulate Community Association Managers was filed on April 11 by Representatives Rodney Moore (Mecklenburg), Frank Iler (Brunswick), Kelly Alexander (Mecklenburg), William Brawley (Mecklenburg), Beverly Earle (Mecklenburg), Elmer Floyd (Cumberland), Yvonne Lewis Holley (Wake), and Mitchel S. Setzer (Catawba).  The bill would allow the Real Estate Commission to regulate community association property managers.  Beginning October 1, 2013, no person would be permitted to act as a community association property manager without being a licensed real estate broker.  No management contracts could exceed one year, and all would have to include an “escape clause” (that term is not defined).  In addition, the bill would require that all community associations register with the Real Estate Commission annually with the names and addresses of board members, the name of the real estate broker managing the association, and by paying $100.

http://www.ncga.state.nc.us/gascripts/BillLookUp/BillLookUp.pl?Session=2013&BillID=H871

 

(2) House Bill 883: Education Required/Community Association Board Members was filed on April 11 by Representatives Rodney Moore (Mecklenburg) and Kelly Alexander (Durham).  The bill would amend the laws regulating real estate brokers and salespersons to require that board members of community associations complete four hours of training within 60 days of election on topics such as “the laws, management, and functions of community associations.”  The bill is unclear as to whether it would apply  to all condominiums and homeowner associations, regardless of when created.

http://www.ncga.state.nc.us/gascripts/BillLookUp/BillLookUp.pl?Session=2013&BillID=H883

 

(3) House Bill 793: HOA’s/Fidelity Bonds was filed on April 10 by Representatives Jason Saine (Lincoln), Rodney Moore (Mecklenburg), and Jonathan Jordan (Ashe/Watauga).  The bill would require that HOA and condo associations with annual assessments in excess of $100,000 maintain a fidelity bond in the amount of $1 million.  Any management company would have to be covered by a fidelity bond of $1 million or more.  In addition, all associations with annual assessments of more than $250,000 would be required to have an independent financial audit annually.  If adopted, the bill amends both the Planned Community Act and Condominium Act to apply to all associations, regardless of when created.  HB 793 has been referred to the House Judiciary Committee, Subcommittee B.

http://www.ncga.state.nc.us/gascripts/BillLookUp/BillLookUp.pl?Session=2013&BillID=H793

 

(4) House Bill 553: Amend Carteret County Occupancy Tax was filed on April 3 by Representative Pat McElraft (Carteret/Jones).  This local bill would allow Carteret County to levy an additional one percent room occupancy and tourism development tax on the “rental of any room, lodging, or similar accommodation furnished by any . . . condominium . . . within the county that is subject to sales tax imposed by the State.”  HB 553 has been referred to the House Committee on Government.

http://www.ncga.state.nc.us/gascripts/BillLookUp/BillLookUp.pl?Session=2013&BillID=H553

 

(5) House Bill 278: HOA’s/Voluntary Prelitigation Mediation was filed on March 13 by Representatives Deborah Ross (Wake), Duane Hall (Wake), Kelly Alexander (Durham), Beverly Earle (Mecklenburg), Susan Fisher (Buncombe), Rosa Gill (Wake), Pricey Harrison (Guilford), Jonathan Jordan (Ashe/Watauga), Marvin Lucas (Cumberland), Chuck McGrady (Henderson), Rodney Moore (Mecklenburg), and Michael Wray (Halifax/Northampton).  The bill would allow for prelitigation mediation of disputes between associations and owners (except disputes regarding assessments) through local community mediation centers.  All associations would have to notify members in writing each year of the right to mediation, and the implementation of mediation would toll any statutes of limitation or repose with respect to claims.  HB 278 has been referred to the House Judiciary Committee, Subcommittee A.

http://www.ncga.state.nc.us/gascripts/BillLookUp/BillLookUp.pl?Session=2013&BillID=H278

 

(6) House Bill 331: HOA’s Uniform Lien Procedure was filed on March 18 by Representatives Rob Bryan (Mecklenburg), Paul “Skip” Stam (Wake), Robert Brawley (Iredell), and Phil Shepard (Onslow).  The bill would standardize procedures for collections and enforcing claims of lien, stabilize title issues by validating past nonjudicial foreclosures, and makes other technical corrections to the Condominium and Planned Community Acts.  HB 331 was recommended by the Real Property Section of the NC Bar Association and is part of the Bar Association’s legislative agenda.  HB 331 has been referred to the House Judiciary Committee, Subcommittee B.

http://www.ncga.state.nc.us/gascripts/BillLookUp/BillLookUp.pl?Session=2013&BillID=H331

 

(7) Senate Bill 228: HOA’s/Limited Common Elements/Amend of Declaration was filed March 7 by Senators Bill Cook (Beaufort/Camden/Currituck/Dare/Gates/Hyde/Pasquotank/Perquimans) and Ronald Rabin (Harnett/Johnson/Lee).  The bill would require that owners of condominiums or HOA’s afford access through limited common elements when necessary to conduct maintenance, repair or replacement activities.  In addition, the bill provides that any amendment to an HOA declaration adopted by the association (regardless of when the association was created) that follows the provisions of the Planned Community Act or the procedures provided in the declaration would be presumed valid and enforceable.  If adopted, the bill provides that it’s amendments to the Planned Community Act apply to all HOA’s, regardless of when created.  SB 228 has passed both the Senate and the House.

http://www.ncga.state.nc.us/gascripts/BillLookUp/BillLookUp.pl?Session=2013&BillID=sb228&submitButton=Go

