Bill Summary for H 531 (2021-2022)

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Summary date: 

Apr 12 2021

Bill Information:

View NCGA Bill Details2021
House Bill 531 (Public) Filed Monday, April 12, 2021
Intro. by Howard, Hastings, Moffitt, K. Hall.

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Bill summary

Amends GS 93A-34 to no longer require applications for private real estate education providers using methods other than only distance education to contain a copy of the bond required by GS 93A-36.

Makes the following changes to Article 4 of GS Chapter 93A, now cited as the North Carolina Timeshare Act." Makes conforming changes throughout to refer to "timeshare" rather than "time share." 

Replaces the content of GS 93A-40 to now provide the following. Makes it unlawful to engage or assume to engage in the business of a timeshare salesperson without first obtaining a real estate broker license pursuant to Article 1, unless exempt under GS 93A-2(c)(1) or the timeshares salesperson is the employee of the registered timeshare developer whose income is reported on IRS Form W-2 of the registered timeshare's developer. Makes it unlawful for a timeshare developer to sell or offer to sell a timeshare required to be registered under the Article without first obtaining a certification of registration under Article 4. Makes it a Class I felony for a person responsible as a general partner, corporate officer, joint venture, or sole proprietor who intentionally acts as a timeshare developer, allowing the offering of or the sale of timeshares to a purchaser, without first obtaining registration of the timeshare project under the Article. Enumerates nine exemptions from Article 4, including any arrangement, plan, scheme, or method wherein the contractually specified maximum total financial obligations on the owner's part is $3,000 or less during the entire term of the plan. Amends the definition to timeshare set forth in GS 93A-41 to now define the term to mean a timeshare estate, defined to mean an arrangement under which the owner acquired a right to occupy a timeshare unit together with ownership of a real property interest, or a timeshare use, defined as an arrangement under which the owner received a right to occupy the timeshare unit but did not receive ownership of a real property interest. 

Revises and adds to the defined terms of the Article as follows. Adds the following: assessment; Board; closing or close; common expense; conspicuous type; consumer resale timeshares; consumer timeshare reseller; electronic; foreclosing party; interestholder; lead dealer; managing entity; multistate timeshare program; one-to-one use night to use right ratio; owner; personal contact information; regulated party; resale advertiser; resale advertising service; resale broker; resale brokerage services; resale service provider; reservation system; reservation system operator; time share declaration; timeshare estate; timeshare owners' association; timeshare period; timeshare property; timeshare transfer services; timeshare transfer services agreement; transfer service provider; and timeshare use. Modifies or replaces the definitions for the following terms: developer; enrolled; exchange program; independent escrow agent; purchaser; timeshare; timeshare program; and timeshare project. No longer defines managing agent. Makes changes throughout to refer to "purchaser" and/or "owner" as appropriate in the context given (previously referred to "purchaser" throughout.) 

Amends GS 93A-42 to deem a timeshare estate to be an interest in real estate governed by state laws pertaining to real estate (previously deemed a timeshare in which in whole or in part burdens or pertains to real property a real estate interest). Establishes that a timeshare estate includes a right to use a timeshare unit coupled with a freehold estate or an estate for years with a future interest in property, an ownership interest in a condo unit, or a direct or indirect beneficial interest in a trust if the timeshare instrument contains a provision declaring that such interests are real property interests and provided that the trust does not contain any timeshares created in personal property. Allows the owner to register the timeshare instrument, which entitles the owner to GS Chapter 47 protections such as for the recordation of other real property instruments. Makes changes to refer to a "timeshare use," rather than a time share which burdens or pertains to no real property; make conforming changes throughout. Requires the developer to close on the sale of the timeshare estate and record or cause to be recorded a timeshare instrument for timeshare estates located in the State within 180 days following execution of the contract of sale by the purchase so long as all payments made by the purchaser are placed by the developer with an independent escrow agent upon the expiration of the escrow period pursuant to GS 93A-45. Deems a timeshare use not an interest in real property and governed by state laws pertaining to real estate. Requires the developer to deliver an instrument evidencing transfer of the legal title to a timeshare use at closing to the purchaser. Requires closing on the sale of a timeshare use within 180 days following the execution of the contract of sale by the purchaser, so long as all payments made by the purchaser are placed by the developer with an independent escrow agent upon the expiration of the escrow period pursuant to GS 93A-45. Specifies that the developer is not required to close and record the timeshare instrument, or close on the sale of a timeshare use, if the purchaser is in default of the purchaser's obligations under the contract of sale. Subjects recordation requirements to the provisions of the timeshare instrument. Bars developers from selling or closing a sale of any timeshare that would cause the total number of timeshares available for use or sold in the timeshare program to exceed the one-to-one use night to use right ratio, defined as the ration of the number of owners eligible to use the timeshare units on a given night to the number of timeshare units available for use within the timeshare program on that night, such that the total number of owners eligible to use the timeshare never exceeds the total number of timeshare units available for use in the timeshare program during that year. Eliminates previous provisions regarding recordation by the developer and duties of the independent escrow agent. 

