Bill Summary for H 814 (2017-2018)

Summary date: 

Apr 13 2017

Bill Information:

View NCGA Bill Details2017-2018 Session
House Bill 814 (Public) Filed Tuesday, April 11, 2017
AN ACT TO AMEND THE PLANNED COMMUNITY ACT AND THE CONDOMINIUM ACT FOR THE PURPOSE OF CREATING CONSISTENCY AND ENHANCING CONSUMER PROTECTIONS.
Intro. by Jordan, Blust.

View: All Summaries for BillTracking:

Bill summary

Part I

Amends the NC Planned Community Act by enacting GS 47F-2-105, Contents of declaration, requiring the declaration that creates a planned community to include 14 specific types of information, such as a legal description of the real estate included in the common interest community and any authorization that entitles the association to establish and enforce construction and design criteria and aesthetic standards. Enacts GS 47F-2-106, requiring the declaration to allocate the common expense liabilities of the association and a portion of the total association votes to each lot, with disclosure on how those allocations are made. Sets out class voting regulations.

Amends GS 47F-2-117, Amendment of declaration, making conforming changes and providing that an association cannot require more than an 80% majority vote to amend the declaration. Adds clarifying language.

Amends GS 47F-3-101, Organization of owners' association, making conforming changes.

Amends GS 47F-3-102, Powers of owners' association, making organizational and clarifying changes.

Amends GS 47F-3-103, Executive board members and officers, setting out provisions which limit the control period of a declarant to the earliest occurrence of (1) 120 days after conveyance of 75% of the lots to lot owners other than the declarant, (2) two years after a declarant has 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. Provides procedures and requirements for electing board members not later than 60 days after 25%, and then 50%, of the lots have been conveyed. Prohibits financial payments from being made to any officer or member of the executive board except as expressly provided for in the bylaws or in payments for services or expenses paid on behalf of the association approved in advance by the executive board. 

Amends GS 47F-3-105, Termination of contracts and leases of declarant, which provides for termination of certain contracts and leases entered into before the executive board elected by the lot owners pursuant to GS 47F-3-103 takes office. Establishes that the following contracts and leases can be terminated without penalty by the association at any time after the executive board elected by lot owners, pursuant to GS 47F-3-103, takes office, upon at least 90 days' notice to the other party: (1) any management contract, employment contract, or lease of recreational or parking areas or facilities; (2) any other contract or leases 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 entered into under the prevailing circumstances. Adds that notice of the substance of the provisions of the statute must be set out in each contract entered into by or on behalf of the association before the executive board elected by the lot owners takes office. Provides that failure of the contract to contain this provision does not affect the rights of the association under the statute. 

Amends GS 47F-3-108, Meetings, to require an association to hold a meeting of lot owners at a time, date, and place stated or fixed in accordance with the bylaws (currently, must hold a meeting at least one a year). Provides that when an association fails to notify lot owners of a special meeting within 30 days after the requisite number or percentage of lot owners request a special meeting, as described, then the requesting lot owners can notify all of the lot owners. Adds that only matters described in the meeting notice can be considered at a special meeting. 

Amends GS 47F-3-111, Tort and contract liability, establishing that a declarant is liable to the association for an action brought against the association for a claim which occurred during any period the declarant was in control if the association gives the declarant that controlled the association when the claim occurred reasonable notice of and an opportunity to defend against the action. Provides that a declarant in this situation is liable for all tort losses incurred by the association that are not covered by an insurance policy held by the association, and all losses which the association would not have incurred but for a breach of contract. Clarifies that this provision does not impose strict liability or absolute liability upon the declarant for claims occurring during the period of declarant control. Further provides that in any situation where the declarant is liable to the association under the statute, the declarant is also liable for all litigation expenses.

Amends GS 47F-3-114, Surplus funds, deleting language which allowed for the funding of a reasonable operating expense surplus.

Amends GS 47F-3-116 to provide that claims of lien can only be foreclosed in like manner as a mortgage or deed of trust on real estate if the assessment has remained unpaid for 90 days and it is against a lot that is not the primary residence of the owner (previously, did not exempt primary residences from such claims of liens). Eliminates the provision deeming the association to have a power of sale for purposes of enforcement of its claim of lien. Provides that a claim of lien against a primary residence can only be enforced by judicial foreclosure. 

Amends GS 47F-3-118, Association records, deleting all of the substantive language of subsection (a) and adding language which requires associations to retain 11 different types of records as specified, including financial statements and tax returns of the association for the preceding three years and all ballots, proxies, and other records related to voting by lot owners for at least one year. Provides that records are to be made available for inspection and copying by lot owners or agents and details matters that can be withheld from inspection and copying. Authorizes an association to charge a reasonable fee for providing copies of any records under the statute and for supervising the lot owner's inspection. Adds that a right to copy records under this statute includes the right to receive copies by photocopying or other means, including electronically if available. Provides that an association is not obligated to compile or synthesize information. Establishes that information provided pursuant to the statute cannot be used for commercial purposes. Makes technical changes.  

