What House Bill 444 Would Mean for North Carolina Condominium & Homeowners Associations
Today, Tuesday, March 18, House Bill 444 (the “Homeowners Association Reform Bill”) was filed. This is the first bill in the new two-year legislative session that, if adopted, would impact North Carolina homeowner and condominium associations.
While some updates to existing laws are necessary, any legislative changes should be made carefully and with common sense. North Carolina has over 15,000 community associations (homeowner and condominium associations) with 2.9 million residents living in them. Any changes that hurt an association’s finances—forcing other homeowners to pay more—or that prevent associations from enforcing the agreements that homeowners agreed to when they bought their homes could create widespread problems.
Some parts of this bill were previously proposed in past legislative sessions. (See Legislative Update – NC House Select Committee on HOAs Files New Bill and NC Community Association Legislative Update – February 28, 2024)
The bill is 20-pages long, but below is a summary of key provisions:
DELAYED DECLARATION AMENDMENTS. A major change in House Bill 444 would delay amendments to an association’s declaration. Currently, changes to an association’s restrictions typically require approval from 67% or more of all owners. Under the proposed law, amendments would only apply to new owners when they purchase their properties. This means different homeowners would be subject to different rules, which could lead to confusion and unfair treatment. Additionally, associations sometimes must amend their governing documents to increase dues or change insurance coverage based on financial needs and changing costs. This bill could make it nearly impossible to manage those adjustments. Would owners pay different dues or have different insurance coverage based on when they purchased? (See Proposed NC Law Changing Declaration Amendments Would Harm Associations and Owners)
ASSOCIATION RECORDS. Under the proposed law, homeowner and condominium associations would be required to make certain association records available within 30 days of a written request. However, they would only be required to provide financial records from the past three years. Homeowners would also have the right to inspect and copy management contracts with proper notice.
COMMUNITY MANAGEMENT AGREEMENTS. The bill would limit the length of community management agreements. Contracts between associations and management companies would not be allowed to exceed one year, and automatic renewals would require at least 30 days’ notice for cancellation. Any automatically renewing contract could be canceled by the association for any reason with 60 days’ notice.
PUBLIC STREETS. Without authorization in the Declaration, associations would no longer be able to enforce parking restrictions on public streets unless their governing documents specifically give them that authority. Currently, there is no official process for an association to receive that authority from the Department of Transportation or local governments. The bill also defines a “personal vehicle” and excludes motor homes, self-propelled RVs, and commercial vehicles from that category.
FINES. Associations would not be allowed to fine homeowners for offering tutoring, music lessons, or swimming lessons to small groups of up to five people—regardless of the noise level or time of day. This restriction would apply even in townhomes and condos with shared walls.
LENDER QUESTIONNAIRES AND STATEMENTS OF UNPAID ASSESSMENTS. Under the proposed law, fees for preparing a lender’s questionnaire or a statement of unpaid assessments would be limited to $200 per request. If a lender requests expedited processing (less than 10 days), an additional $100 fee could be charged. However, aside from these specific fees, associations would be prohibited from charging homeowners or buyers any additional costs related to the conveyance of a property.
COPY COSTS. Costs for providing copies of records requested by a member could not exceed the actual cost of photocopying the records.
ARCHITECTURAL DECISIONS. Architectural review decisions would face stricter guidelines. Associations would be required to have clear procedures for reviewing and approving architectural requests, with a defined timeline. At a minimum, a decision would have to be made within 90 days of submission. If a request is denied, the association must provide an explanation and a process for reconsideration. However, the bill’s wording is unclear on whether reconsideration would be handled by the Board or a separate committee, which could create confusion.