Amends GS 93A-43 to prohibit timeshare owners from maintaining a proceeding for partition of the timeshare unit, timeshare project, or timeshare program in which the timeshare is held.

Replaces the content of GS 93A-44. Enumerates 12 required components of the contract of sale between a developer and a purchaser for the sale and purchase of a timeshare. Requires each developer, prior to executing a contract of sale, to provide the purchaser with a public offering statement and obtain a written acknowledgement of receipt of the public offering statement and any other documents required to be delivered to the purchaser. Lists 21 components the public offering statement must contain, in addition to any other information that the developer discloses. Requires the following documents to be provided to the purchaser, prior to execution of a contract of sale, either attached as an exhibit to the public offering statement or provided as a supplement with the public offering statement: the timeshare declaration; the timeshare owners' association articles of incorporation and bylaws, if applicable; any timeshare unit or timeshare project rules and regulations; and an estimate of the current year's operating budget for the timeshare program. Provides further requirements for multisite timeshare programs. Requires contemporaneously with the execution of a contract of sale by a purchaser, a copy of the contract of sale signed by the purchaser, receipt for the public statement signed by the purchaser, financing documented signed by the purchaser, and any other document signed by the purchaser at the time of execution of the contract of sale. Allows for the purchaser to elect to use electronic means for the execution of the contract and other required documents, as well as electronic delivery of required documents, including the public offering statement. Requires a developer to provide a separate paper or email copy of a purchaser's cancellation rights if the purchaser elects to receive documents electronically at the time of execution of a contract of sale. 

Replaces the content of GS 93A-45 as follows. Grants the purchaser the right to cancel the contract of sale until midnight of the later of the fifth day after execution or the receipt of the public offering statements and all other required documents. Bars waiver of the right of cancellation and deems any purported waiver void. Requires the cancellation period to expire prior to closing. Details cancellation procedures for the purchaser and provides for a full refund within 20 days of demand by with purchaser or within five days after receipt of cleared funds from the purchaser, whichever is later. Requires a developer to establish an escrow account with an independent escrow agent prior to a purchaser's execution of the contract of sale. Provides for protection of funds of the purchaser received by the developer or timeshare salesperson prior to closing, either through a trust or escrow account, or, in lieu of escrow requirements, other alternative financial assurances such as a surety bond, subject to Real Estate Commission (Commission) approval. Describes affidavits the developer must present to the independent escrow agent prior to the release of any escrowed funds. Describes the duties of the independent escrow agent, including retention of any affidavits received for a period of five years. Provides for resolution of conflicting demands of escrowed funds not resolved within 30 days by the independent escrow agent, either by the Commission, an arbitrator, or a court. If a developer fails to provide an owner to whom a timeshare is transferred the cancellation notice required, provides the owner the right to void the transfer and receive all funds paid for the timeshare together with an amount equal to 10% of the sales price of the timeshare, not to exceed $3,000. Deems a receipt signed by the owner stating that the owner has received the required notice prima facie evidence of delivery of the statement. Specifies that a timeshare declaration or other instrument establishing or governing a timeshare program or an underlying timeshare property regime is not an encumbrance, and does not create a requirement for subordination and notice to creditors instrument. 

Amends GS 93A-47, limiting proxies, powers of attorney or similar devices given by the owner of a timeshare regarding voting in a timeshare owners' association to one year in duration (was, regarding the management of the time share program).

Makes technical and clarifying changes to GS 93A-48, regarding exchange programs. 

