Jim Slaughter

NC Community Association Legislative Update – May 9, 2023

Thursday, May 4, was the “crossover deadline” in the NC General Assembly. That’s the date bills not related to taxes or spending must have passed one chamber to be eligible for consideration during the 2023-2024 legislative session. CAVEAT: In terms of legislation, “dead” doesn’t always mean “completely dead.” A News & Observer story once noted that legislative rules “are made to be circumvented, so there are many ways to keep legislation alive.” (For instance, proposals sometimes appear later in other bills as “technical corrections.”)

With the crossover deadline behind us, now is a good time to revisit my last legislative update (NC Community Association Legislative Update – April 18, 2023) to see which bills are still active that could impact North Carolina’s homeowner or condominium associations.

The first bill below has been adopted. The second set of proposals passed at least one chamber by crossover deadline and are still subject to consideration. The third set of proposals did not pass a chamber by crossover, are likely not exempt from crossover rules, and are likely dead for the two-year session. (But reread the “dead” caveat above.) 

ADOPTED Community Association Bills

House Bill 311: Community Association Oversight Division. THIS BILL WAS CHANGED CONSIDERABLY BY AMENDMENT. Originally designed to create a governmental division, HB 311 as adopted was retitled “A House Resolution to Establish a House Select Committee on Homeowners’ Associations” and creates a 9-member House Select Committee on Homeowners’ Associations. The Select Committee is tasked with examining planned communities and condominium associations, including:

  1. Current laws applicable to HOAs.
  2. Existing remedies for HOA violations of their obligations under the law and recommended additional remedies for such violations.  
  3. Executive agencies that are best positioned to assist homeowners in resolving complaints against HOAs for violations of law.
  4. Any other relevant issue the Select Committee deems appropriate.   

The Select Committee is instructed to provide a final report on the results of its study, including any proposed legislation, to the General Assembly on or before March 1, 2024.

The full bill can be found at https://www.ncleg.gov/BillLookUp/2023/H311.

Community Association Bills That Passed One Chamber by Crossover Deadline

(1) Senate Bill 376: Expanding Members’ Access to HOA Records

SB 376 was filed on March 27, 2023, by primary sponsor Sen. Todd Johnson (R-Cabarrus, Union). Other sponsors include Sen. Gale Adcock (D-Wake), Sen. Bobby Hanig (R-Bertie,   Camden,  Currituck,  Gates,  Halifax,  Hertford,  Martin,  Northampton,  Tyrrell,  Warren), Sen. Julie Mayfield (D-Buncombe), Sen. Timothy Moffitt (R- Henderson,  Polk,  Rutherford), Sen. Mujtaba Mohammed (Mecklenburg), Sen. Natalie Murdock (D-Chatham, Durham), and Sen. Gladys Robinson (D-Guilford).

The bill has changed since its introduction and would now amend the NC Planned Community Act (NCGS 47F) and the NC Condominium Act (NCGS 47C) to provide that “A unit owner or the unit owner’s authorized agent is entitled to inspect and copy, at a reasonable time and location specified by the association, any contract entered into by the association authorizing a managing agent to exercise any of the powers granted to the association pursuant to G.S. 47C-3-102, if the unit owner gives the association written notice of the demand at least five business days before the date on which the unit owner wishes to inspect and copy.”

The full bill can be found at https://www.ncleg.gov/BillLookUp/2023/S376.

(2) House Bill 542: Protect Homeowners’ Rights

HB 542 was filed on March 30, 2023 by primary sponsors Rep. Ya Liu (D-Wake, Primary), Rep. Mark Brody (R-Anson/Union, Primary), Rep. Steve Tyson (R-Craven, Primary), and Rep. Frank Iler (R-Brunswick, Primary). There are twenty additional sponsors.

The bill would prohibit the filing of a lien against an owner for not paying obligatory assessments unless the amount is $2,500 “or one year of unit owners’ association assessments, whichever is lesser.” Before filing a claim of lien, the current law is that notice of delinquency must be sent by U.S. Mail. This proposal would require that notice be sent to the “physical mailing address, current electronic mailing address, and current telephone number.” If either the physical address or email address of the owner are unavailable, the bill adds this additional requirement:

“If the association is unable to locate the current physical mailing address or current electronic mailing address of the unit owner, the association shall contact the closing attorney who represented the unit owner in the real estate transaction for the property as indicated in public records and attempt to obtain the contact information from that person. Nothing in this subsection shall prevent the person responsible for providing the contact information from seeking reasonable compensation for the procurement process.”

For concerns about the proposal, see NC Bill to Restrict HOA/Condo Collections Would Harm Associations & Owners.

The full bill can be found at https://www.ncleg.gov/BillLookUp/2023/H542.