 

(8) House Bill 175: No HOA’s Home Foreclosures was filed on February 27 by Representatives Rodney Moore (Mecklenburg), Kelly Alexander (Mecklenburg), Susi Hamilton (Brunswick/New Hanover), Larry Bell (suplin/Sampson/Wayne), Dana Bumgardner (Gaston), Susan Fisher (Buncombe), Larry Hall (Durham), Pricey Harrison (Guilford), Yvonne Lewis Holley (Wake), and Larry Pittman (Cabarrus).  The bill would prohibit homeowner and condominium associations from foreclosing on association assessment liens.  Associations would be limited to filing liens or bringing a lawsuit against delinquent owners. HB 175 has been referred to the House Judiciary Committee, Subcommittee A.

http://www.ncga.state.nc.us/gascripts/BillLookUp/BillLookUp.pl?Session=2013&BillID=H175

 

(9) Senate Bill 18: Amend Locksmith License Act was filed January 30 by Senators Stan Bingham (Davidson/Montgomery), Bill Cook (Beaufort/Camden/Currituck/Dare/Gates/Hyde/Pasquotank/Perquimans), Clark Jenkins (Bertie/chowan/Edgecombe/Hertford/Martin/Northampton/Tyrrell/Washington), and Gene McLaurin (Anson/Richmond/Rowan/Scotland/Stanly).  The bill would amend the Locksmith Licensing Act to require that any person providing locksmith services for a “multi-family unit, such as an apartment or condominium” must be licensed or face a misdemeanor or a felony, depending on the offense.  SB 18 has been referred to the Senate Finance Committee.

http://www.ncga.state.nc.us/gascripts/BillLookUp/BillLookUp.pl?Session=2013&BillID=SB18&submitButton=Go

If you have questions about a specific bill, feel free to contact me. I’ll try to provide more information as the legislative session develops.

Jim

_______________________________________________________
JAMES H. SLAUGHTER
ROSSABI BLACK SLAUGHTER, PA

ATTORNEYS AT LAW

Greensboro Offices:P.O. Box 41027

Greensboro, NC 27404

336-378-1899

Charlotte Offices:
301 McCullough Drive, 4th Floor
Charlotte, NC 28262
704-970-1593

jslaughter@lawfirmrbs.com
Firm Web Site: www.lawfirmrbs.com
Parliamentary Web Site: www.jimslaughter.com

7 thoughts on “2013 NC Community Association Legislative Update

  1. Requiring an independent audit for assessments of $250K annually may not be the best idea in my opinion. The State and Federal government sets their audit requirements at $500K. Anything under $500K, the recipient prepares a Statement of Revenues and Expenditures and submits to the branch of government that made the payment (award). The purpose is to ensure that more funds are available to benefit the program rather than paying for audits. Remember audits just provide an assurance of material correctness of the balance sheet and operating statement. Audits may not detect fraud or kickbacks. For HOA’s of $250K and under, I think an HOA member could pretty much make a good guess based upon the number of units times the monthly assessments (revenues that should have been collected) in relation to basic expenditures (untilities, trash, insurance, etc) — and come to a decent conclusion by using a plain old reasonableness tests.

    Most HOA’s that collect no more than $250K annually need every dollar they can get just to cover basic operations and property upkeep. I believe that it may be more beneficial for the association to follow the State/Federal guidelines of $500K if no other HOA audit requirements are in place to supercede. Another option would be to require an audit covering the period for each $500K in collections received — probably be around every two years for small organizations.

    A better option to me would be to provide HOA’s with a set of financial guidelines that incorporates internal control procedures such as documenting bids for services, good disclosure procedures etc. I would prefer my HOA to send me a Statement of Revenues and Expenditures every quarter or twice a year. More than anything else, HOA members need more disclosure so they can maintain proper financial oversight themselves —- and they need to elect a HOA treasurer that reviews the actual bank statements (which is the true external evidence of actual transactions) rather than just a property manager’s computer printout.

    I commend the legislators for realizing that property managers should be under the NC Real Estate Commission oversight. This can provide HOA members some form of recourse when problems occur. Ofcourse, that means a fee will have to be imposed to foot the bill since the Commission is receipts supported, but it’s cheaper than paying for audits that most HOA members never read. I doubt that the Real Estate Commission plans to require an audit report to review from each HOA receiving $250K in assessments as part of their oversight. That’s another reason I think the $250K is too low — if you consider the cost/benefit analysis.

    Sorry for the too long comment.

  2. Does Senate Bill 228 allow for an association in any way to change the wording or conditions of a property owner’s existing deed restrictions or will 228 allow for the association to have powers
    that will supersede a property owner’s existing deed restrictions?

    • SB228 doesn’t confer any power additional power on the HOA to amend the CCRs. One of the purposes for this bill was to clarify an ambiguity in the laws regarding the HOA’s and other owners’ access over limited common elements (in addition to common elements) to perform repairs, and hold owners liable for damage they cause to limited common elements in addition to common elements. The bill also makes it clear that if amendments to the declaration are approved pursuant to the procedures in Condo Act or Planned Community Act then they are automatically presumed to be valid and enforceable. The purpose for this provision was to basically nullify a recent appellate court decision that held that amendments may be ruled invalid by a court if the court felt that the provisions of the amendment went too far, beyond the original scope of the development or the developer’s vision for the community.

  3. Has there been any progress on bill – House Bill 871: Regulate Community Association Managers? We have a HOA manager in Hendersonville NC who needs to be investigated for illegal practices.

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