Revises GS 93A-52 as follows. Requires registration of timeshare programs by the developer with the Commission prior to offering any timeshare located in the State in the State. Makes changes throughout the statute and Article to refer to timeshare "program" rather than "project," as appropriate. Requires the application to include copies of proposed timeshare declaration, timeshare program governing documents, public offering statement, form timeshare instrument, form contracts for sale if different, and other documents referred to in the public offering statement (was, copies of proposed time share documents including public offering statements, sale contracts, deeds, and other documents referred therein). Now gives the Commission 30 days rather than 15 days within which to notify the developer that an application is incomplete. Now requires the Commission to, within 60 days (was, 45 days) of receipt of a properly completed application, either issue a certificate of registration or notify the developer by mail or electronic means (was, mail only) of any specified objections to the registration. Requires certificates to be available for inspection upon request by the Commission, and a copy available for inspection by written request from any purchaser or owner (previously required prominent display in the office of the developer on the site of the project only). Requires prompt reporting of any material changes to the information required for registration (previously did not qualify that the changes be material). Excludes transfers of timeshares to purchasers in the ordinary course of business from the duty of the developer to notify the Commission regarding any change in its interest in a registered timeshare program. Adds to the required actions regarding a developer that disposes of or terminates its interest in the timeshare program to require the developer to cease all marketing and sales of timeshares. Allows for renewal of a certificate within 45 days prior to the expiration date by filing an application with and paying the Commission the timeshare program registration renewal fee (previously provided for renewal in June preceding the date of expiration). No longer requires a copy of the exchange program report required under GS 93A-48. Increases the fee for duplicate certificate from $1 to $5.  

Revises GS 93A-54, which authorizes disciplinary action by the Commission, as follows. More specifically authorizes the Commission to take disciplinary action for violation of the Article's provisions in the offering or sale of a timeshare program to a purchaser. Authorizes the Commission to investigate, on its own motion or on the complaint of any person, the actions of any regulated party or other person or entity who assumes to act in such capacity of a regulated party. Defines regulated party as any developer, exchange company, managing entity, timeshare owners' association, timeshare owners' association director or officer, third party management firm, independent escrow agent, lead dealer, resale broker, resale service provider, resale advertiser, timeshare transfer provider, timeshare registrar, any other person having duties or obligations pursuant to the Article, and any of their respective assignees or agents. Following a hearing, authorizes the Commission to suspend or revoke a real estate license issued to a timeshare salesperson or a program broker, or a certificate of registration of a timeshare program issued to a developer, or reprimand or censure a regulated party; fine a regulated party $500 per violation; or impose other specified penalties permitted by the Article; if the Commission adjudges a regulated party to be guilty of any of the 16 specified violations. Makes conforming changes to reflect the expansion of the Commission's disciplinary authority to regulated parties. Makes conforming changes to reflect the revisions regarding developers' duties with respect to funds received prior to closing. Updates statutory cross-references. Requires each escrow agent to maintain or cause to be maintained complete records pertaining to the deposit, maintenance, and withdrawal of money required to be held in an escrow account (was the duty of the developer); makes these records available for inspection by the Commission periodically without prior notice as well as inspection relating to an investigation of a specific complaint against the independent escrow agent. 

Revises GS 93A-57, requiring a developer to record a release of all liens or encumbrances affecting the purchaser's timeshare or the timeshare property prior to any closing. Otherwise, requires either (1) execution and recordation of a subordination and notice to creditors instrument, as specified, by any interestholders in the timeshare or timeshare property, or (2) make alternative arrangements adequate to protect the rights of the owners of the timeshares and timeshare property, subject to Commission approval. Makes language gender neutral.

Adds the following to GS 93A-58, regarding the designation of a registrar and broker for registered timeshare programs. Makes it a Class E felony for any developer or independent escrow agent to intentionally fail to comply with the Article regarding the establishment of an escrow account, deposits of funds into escrow, and withdrawal therefrom. Deems failure to establish an escrow account to place funds therein as required in the statute prima facie evidence of an intentional and purposeful violation of the new subsection. 

Makes clarifying and technical changes to GS 93A-59, which provide for the preservation of an owner's claims and defenses. 

Enacts GS 93A-60, providing that if a developer or managing entity has, in good faith, attempted to comply with the Article and the developer has in fact substantially complied, nonmaterial errors or omissions are deemed not actionable and do not give rise to any purchaser cancellation rights provided that the developer or managing entity has the burden of proof under this provision. 

