2013 North Carolina Bills Impacting Community Associations (Homeowner and Condominium Associations)
The General Assembly adjourned for this year on Friday (July 26). While North Carolina actually has two-year sessions (2012-2013), it is unlikely that any special sessions this fall will take up HOA/condo issues prior to next year. As a result, now seems a good time to re-cap the bills introduced in 2012 that would in some way impact homeowner or condominium associations in North Carolina. Some are big, and some small—I’ve tried to list them all. (See also NC 2013 Community Association Legislative Update.)
The order of listing below warrants explanation. The top bills HAVE ALL PASSED AND ARE LAW (or are awaiting the Governor’s signature, which is likely). The second set of bills passed at least one chamber by crossover deadline, which means they can easily be considered in 2014. The last set at the bottom did not cross a chamber by crossover, which demands a bit more discussion. Basically, bills that are considered “non-budget” must pass at least one chamber by the deadline or are dead for the two-year session. (CAVEAT: “Dead” legislatively doesn’t mean “fully dead.” As the News & Observer has noted: “[Legislative] rules are made to be circumvented, so there are many ways to keep legislation alive.”) FYI, BILLS THAT SPEND OR TAKE IN MONEY ARE NOT USUALLY SUBJECT TO CROSSOVER DEADLINES.
The bills below are listed by passage date. There is a link at the end of each paragraph to confirm specifics on any proposal. Particularly for bills enacted into law, specifics should be reviewed carefully and/or reviewed by association counsel to ensure that any new requirements are complied with.
COMMUNITY ASSOCIATION BILLS THAT PASSED BOTH CHAMBERS
(1) 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 has three main separate provisions:
a) owners of condominiums or HOA’s must afford access through any limited common elements when necessary for maintenance, repair or replacement activities;
b) the Planned Community Act was amended to make clear that the declaration, bylaws, and articles of incorporation together “form the basis for the legal authority for the planned community;”
c) any amendment to an HOA declaration adopted by the association (regardless of when the association was created) pursuant to the provisions of the Planned Community Act or the declaration “are presumed valid and enforceable.”
The provisions of SB 228 also apply to pre-1999 associations. SB 228 passed both the Senate and the House and was signed into law on April 24. SB 228 became effective April 24, except for (c) above, which applies to amendments recorded on or after October 1, 2013.
(2) 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, provide for a trustee to conduct a foreclosure proceeding or sale, 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 passed both the Senate and the House and was signed into law on June 26. SB 331 is effective October 1, 2013.
(3) 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 pre-litigation mediation of disputes between associations and owners (except disputes regarding assessments) through authorized mediators (names are available from the N.C. Dispute Resolutions Commission or the Mediation Network of North Carolina). The implementation of mediation would toll any statutes of limitation or repose with respect to claims. Associations must, in writing, notify members each year of the right to mediation; such notice can be on the association’s Web site or published with the names of association officers and board members required by NCGS 47C/F-3-103. HB 278 was ratified on June 12 and signed into law on June 19. HB 278 became effective July 1, 2013.
(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.” SB 18 was ratified and became effective June 27, 2013.
(5) 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 [a] condominium” must be licensed or face a misdemeanor or a felony, depending on the offense. SB 18 passed both the Senate and the House and was presented to the Governor for signing on July 25. Most of SB 18 is effective October 1, 2013.
COMMUNITY ASSOCIATION BILLS THAT PASSED ONE CHAMBER BY CROSSOVER DEADLINE
(1) House Bill 330: Planned Community Act/Declarant Rights was filed on March 18 by Representatives Rob Bryan (Mecklenburg), Paul “Skip” Stam (Wake), Tom Murry (Wake), and John Szoka (Cumberland). The bill would clarify language in the Planned Community Act as to successor declarants, whether by transfer or foreclosure. The bill was supported by the NC Bar Association and would bring North Carolina’s Act more in line with the Uniform Planned Community Act. HB 330 passed the House on May 6 and was referred to the Committee on Rules and Operations of the Senate on May 7. No further action was taken this year.
(2) 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 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. HB 793 passed the House on May 16 and was referred to the Senate Commerce Committee, which reported the bill out favorably. It was then re-referred to the Committee on Insurance on June 4. No further action was taken this year.
COMMUNITY ASSOCIATION BILLS THAT DID NOT PASS EITHER CHAMBER BY CROSSOVER DEADLINE (POSSIBLY DEAD, BUT SEE CAVEAT AT TOP)
(1) 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 was referred to the House Judiciary Committee, Subcommittee A on February 28. No further action was taken this year.
(2) 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. HB 871 was referred to the Committee on Rules, Calendar and Operations of the House on April 15. No further action was taken this year. BECAUSE HB 871 SPENDS OR TAKES IN MONEY, THE BILL IS LIKELY NOT SUBJECT TO CROSSOVER DEADLINES AND COULD BE CONSIDERED IN 2014.
(3) 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. HB 883 was referred to the House Judiciary Committee, Subcommittee B on April 15. No further action was taken this year.
(4) Senate Bill 54: Time for Recording Foreclosure Notice was filed on February 5 by Senator Malcolm Graham (Mecklenburg). The bill would require that in case of foreclosure, the commissioner or trustee must record a notice of foreclosure with the Register of Deeds within 60 days after filing the final report on the sale of the property. SB 54 was referred to the Judiciary II Committee, reported out favorably, withdrawn from the calendar several times, and finally re-referred to Judiciary II on March 7. No further action was taken this year.
If you have questions about a specific bill, feel free to contact any of the attorneys at our firm. Because North Carolina has 2-year legislative sessions, updates on pending community association bills will resume in spring 2014.