Revisions to North Carolina Homeowner Association Law Loom

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: