Bill Summary for H 165 (2011-2012)

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Summary date: 

Feb 23 2011

Bill Information:

View NCGA Bill Details2011-2012 Session
House Bill 165 (Public) Filed Wednesday, February 23, 2011
Intro. by McGee, Weiss, Earle, Howard.

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Bill summary

Amends various sections of the NC Planned Community Act (Planned Community Act) and the NC Condominium Act (Condominium Act) affecting homeowners or unit owners association management, liens for assessments, and providing for alternative dispute resolution. Makes additional changes to the Planned Community Act affecting declarant rights. Enacts new Article 4 to the Planned Community Act, requiring certain sellers to disclose to purchasers specified information on the lot and homeowners association, and makes conforming changes to the Condominium Act.
Association Management. Enacts new GS 47F-3-102.1 (planned communities) and new GS 47C-3-102.1 (condominiums) allowing an association’s executive board, in its discretion, to take enforcement action by imposing sanctions or commencing an action. Provides that the board does not have a duty to take enforcement action if it determines any of the following: (1) the association’s legal position does not justify action; (2) the covenant, restriction, or rule being enforced is or may be inconsistent with law; (3) the violation is not so material as to be objectionable to a reasonable person or to justify expending resources; or (4) it is not in the association’s best interest.
Repeals GS 47F-3-103(c) and GS 47C-3-103(c) (concerning budget ratification procedures) and replaces with new GS 47F-3-107.2 and new GS 47C-3-107.2, addressing budget ratification and special assessment procedures. Requires the executive board to adopt, at least annually, a proposed budget and to provide a budget summary to all owners (refers to “lot owners” under the Planned Community Act and to “unit owners” under the Condominium Act) within 30 days of adoption. Specifies timeline and meeting procedures for ratification. Allows the board, at any time, to propose a special assessment provided the board follows the procedures for budget ratification. Upon a two-thirds vote by the board that a special assessment is necessary to respond to an emergency, authorizes the board to impose an emergency special assessment without following the budget ratification procedures, provided the funds are spent only for the purposes described in the vote. Requires prompt notice of the emergency special assessment to all owners.
Amends GS 47F-3-108 and GS 47C-3-108 to require that an association hold a meeting of owners annually at a time, date, and place stated in or fixed in accordance with the bylaws (previous law required a meeting at least once each year). Current law allows owners with 10% (or lower percentage stated in bylaws) of the association’s votes to call a special meeting. Proposed amendment also allows the requesting lot owners to notify all owners of the meeting if the association fails to do so within 30 days of the request. Deletes subsection (b), concerning speaking opportunities for owners at board meetings. Allows association and executive board meetings to be held by telephonic, video, or other conferencing process if specified conditions are met. Mandates that owners be given a reasonable opportunity to comment on relevant matters during any meeting or executive board meeting. Requires that meetings of the executive board and association committees be open to the owners, except during executive sessions, which may be held only during a regular or special meeting. Forbids any final vote or action from occurring during an executive session. Lists the permitted purposes for an executive session. Details additional rules and restraints for meetings, including schedules, location, and periods of declarant control.
Liens for Assessments. Amends GS 47F-3-116 and GS 47C-3-116 to provide that any assessment levied against a lot or unit remaining unpaid for 90 days (was, 30 days) or longer will constitute a lien on that lot or unit when a claim of lien is properly filed. Requires the association to include an offer to accept payments in installments with the mailed notice of assessment amount due (previous law allowed the association to accept installments). Allows the association, acting through the executive board, to foreclose the claim of lien according to Article 2A of GS Chapter 45 (power of sale foreclosure) if the assessment remains unpaid for 90 or more days and the owner failed to accept or comply with the payment installment plan. Prohibits the association from foreclosing the claim of lien if the executive board does not vote to commence the foreclosure proceeding. Adds new subsection (b1), specifying that the association must apply any payments in the following priority: (1) unpaid assessments; (2) late charges associated with the assessment; (3) attorneys’ fees and other collection charges; and (4) fees, fines, interest, and associated late fees. Allows an association to file a claim of lien when a scheduled payment remains unpaid for 30 days or longer, if an owner accepts a proposed installment plan and fails to comply with its terms. Requires the installment plan to consist of equal periodic payments made over a reasonable time based on the outstanding balance and states that the accumulation of late charges must cease when the owner agrees to pay according to an installment plan.
Association Records. Amends GS 47F-3-118 and GS 47C-3-118, listing specific records that the association must retain (expands current record-keeping requirements). Describes requirements for examining and copying records and permissible exceptions. Recodifies, as GS 47F-3-103(g) and GS 47C-3-103(g), the provisions prohibiting payments to any association officer or board member or to any related entity, unless expressly allowed.
Alternative Dispute Resolution. Enacts new GS 47F-3-120.1 and new GS 47C-3-120 to allow parties to resolve their dispute by any form of binding or nonbinding alternative dispute resolution (ADR). Allows a declarant to submit a dispute to ADR only after the period of declarant control ends. Requires that parties electing ADR use only mediators certified by the Dispute Resolution Commission.
Declarant Control and Transfer of Special Declarant Rights. Adds definitions for affiliate of a declarant and dispose or disposition under the Planned Community Act. Amends GS 47F-3-103 to mandate that a period of declarant control terminates at the earlier of: (1) 120 days after conveyance of 75% of the lots to lot owners other than the declarant, (2) two years after all declarants have ceased to offer lots for sale in the ordinary course of business, or (3) two years after any development right to add new lots was last exercised. Permits a declarant to voluntarily surrender the right to appoint and remove officers and executive board members before the declarant control period terminates, but allows the declarant to retain approval rights over certain actions of the association or executive board, as recorded, for the entire period. Enacts new subsection (d1) to limit the duration of declarant control, according to specified conveyance benchmarks.
Amends GS 47F-3-104 to detail a transferor declarant’s liability upon transfer of any special declarant right in various circumstances. Explains the process of special declarant rights transferred upon foreclosure or sale. Lists the liabilities and obligations of successors to special declarant rights.
Amends GS 47F-3-105 to clarify that (1) any management contract, employment contract, or lease of recreational parking areas or facilities; (2) any other contract or lease between the association and a declarant or an affiliate of a declarant; or (3) any contract or lease that is not bona fide or was unconscionable to the lot owners at the time of agreement, may be terminated without penalty, according to the specified procedure. Requires that this contract termination provision be included in each contract entered into by or on behalf of the association before the elected executive board takes office; absence of the contract provision will not affect the association’s rights.
Amends GS 47F-3-111 to make a declarant liable to the association for (1) all tort losses not covered by insurance and (2) all breach of contract losses when an action is brought against the association for a wrong that occurred during a period of declarant control, and the association gives the declarant reasonable notice of and an opportunity to defend against the action.
Disclosures to Purchasers. Enacts new Article 4 to GS Chapter 47F (Planned Community Act) to require that each seller of a lot in a planned community provide the purchaser a copy of the declaration before the earlier of either conveyance or transfer of right of possession. Also requires the seller to provide a disclosure certificate containing 16 enumerated items, including assessment amounts, restrictive covenants, and any unsatisfied judgments against the association. Lists the types of dispositions excepted from the disclosure certificate requirement and makes a conforming change to GS 47C-4-101. Allows a potential purchaser to void a purchase contract if the purchaser does not receive the disclosure certificate more than 5 days before contract execution by following the specified steps. Directs an association, within 10 days of the owner’s request, to supply the information necessary for inclusion in the disclosure certificate. Makes corresponding changes to the Condominium Act.
Directs the NC Real Estate Commission to revise the Residential Property Disclosure Statement (developed pursuant to GS 47E-4) to provide for disclosure of the existence of any homeowners association and any restrictive covenants affecting the real property, regardless of whether the covenants are currently violated.
The amendments to the Planned Community Act apply to all (1) planned communities containing more than 20 residential lots and created in NC on or after the date that the act becomes law and (2) planned communities containing more than 20 residential lots already in existence, but the act only applies to events and circumstances that occur on or after the date that the act becomes law and does not invalidate existing provisions of those planned communities. Allows planned communities pre-dating the act to amend their governing documents, in accordance with the act.
The amendments to the Condominium Act apply to all (1) condominiums created in the state on or after the date that the act becomes law and (2) condominiums created in the state before that date, except the act applies only with respect to events and circumstances occurring on or after the act’s effective date and does not invalidate existing provisions of those condominiums. Allows condominiums pre-dating the act to amend their governing documents in accordance with the act.
Other Provisions. Directs the Consumer Protection Division of the Department of Justice (DOJ) to provide general information to and receive complaints from the public regarding the act. Requires DOJ to compile all complaints related to homeowners associations in an annual report, and publish the report online. Includes a severability clause.