Sixth Community Association Bill Signed into Law: Transfer Fees Clarification

Community Association Legislation

Senate Bill 119 “General Statutes Commission Technical Corrections 2015″ was ratified by the NC General Assembly on September 30, 2015 and signed by Governor McCrory last week. SB 119 becomes the sixth (and final for 2015) piece of legislation to impact community associations enacted into law this year (see First Community Association Bill Signed into LawSecond Community Association Bill Signed into LawThird Community Association Bill Signed into Law: Landlord/Tenant Foreclosure and Eviction ChangesFourth Community Association Bill Signed into Law: Streets & Traffic Safety Devices, and Fifth Community Association Bill Signed into Law: Increased Register of Deeds Indexing Fees). For a full list of filed HOA/condo bills, visit Community Association Legislative Roundup – May 14, 2015.

The new law is intended to clarify NCGS § 39A (“Transfer Fee Covenants Prohibited”). The original bill in 2010 that placed restrictions on transfer fees contained enactment language that did not make it into the final statute, which has led to confusion as to whether older transfer fee provisions are still valid. (Although the term “transfer fee” is often used loosely, state statute defines the term as focused on fees required by a Declaration to be paid to the association or developer upon the transfer of a lot, and sometimes called by other names such as “working capital” or “capital funds.” Such transfer fees are different than and have nothing to do with charges by an association/management company at the sale of a lot to confirm a seller’s account payment information, prepare a statement of unpaid assessments, and other activities incident to new ownership, etc.)

The new law adds the following language to N.C. General Statute 39A-4:

§ 39A-4. Applicability; interpretation.

(a) This Chapter applies to (i) any transfer fee covenant that is recorded after July 1, 2010; (ii) any lien that is filed to enforce a transfer fee covenant that is recorded after July 1, 2010, or purposes to secure payment of a transfer fee that is recorded after July 1, 2010; and (iii) any agreement imposing a private transfer fee obligation entered into after July 1, 2010.
(b) Nothing in this Chapter shall be interpreted to mean that a transfer fee covenant recorded prior to July 1, 2010, is valid or enforceable.

While the new statutory language is still rather confusing (and can be interpreted two different ways), it appears the intent is that older transfer fee covenants remain permissible, while transfer fee covenants recorded after July 1, 2010 are prohibited unless they fall into one of the statutory exceptions.

To view the full bill and legislative history, visit:

HOA & Condo Associations