Archive for the ‘Condominium Law’ Category

Condominiums – No Longer Subject to Interstate Land Sales Act (ILSA Law)

Thursday, October 2nd, 2014

On September 18, 2014 the US Senate unanimously approved amendments which will have the effect of removing condominium developments from application of ILSA.  The amendment becomes effective 180 days after signed by the President, which is expected given overwhelming bi-partisan support in the Senate and House.  ILSA was enacted in the 1960’s to protect consumers from large development lot sale scams. Before changes to the law, developers of condominiums containing more than 99 units were technically required to register under ILSA, and many argued for years that application to condominiums was not what was originally intended, and did not really have any additional positive protective effect for purchasers.  The fact that developers will not have to comply with this very cumbersome law should be a great relief to developers, one that will hopefully be one more encouragement to commence larger scale condominium projects.

For more information, this link will take you directly to the version of the bill approved by the US Senate:

Please call any of the attorneys in our Commercial Development Practice Group if you have any questions about ILSA, or any other legal issues related to commercial real estate development.


Revisions to North Carolina Homeowner Association Law Loom

Tuesday, May 3rd, 2011

Our Firm has many Homeowner Association clients, both condominium and planned communities.  We have even more clients who are developers of real property (Declarants), both condominium and planned community.   These clients need to be aware of a bill (House Bill 165) now before the NC General Assembly. Passing its first reading, this bill is now in Committee.  Interested and concerned Associations and Developers of real property should contact their legislature representatives and let them know how they feel about the proposed amendments to Chapter 47C and 47F.  It is my interpretation of what I have read (link to bill as proposed is set forth below for your own review and interpretation) that the new law will make it much more difficult for Associations to hold owners accountable in meeting their obligations as members of a common development.  It is my belief that the while there are a few positive provisions in the amendments which are helpful in clarification of the obligations of officers and board members, some provisions of the law will lead to compliant neighbors sharing a greater financial burden of those members who do not live up to their obligations; an unfair result.  For developers of real property, you need to be aware that the legislature is taking action to make certain rights of “declarant” more difficult to assert, and are proposing that purchaser protection provisions (much the same as in the Condominium Act) be applied to the sale of planned community lots.  The purpose of this post is to point out a few areas where I have greatest concern, both for our developer and association clients:

1.       In both statutes, a specific priority application of payments is now mandated, with payments applied first to assessments, then to late charges, attorney fees and fines and interest.  It is in the best interest of the Association to have application just the opposite as that stated, and the new application pattern will create more difficulty in foreclosing liens where back assessments are paid, but other charges, fees and expenses are not, and therefore a different (more cumbersome) foreclosure procedure must be complied with.

2.       Both statutes would now mandate that when assessments are delinquent, some provision for periodic partial payment over a “reasonable time” must be created by the Association before the procedure for lien and foreclosure is commenced.  The statute is very uncertain as to what a “reasonable time” is, and refers to there being rights to file a lien if an owner “accepts” a plan and then defaults.  The statute does not say what would happen if a payment plan is not accepted, but I assume the lien process could move forward.  Unfortunately, the legislature is going to give more time for the owners to pay the assessments they are responsible for, but at the same time does not create an additional period of time for the Associations (and therefore the responsible owners) to live up to the legally required financial obligations of the Association.

3.       For Declarant, required alternative dispute resolution (between declarant and Association) is limited until after the period of Declarant control is over.

4.       Some new provisions of note in the Planned Community Act – certainty as to the limits of the period of declarant control, and purchaser protection provisions (in the form much like the public offering statement required in the Condominium Act).

5.       For both statutes, it appears that there is now a burden of a public offering statement in resales of lots, and though the statement must be given by the Seller to the Buyer, the burden of providing information to create the statement is on the Association.

These are just some of the changes.  All Association leaders need to take a good look at this proposed statute as it gets closer to being adopted law in North Carolina.  If adopted, I would predict that fewer people will be willing to take on the duties of leadership in an Association.

Link to Proposed Law:          


Tuesday, November 10th, 2009

When can I record?

There is a question that arises in just about every new construction condominium, and that is:  When can I create the condominium.  A condominium is only created upon the recording  of a declaration of condominium.  Until the moment that the declaration is recorded, a parcel of land remains a parcel of land, and units of space cannot be conveyed (other than in the traditional sense, as a subdivision or planned community).  In many condominiums, especially where there is only one or just a few buildings, and no phasing of units by building is intended, there will come a time when a portion of the building is complete, and a portion is not.  At that time, the question arises whether the declaration is allowed to be recorded, because once recorded, the space is legally created and definable and can be conveyed.  Delays in creation of the condominium usually mean delays in the ability to close on sales and convey.  Obviously, delays like this mean delays in meeting financial obligations. 

North Carolina law provides that a condominium declaration cannot be recorded unless all of the structural components and mechanical systems of the building are complete as certified by either a North Carolina licensed architect or engineer.  For definitional purposes, the official comment to the statute is quite helpful.  Generally, structural components are complete when those portions of the building necessary to keep it standing are in place, and when the building is weather tight.  I once had a client that desired to record a condominium declaration and sell a lower unit fully complete (including windows) even though the upper units had no windows or window frames yet installed.  Clearly, without some of the building windows in place, it was my view that the declaration should not be recorded.   Mechanical systems of a building are complete when such normal or customary (in the locale) systems for the building (as opposed to individual unit fixtures) such as plumbing, electrical, and heating and air conditioning are in place and operation when connected to.   

Once a condominium declaration is recorded, space (or condominium units) can be conveyed by the Declarant to others.  However, developers of any condominium structure which includes one or more residential units need to be aware that the purchaser protection provisions of the North Carolina Condominium Act do not allow the conveyance of any Unit in the building (residential or commercial) until the Unit is substantially complete as evidenced by a certificate of occupancy issued as provided by law, or in the alternative if such Unit is certified substantially complete by an architect or engineer.  Though there are no case interpretations on point, absent a certificate of occupancy, it is my believe (without legal certainty, but based on what I believe to be the logical interpretation of the statute) that the architect or engineer is certifying completion as to the “Unit” contracted for.  In many mixed use condominiums, sales of residential condominiums proceed prior to lower floor commercial units being contracted for.  In many instances, commercial units are “finished” by the purchaser after closing, based upon the commercial needs of the business to be operated, and the “unit” conveyed is actually just a “shell”.  Therefore, for the purpose of conveyance of a shell, it is my belief that the best interpretation is that the architect or engineer would be certifying to substantial completion of the Unit “shell”, as opposed to the Unit as “upfitted” or “finished”.

In that this question comes up in almost every new construction condominium, I hope this is helpful information.  Feel free to contact me if you have need of further interpretation.


Tom Grella