Enacts new GS 93A-61 requiring the developer to provide each timeshare program with a managing entity, which must be either the developer, a separate management firm, or timeshare owners' association. Prohibits the managing entity from giving the name, address, e-mail address, or contact information of any owner to any person, unless the person gives written permission to disclose their information. Requires the managing entity to keep, and provide to the Commission upon request a complete list of the names and addresses of all owners in the timeshare program, with the list updated quarterly. Prohibits providing the list to anyone else. Sets out when the list can be used for mailings as well as additional requirements for such mailings. Requires the predecessor in interest, or a transfer service provider for the predecessor in interest, to give the managing entity a copy of the recorded timeshare instrument if the timeshare is a timeshare estate or a copy of the instrument of transfer if the timeshare is a timeshare use, with the name and mailing address of the successor in interest within 15 days after transfer. Requires after the date of transfer that the successor in interest be listed by the managing entity as the owner of the timeshare on the books and records. Requires the managing entity to make the books and records reasonably available for inspection by any owner or an owner’s authorized agent. Sets out additional requirements governing the maintenance of books and financial records as well as their disclosure. Requires an owner’s consent to provide notices and other information via e-mail. Requires an officer, director, or agent of a timeshare owners' association to discharge their duties in good faith, with the care an ordinarily prudent person in a like position would exercise under similar circumstances, and in a manner they reasonably believe to be in the interests of the timeshare owners' association; creates an exemption from liability for monetary damages unless there is a breach or failure to perform duties, which constitutes a violation of criminal law; a transaction from which the actor derived an improper personal benefit; or recklessness or an act or omission that was in bad faith, with malicious purpose, or in a manner exhibiting wanton and willful disregard of human rights, safety, or property. Sets out additional provisions that apply when a state of emergency has been declared under the North Carolina Emergency Management Act or by any governmental agency with authority where the timeshare property is located.

Enacts GS 93A-62 setting out allowable charges on delinquent assessments. Allows the managing entity to deny the use of the timeshare units or facilities to an owner who is delinquent in the payment of any assessments made by the managing entity against the owner for common expenses; sets out procedures to be followed in these instances. Also allows the managing entity to give further notice to the delinquent owner that the managing entity may rent the delinquent owner's timeshare; sets out procedures to be followed in these instances. Specifies that for timeshare estates located in this state, the managing entity has a lien on a timeshare for any assessment levied against that timeshare from the date such assessment becomes due, as well as on the timeshare estate of any owner for the cost of any maintenance, repairs, or replacement resulting from an act of the owner or the owner's guest or lessee that results in damage to the timeshare property. Sets out provisions governing these liens. Makes a successor in interest jointly and severally liable with their predecessor in interest for all unpaid assessments against the predecessor up to the time of transfer of the timeshare to a successor, without prejudice to any right a successor in interest may have to recover from their predecessor in interest any amounts assessed against the predecessor and paid by the successor. Exempts, however, a first mortgagee or its successor or assignee who acquires due to the foreclosure of the mortgage or by deed in lieu of foreclosure of the mortgage from liability for all unpaid assessments attributable to the timeshare or chargeable to the previous owner which came due prior to acquisition of title by the first mortgagee.

Enacts new GS 93A-63 to require the developer to describe in the timeshare declaration any creation of a reservation system and establish rules and regulations for its operation, taking into account specified issues. Requires the rules to allow for changes to the system to respond to uses and demand for the units. Sets out actions that may be taken by the reservation system operator when managing and adjusting the system. Sets out procedures governing terminating an agreement with the reservation system operator when the operator is not the timeshare owners’ association.

Enacts new GS 93A-64 by setting out multiple items that must be included in the timeshare declaration with respect to (1) addition of timeshare units, amenities, or timeshare projects to the multisite timeshare program or (2) substitution of timeshare units, amenities, or timeshare projects for existing timeshare units, amenities, or timeshare projects in a multisite timeshare program, including the basis for the change and any fiscal impacts, and the extent to which the owners have a right to consent. Sets out items that must be included in a timeshare declaration with respect to deletion of timeshare units, amenities, or timeshare projects, with the requirements dependent upon where the deletion is a result of a casualty or eminent domain.

Enacts new GS 93A-65 requiring a consumer timeshare reseller, or any agent of a reseller, to use a resale purchase contact that contains all of the six specified items including a statement about the assessment amount, a statement about any delinquent assessments or outstanding real estate taxes, and a statement on contract cancellation. Voids the transaction at the purchaser’s option for one year if the resale purchase contract does not comply with the statute’s requirements.

Enacts new GS 93A-66 setting out the kinds of records that resale service providers, lead dealers, and transfer service providers must keep for three years. Provides that in any civil or criminal action relating to the wrongful possession or wrongful use of personal contact information by a resale service provider or lead dealer, any failure by a resale service provider, transfer service provider, or lead dealer to produce the required records leads to a presumption that the personal contact information was wrongfully obtained. Sets out penalties for the use of wrongfully obtained personal contact information.