Enacts GS 47F-3-120.1, Alternative dispute resolution allowed, authorizing parties to resolve a dispute arising under GS Chapter 47F or an association's declaration, bylaws, or rules and regulations by any form of binding or nonbinding alternative dispute resolution, except that a declarant can agree with an association to resolve a dispute through alternative dispute resolution only after the period of declarant control has expired. Requires parties electing to use alternative dispute resolution to use mediators certified by the Dispute Resolution Commission. Also requires an agreement to submit to any form of binding alternative dispute resolution to be in a record authenticated by the parties. 

Enacts new Article 4 of GS Chapter 47F, Protection of Purchasers.

New GS 47F-4-101 provides that the Article applies to the disposition of all lots that are part of a planned community subject to the Chapter, except for the provided exceptions or as modified or waived by agreement of purchasers of lots in a planned community in which all lots are restricted to nonresidential use. Sets forth seven classifications of dispositions where no disclosure certificate, as provided for in GS 47F-4-103, need be prepared or delivered.

New GS 47F-4-102, Purchaser's right to cancel, requires a person required to deliver a disclosure certificate to provide a purchaser with a copy of the certificate before conveyance of the lot and no later than the date of any contract of sale. Establishes that the purchase contract is voidable by the purchaser, unless a purchaser is given the disclosure certificate more than five days before execution of the contract for the purchase of the lot, until the certificate has been provided and for five days thereafter or until conveyance, whichever occurs first. Requires a purchaser who elects to cancel a contract to hand-deliver notice to the seller or by mailing the notice to the seller or the seller's agent. Allows the purchaser to cancel without penalty, and requires all payments made by the purchaser before cancellation to be promptly refunded. 

New GS 47F-4-103, Disclosure to be made to purchasers, requires a seller of a lot that is part of a planned community to give the purchaser, before the earlier of conveyance or transfer of the right to possession of the lot, a copy of the declaration other than any plats and plans, the by laws, the rules or regulations of the association, and a certificate. Details 16 elements the certificate must contain, including a statement setting forth the amount of the periodic common expense assessment and any unpaid common expense or special assessment currently due and payable from the owner who is selling the lot and a statement disclosing the effect on the lot to be conveyed of any restrictions on the owner's right to use or occupy the lot or to lease the lot to another person. Directs the association to furnish a certificate containing the required information and copies of all documents necessary to enable the lot owner to comply with the statute within 10 days after a request by a lot owner. Provides that a lot owner providing a certificate is not liable to the purchaser for any erroneous information provided by the association and included in the certificate. Adds that a purchaser is not liable for any unpaid assessment or fee greater than the amount set out in the certificate prepared by the association, and a lot owner is not liable to a purchaser for the failure or delay of the association to provide the certificate in a timely manner. 

Apples to all (1) planned communities created in this state on or after the date the act becomes law that contain more than 20 residential lots and (2) planned communities created in this state before the date the act becomes law that contain more than 20 residential lots, except that the act applies only with respect to events and circumstances occurring on or after the effective date of this act, and this act does not invalidate existing provisions of the declaration, bylaws, or plats or plans of those planned communities. The declaration, bylaws, or plats and plans of any planned community in this state created before the date the act becomes law can be amended to achieve any result permitted by this act, regardless of what applicable law provided before that date.

Part II

Amends the NC Condominium Act, GS Chapter 47C, as follows.

Amends GS 47C-3-103, Executive board members and officers of condominiums, providing that no financial payments can be made to any officer or members of the executive board, or to a business, business associate, or relative of an officer or member of the executive board, except as expressly provided for in the bylaws or in payments for services or expenses paid on behalf of the association approved in advance by the executive board.

Amends GS 47C-3-108, Meetings, to require an association to hold a meeting of unit owners at a time, date, and place stated or fixed in accordance with the bylaws (currently, must hold a meeting at least once a year). Provides that when an association fails to notify the unit owners of a special meeting within 30 days after the requisite number or percentage of unit owners request a special meeting, as described, then the requesting unit owners can notify all of the unit owners. Adds that only matters described in the meeting notice can be considered at a special meeting. Eliminates subsection (b), providing for executive board meeting requirements. Instead, provides, unless the declaration or bylaws otherwise provide, meetings of the association and the executive board can be conducted by phone, video, or other conferences as long as the meeting notice states the conferencing process to be used and provides information on how unit owners can participate, and the process provides all unit owners the opportunity to hear or perceive the discussion and to comment. Requires unit owners to be given a reasonable opportunity at any meeting to comment regarding any matter affecting the condominium or the association, including executive board meetings. Provides parameters concerning limitations and requirements for meetings of the executive board and other committees of the association, as well as actions of the board. Requires the secretary or other specified officer to give notice of each executive board meeting to each board member and to the unit owner no less than 10 and no more than 60 days before the meeting, unless the meeting is included in a schedule given to the unit owners or the meeting is called to deal with an emergency. Provides for copies of meeting materials to be made available to unit owners. Establishes that an action by the board is valid unless set aside by a court. A challenge to the validity of a board action must be brought within 60 days after the minutes of the board meeting at which the action was taken are approved or the record of that action is distributed to the unit owners, whichever is later.

