NC Community Association Legislative Update – December 15, 2016

Community Association Legislation

Well, this is a first—I’ve never done a community association legislative update just before Christmas. After all, the General Assembly doesn’t meet in December. But what’s been normal about politics in 2016?

Earlier this week the General Assembly convened for a special legislative session to deal with issues related to hurricane disaster relief. At the end of that session, legislators issued a proclamation convening a new special session to deal with other unnamed issues. A number of bills have been filed, ith many dealing with restructuring aspects of state government following the recent elections. However, at least one proposal has been filed that would impact North Carolina homeowner and condominium associations.

House Bill 20: Community Association Managers Licensing Act was filed on December 14, 2016, by Rep. Justin Moore (R-Mecklenburg) and was referred to the House Committee on Judiciary IV. The bill, with a full title of “An Act Establishing the Community Association Managers Licensure Act and Requiring Registration of All Community Associations,” is some 15 pages long and, if adopted, would require that:

  1. At least two members of the NC Real Estate Commission must be licensed community association managers
  2. Beginning July 1, 2018, any person, partnership, corporation, LLC, association, firm or other business entity engaging in community association management must have a “community association manager license” issued by the NC Real Estate Commission
  3. Requirements—although there are also numerous exemptions—for licensure as a community association manager include:
    • being at least 18 years of age
    • having completed at least 45 hours of classroom instruction at a school approved by the Commission
    • passing (although the phrase “may be required” is used) a licensing examination to demonstrate competency
    • paying an application fee not to exceed $200
    • showing evidence of coverage by a fidelity bond “not to exceed the budgets of all clients of the community association manager but shall not exceed two million dollars”
    • demonstrating good moral character and emotional fitness
    • providing a criminal history record check.
  4. Licenses are for one year
  5. The Commission shall have a list open to public inspection of all licensees
  6. Continuing education requirements are provided, not to exceed 12 classroom hours a year
  7. Licensees must maintain a fidelity bond or insurance policy “at least equal to the amount of the budgets of all clients of the community association manager but shall not exceed two million ($2,000,000),” and if the bond is canceled, modified or refused, the insurance company must notify “each community association being managed”
  8. Provisions for how association monies are deposited and handled are provided, including a requirement to “[o]btain written authorization if any interest or other income earned by the money is to be paid to any person or party other than the association or member to whom the money belongs”
  9. Disciplinary and license revocation provisions are given
  10. The Commission is authorized to create rules related to the types of association records that licensed community managers must maintain for three years
  11. Numerous provisions for issuing licenses to “private community association manager schools”

A second major part of the bill concerns the registration of all community associations and would require each association to register with the Commission beginning January 1, 2018. Contacts must include (1)  the association, (2) the community manager, and (3) “the addresses, e-mail addresses, and telephone numbers” for every board member. Initial registration is not to exceed $100 per year (but can increase), and any association failing to register with the Commission “shall be prohibited from pursuing any legal remedy otherwise available to it until the association has registered with the Commission and paid in full any delinquent registration fee.” The registry of associations “containing information about each association” shall be made “available to the public” as a directory. Specific additional amendments to the Planned Community Act and Condominium Act would provide that any association failing to maintain its registration “shall not be able to enforce any liens filed against a lot or lot owner.”

An initial reading of the bill raises some interesting questions:

  1. How can a partnership, corporation, limited liability company, association, firm or other business entity be older than 18, which seems a requirement for licensure?
  2. Who is licensed–entities or people? The bill discusses the licensing of partnerships, firms, corporations, and limited liability companies, but other requirements only to apply to specific individuals?
  3. How can the fidelity bond for applicants seeking licensure be based on the budgets of their associations, since applicants shouldn’t have any associations without a license?
  4. The insurance company requirement of tracking all associations managed by a licensee and notifying them of bond cancellations sounds like an administrative nightmare, and who’s liable if that doesn’t happen?
  5. Since associations come and go with community managers, when is the “snapshot” taken for compliance of the bond to equal “the amounts of the budgets of all clients”?
  6. Since the bonds are based on “the amounts of the budgets of all clients,” will bonding/insurance companies adjust limits over time and notify all associations of any significant increases or decreases, as the proposal seems to require?
  7. If the goal of the proposal is to protect associations by requiring certain minimum requirements from a community manager, why is only a bond required (and not other insurance, such as general liability, professional liability, worker’s comp, cyber insurance, etc.)?
  8. Association funds aren’t trust accounts, but does this bill require that associations must provide “written authorization” when a vendor, attorney, insurance company, water, power or cable bill is paid if those funds include any interest or income?
  9. What does it mean for an association whose registration has lapsed to be “prohibited from pursuing any legal remedy otherwise available to it”?
  10. Why aren’t other nonprofits or corporations “prohibited from pursuing any legal remedy otherwise available to it” when they don’t fulfill state administrative requirements?
  11. When a community manager or association officer fails to pay the annual fee, the association cannot send violation letters to owners or attempt to contact non-paying association owners?
  12. If the non-paid registration is later paid, what is the status of actions taken during the violation (likely when the association had no idea of a violation) in the nature of “a legal remedy”?

Let’s hope that these and other concerns get addressed if the bill moves forward.

Because the bill is so long and has so many different provisions, you may wish to take a look at the full proposal at

HOA & Condo Associations