Enacts new GS 93A-67 to require a resale service provider to give a consumer timeshare reseller a written description of the following before engaging in resale advertising services: (1) any fees or costs related to the services that the consumer timeshare reseller, or any other person, is required to pay to the resale service provider or to any third party and (2) a description of when the fees or costs are due. Requires a resale service provider to have a license to engage in real estate broker activities. Sets out eight prohibited activities when a resale advertiser offers services, including: stating or implying that the resale advertiser will provide or assist in providing any type of direct sales or resale brokerage services other than the advertising of the consumer resale timeshare for sale or rent by the consumer timeshare reseller; stating or implying to a consumer timeshare reseller that the timeshare has a specific resale value; and engaging in any resale advertising services for compensation or valuable consideration without first obtaining a written brokerage agreement signed by the consumer timeshare reseller. Voids a contract, at the option of the reseller for one year, when a resale service provider uses a contract for resale advertising services that fails to comply with the requirements of this statute. Makes it the duty of the resale service provider to supervise, manage, and control all aspects of the offering of resale advertising services by any agent or employee of the resale service provider; deems any violation of the statute occurring during that offering to be a violation by the resale service provider as well as by the person actually committing the violation.

Enacts new GS 93A-68, setting out six actions that are prohibited in the course of advertising, marketing, promoting, offering, sale, or performance of any timeshare transfer services, including: engaging in any timeshare transfer services for consideration, or the expectation of receiving consideration, without first obtaining a written timeshare transfer services agreement signed by the consumer timeshare reseller; failing to provide a copy of that agreement to the consumer timeshare reseller and the independent escrow agent; and charging or accepting a fee for obtaining, negotiating, arranging, or assisting with obtaining, negotiating, or arranging the voluntary relinquishment of a consumer resale timeshare to a managing entity in lieu of payment of assessments or ad valorem real estate taxes. Sets out requirements governing the reseller’s cancellation of the timeshare transfer service agreement. Sets out items that must be included in a timeshare transfer services agreement. Sets out actions that are prohibited when the timeshare transfer services to be provided include relief to be obtained from the consumer timeshare reseller's managing entity, mortgagee, or lienor, by the timeshare transfer service provider. Requires a person providing timeshare transfer services establish an escrow account with an independent escrow agent before entering into any timeshare transfer services agreement, to protect the funds or other property of consumer timeshare resellers required to be escrowed. Requires all funds that are received from or on behalf of a consumer timeshare reseller under a timeshare transfer services agreement to be deposited into the escrow account. Sets out additional requirements related to the escrow account. Makes failure to comply with the provisions concerning the establishment of an escrow account, deposits of funds into escrow, withdrawal therefrom, and maintenance of records a Class E felony. Excludes specified resale brokers, attorneys, and mortgagee or servicer or lienor, or their agents, from the provisions that apply to transfer service providers. Excludes from the statute the transfer of ownership of a consumer resale timeshare from a consumer timeshare reseller to the developer or managing entity of that timeshare program unless and only to the extent the transfer includes the assistance of a transfer service provider. Provides that only an attorney licensed in this state or any person authorized to perform nonjudicial foreclosures may offer services to a consumer timeshare reseller in connection with an involuntary transfer, or proposed involuntary transfer, of a consumer resale timeshare. Specifies that it is the transfer service provider’s duty to supervise, manage, and control all aspects of the offering of timeshare transfer services by any agent or employee of the transfer service provider; deems a violation of this statute that occurs during such offering a violation by the transfer service provider as well as by the person actually committing the violation. Allows an owner, managing entity, or developer to bring an action for injunctive relief and recover their reasonable attorneys' fees and costs against a timeshare service provider for a violation of this statute.

Enacts new GS 93A-69 by setting out requirements to be met in order to extend the term of a timeshare program, including the required percentage of votes, the establishment of a quorum, voting eligibility, the use of a voting proxy, and the effect on projects of a multisite timeshare program.

Enacts new GS 93A-69.1 by setting out requirements to be met in order to terminate the term of a timeshare program, including the required percentage of votes; the impact on the timeshare owners’ association; establishing a termination trustee; paying of related fees; procedures for the partition or sale of the property; handling of instances when an underlying property regime is not also terminated; and effect on projects of a multistate timeshare program. Limits this statute’s application to a timeshare program that has been in existence for at least 25 years as of the effective date of the termination vote or consent.

Makes conforming and clarifying changes to GS 47C-1-103, GS 53-244.030, and GS 66-232.