Amends GS 47C-3-118, Association records, deleting all of the substantive language of subsection (a) and adding language which requires associations to retain 11 different types of records as specified, including financial statements and tax returns of the association for the preceding three years and all ballots, proxies, and other records related to voting by unit owners for at least one year. Provides that records are to be made available for inspection and copying by unit owners or agents and details matters that can be withheld from inspection and copying. Authorizes an association to charge a reasonable fee for providing copies of any records under the statute and for supervising the unit owner's inspection. Adds that a right to copy records under this statute includes the right to receive copies by photocopying or other means, including electronically if available. Provides that an association is not obligated to compile or synthesize information. Establishes that information provided pursuant to the statute cannot be used for commercial purposes. Makes technical changes. Makes conforming change to eliminate subsection (c), prohibiting payments to any officer or member of the association's board, or business or a business association or relative of a board member.

Enacts GS 47C-3-120, Alternative dispute resolution allowed, authorizing parties to resolve a dispute arising under GS Chapter 47C or an association's declaration, bylaws, or rules and regulations by any form of binding or nonbinding alternative dispute resolution, except that a decalrant can agree with an association to resolve a dispute through alternative dispute resolution only after the period of declarant control has expired. Requires parties electing to use alternative dispute resolution to use mediators certified by the Dispute Resolution Commission. Also requires an agreement to submit to any form of binding alternative dispute resolution to be in a record authenticated by the parties.

Amends GS 47C-4-101(b), which lists classifications of dispositions where no disclosure certificate need be prepared or delivered, to add property restricted to nonresidential purposes to the list of classifications. Makes clarifying and technical changes.

Amends GS 47C-4-109, Resale of units, requiring the unit owner to furnish, except in the case of a sale where delivery of a public offering statement is required or if exempt under GS 47C-4-101(b), to a prospective purchaser before the earlier of conveyance or transfer of the right of possession to the unit, a copy of the declaration other than any plats and plans, the bylaws, the rules or regulations of the association, and a certificate (previously, only required a statement setting forth the monthly common expense assessment and any other fees payable by unit owners). Details 16 elements the certificate must contain, including a statement setting forth the amount of the periodic common expense assessment and any unpaid common expense or special assessment currently due and payable from the owner who is selling the unit, and a statement disclosing the effect on the unit to be conveyed of any restrictions on the owner's right to use or occupy the unit or to lease the unit to another person. Directs the association to furnish a certificate containing the required information and copies of all documents necessary to enable the unit owner to comply with the statute within 10 days after a request by a unit owner. Provides that a unit owner providing a certificate is not liable to the purchaser for any erroneous information provided by the association and included in the certificate. Adds that a purchaser is not liable for any unpaid assessment or fee greater than the amount set out in the certificate prepared by the association. Establishes that a unit owner is not liable to a purchaser for the failure or delay of the association to provide the certificate in a timely manner, but the purchase contract is voidable by the purchaser until the certificate has been provided and for five days thereafter or until the conveyance, whichever occurs first.

Applies to all (1) condominiums created in this state on or after the date the act becomes law and (2) condominiums created in this state before the date the act becomes law, except that the act applies only with respect to events and circumstances occurring on or after the effective date of this act and does not invalidate existing provisions of the declaration, bylaws, or plats or plans of those condominiums. The declaration, bylaws, or plats and plans of any condominium created before the date the act becomes law can be amended to achieve any result permitted by this act, regardless of what applicable law provided before that date.

Part III

Directs the NC Real Estate Commission to revise the Real Property Disclosure Statement developed by it pursuant to GS 47E-4 to provide a place for disclosure by sellers of the existence of any homeowners' association or unit owners' association with responsibility for enforcing rules and regulations relating to the real property and existence of any restrictive covenants affecting the real property, regardless of whether such restrictive covenants are currently violated by any condition of the real property.

Directs the Consumer Protection Division of the Department of Justice to provide general information to and receive complaints from the public regarding the implementation of this act. Directs the Department of Justice to compile all complaints relating to homeowners' associations into an annual report, and publish the report on the Department's website.

Includes a severability clause.

© 2020 School of Government The University of North Carolina at Chapel Hill

This work is copyrighted and subject to "fair use" as permitted by federal copyright law. No portion of this publication may be reproduced or transmitted in any form or by any means without the express written permission of the publisher. Distribution by third parties is prohibited. Prohibited distribution includes, but is not limited to, posting, e-mailing, faxing, archiving in a public database, installing on intranets or servers, and redistributing via a computer network or in printed form. Unauthorized use or reproduction may result in legal action against the unauthorized user.

Printer-friendly: Click to view