Law Firm Carolinas partner Harmony Taylor serves on the NC Legislative Action Committee (NC-LAC), a committee of the Community Associations Institute. The NC-LAC monitors and makes recommendations on legislation that affects community associations, and its members talk with legislators on issues of concern to HOAs and condos.
The NC-LAC has allowed the firm to share the following update on two proposals of interest.
The legislature continues to consider a number of laws this session which would significantly impact community associations in North Carolina. HB 542 has been referred to the Committee on Rules, Calendar, and Operations of the House. HB 551 has passed the House and has been sent to the NC Senate. Both Bills are opposed by the NC Legislative Action Committee.
Briefly:
HB 542 prohibits all associations from taking any collection action, including the filing of a Claim of Lien, until the delinquent assessments equal $2500 or one year of assessments, whichever is less. It also requires associations to find “current” email addresses and telephone numbers for all delinquent owners and to use those email addresses and telephone numbers to contact the delinquent owner before collection action is taken. While a minimum threshold before assessments can be collected might initially seem reasonable and charitable to owners, this bill creates an incentive for non-payment of assessments and is unfair to owners who pay their obligations on time. Many assessments will simply be lost if the delinquent owner sells the property or a bankruptcy is filed during the moratorium period and before a lien is filed. Many communities also find that the longer collection is delayed, the more likely owners are to find themselves unable to pay. The expanded notice requirements in the bill may require actions by the association that violate the Federal Fair Debt Collection Practices Act. Finally, legislatively prohibiting or delaying action in the courts to collect a lawful debt raises serious constitutional concerns.
HB 551 is mainly focused on landlord-tenant issues, but originally provided any declaration amendments made by an HOA or condo association would “only affect lot owners whose lots are conveyed or transferred after the amendment takes effect.” After objections were raised by the LAC and other concerned organizations, the bill was amendment in the House Judiciary 1 Committee to apply only to amendments prohibiting or restricting rentals. While the more limited scope is an improvement, the LAC believes it still inappropriately limits the amendment powers of condominium and planned community associations and will potentially a patchwork with different rental rules for different lots and units. HB 551 has passed the House and will be next considered by the Senate.
The LAC will continue to pursue all possible avenues for appropriate changes to the bills. If those conversations do not produce more acceptable terms, the LAC will press our legitimate concerns in the Senate after the bills are passed to that body. We will continue to provide updates on these and other important bills under consideration.