ASSESSMENT INCREASES. A controversial part of the bill concerns assessment increases. If an association wants to raise dues by more than 10% from the previous year, the increase would need approval from a majority of all owners (or a larger vote if required by the governing documents). Additionally, after a budget is approved, the board would not be allowed to increase overall spending by more than 5% without another vote, even if the association has funds in reserve. While this may sound like a protective measure, in practice, it could make it extremely difficult for associations to keep up with rising costs. Property insurance premiums, for example, have increased by an average of 11% over the past year, with some coastal communities seeing spikes as high as 200%-500%. Associations also face unexpected maintenance costs, such as structural repairs, that, if ignored, could lead to serious safety risks—like the tragic 2021 condominium collapse in Florida that killed 98 people. This bill could make it time-consuming, difficult, or even impossible for associations to respond to financial needs or natural disasters in a timely manner. (See NC Community Association Legislative Update – February 28, 2024)
COLLECTION OF UNPAID ASSESSMENTS. Under HB 444, an association would not be able to foreclose on a property for unpaid dues unless the total owed is at least six months’ worth of assessments or $2,500, whichever is less. The association would also be required to offer the homeowner a payment plan, and only if the owner refused or defaulted could foreclosure proceed. While this provision may seem fair, the way it is written would allow homeowners to remain five months behind on dues indefinitely without facing foreclosure. Since associations rely entirely on collected assessments to operate, this could lead to financial strain, forcing other homeowners to cover the shortfall. (See NC Bill to Restrict HOA/Condo Collections Would Harm Associations & Owners)
VIOLATIONS. The bill also proposes new rules for violations and fines. Homeowners must receive at least 10 days’ notice before a hearing on any alleged violation. If fines are imposed, they can be up to $100 per day, but the total fine for any violation cannot exceed $2,500. Additionally, instead of fines going to the association, they would be sent to the State Civil Penalty and Forfeiture Fund. This shift in policy raises concerns, as it removes incentive for associations to enforce rules in a way that benefits the community. The bill also limits how associations can file liens related to fines, requiring them to be filed with the court within 90 days and expiring after one year unless legal action is taken. Judicial foreclosure would no longer be an option for unpaid fines, meaning associations would need to file civil lawsuits instead.
VIOLATION FINES TO STATE. The statute creating the Civil Penalty and Forfeiture Fund (which previously has only contained funds collected by the State) is amended to allow the General Assembly to “authorize the placement of additional funds from other sources into the Fund.” Funds going into the Fund–including fines paid by homeowners–must be remitted to the Office of State Budget and Management “by the entity having custody of the funds within 10 days after the close of the calendar month in which the funds were received or collected.”
PRE-LITIGATION MEDIATION. Another change in the bill is a requirement for mediation before lawsuits. The NC General Assembly created voluntary pre-litigation mediation for certain HOA/condo disputes in 2013. This bill would make it mandatory unless both parties agree to waive it. This could slow down the resolution process, particularly for urgent matters. (See New Voluntary Mediation Law for HOAs and Condos and New Mediation Program to Help Resolve North Carolina HOA/Condo Disputes.)
REPORTING ON OWNERS’ ASSOCIATION COMPLAINTS. Finally, the bill proposes that the North Carolina Department of Justice collect and publish data on homeowner complaints against associations. While the DOJ would not act as a mediator or arbiter, it would track and report complaint trends to the General Assembly.
FINAL THOUGHTS
While many of these proposals aim to address homeowner concerns, the details of the bill could create unintended consequences. Poorly worded laws can lead to confusion or financial hardships for associations and homeowners alike. For example, the six-month foreclosure requirement could result in homeowners staying indefinitely behind on dues, forcing others to cover the difference. Similarly, requiring a majority vote for any significant increase in dues could leave associations unable to keep up with rising insurance costs or necessary maintenance, which could lead to serious safety risks.
There is no single solution that works for every homeowner or condominium association, as communities vary in size and structure. North Carolina has both small, two-home associations and massive developments with thousands of members. A one-size-fits-all approach to community association law could have serious consequences. Our firm represents associations across the state and understands the challenges these communities face. We are happy to provide guidance and insights to legislators as they review this bill.
The full bill can be found at House Bill 444.