(3) Senate Bill 553 / House Bill 551: Landlord/Tenant and HOA Changes

SB 553 was filed on April 4, 2023, by primary sponsors Sen. David Craven (R-Anson, Montgomery, Randolph, Richmond, Union), Sen. Timothy Moffitt (R-Henderson, Polk, Rutherford), and Sen. Jim Perry (R-Beaufort,  Craven,  Lenoir).  Other sponsors include Sen. Bobby Hanig (R-Bertie,  Camden,  Currituck,  Gates,  Halifax,  Hertford,  Martin,  Northampton,  Tyrrell,  Warren) and Sen. Tom McInnis (R-Cumberland,  Moore).

An identical House version, HB 551, was filed on April 3, 2023 by primary sponsors Rep. John Bradford (R-Mecklenburg), Rep. Jon Hardister (Guilford), and Rep. Kyle Hall (Forsyth, Stokes). Other sponsors include Rep. Kevin Crutchfield (R-Cabarrus,  Rowan), Rep. Frances Jackson (D-Cumberland), Rep. Jeffrey McNeely (R-Iredell), Rep. Joseph Pike (R-Harnett), Rep. Bill Ward (R-Camden,  Gates,  Hertford,  Pasquotank), and Rep. Harry Warren (R-Rowan).

SB 553 and HB 551 have been amended since introduction. The proposal remains mostly focused on rental issues between landlords and tenants. The original bill would have amended both the NC Planned Community Act (NCGS 47F) and the NC Condominium Act (NCGS 47C) so that any declaration amendments made by the members would “only affect lot owners whose lots are conveyed or transferred after the amendment takes effect.” The bill AS NOW AMENDED provides that “An amendment to the declaration that prohibits or otherwise restricts the rental of a lot shall only be enforceable against an owner who acquires title to a lot after the date the amendment takes effect.”

The bill states that this new language is simply “clarifying of the General Assembly’s intent under previous amendments to this statute,” which suggests the proposal would apply to all HOA or condo declaration amendments that prohibit or restrict rentals, whether adopted before or after this new proposal.

From a community association perspective, there are still concerns with such a proposal, including:

  • Condominiums are not able to obtain FHA/Fannie Mae/Freddie Mac financing unless they have certain rental restrictions in place. As a result, we are often asked by older condominiums to amend the declaration to align with federal regulations. Saying that current owners are not impacted by a declaration rental amendment would mean the condominium is out of compliance with federal regulations. This bill as applied to condominiums will make financing for purchases of condos difficult to impossible for some condominiums.
  • As to rental issue, associations would no longer have common schemes of development, which is a major reason buyers purchase in homeowner and condominium associations. Whether a particular lot is subject to a specific declaration rental amendment would depend on when the lot was purchased in relation to when the amendment was adopted. For an association to figure that out would require significant research and tracking. Adopted rental restrictions would only apply to owners purchasing after the declaration amendment was adopted, even if a specific owner voted IN FAVOR of the amendment to restrict short term rentals.

For concerns about the proposal as originally proposed, see Proposed NC Law Changing Declaration Amendments Would Harm Associations and Owners.

The full bill can be found at https://www.ncleg.gov/BillLookUp/2023/H551.

Community Association Bills That Did Not Pass Either Chamber by Crossover Deadline (Likely Dead, But See Caveat at Top)

For more details and the legislative history on any of the following proposals, visit NC Community Association Legislative Update – April 18, 2023.

(1) House Bill 183: WC/Sole Proprietors Must Have Coverage
The full bill can be found at https://www.ncleg.gov/BillLookUp/2023/H183.

(2) Senate Bill 312: Changes to Liens and Foreclosures by HOAs
The full bill can be found at https://www.ncleg.gov/BillLookUp/2023/S312.    

(3) Senate Bill 344 / House Bill 422: Unfair Real Estate Agreements Act
The full bill can be found at https://www.ncleg.gov/BillLookUp/2023/S344.

(4) Senate Bill 423: Homeowner Solar Expansion Act
The full bill can be found at https://www.ncleg.gov/BillLookUp/2023/S423.

(5) Senate Bill 529: Various Changes to Nonprofit Corporations Act
The full bill can be found at https://www.ncleg.gov/BillLookUp/2023/S529.

(6) House Bill 642: Marketable Title Act – Restrictive Covenants
The full bill can be found at https://www.ncleg.gov/BillLookUp/2023/H642.

The NC Legislative Action Committee (NC-LAC) is a committee of the Community Associations Institute that monitors and makes recommendations on legislation that affect community associations. Law Firm Carolinas partner Harmony Taylor currently serves on the NC-LAC. (Firm brag: Law Firm Carolinas partner Steve Black previously served on the NC-LAC, and Law Firm Carolinas partner David Wilson is Chair of the South Carolina-LAC!) To do its job, the NC-LAC needs funds for mailings, communications, and other costs. Please consider a contribution to the NC-LAC by visiting 12 Reasons Why You Should Donate to the NC-LAC or donate directly at CAI’s Contribute to Your State LAC page.

If you have specific questions on any of the above bills, feel free to contact me or another attorney at our firm. If there are developments on these legislative proposals, additional information will be posted.

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