Archive for the ‘Property Owner Associations’ 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.



Friday, November 22nd, 2013

By:  Rick Jackson

On January 1, 2014, Chapter 57D of the North Carolina General Statutes goes into effect (“New LLC Statute”) and Chapter 57C is repealed (“Old LLC Statute”).  The New LLC Statute will apply to all LLC’s, even those formed before January 1, 2014.

So is it time to make an appointment with your attorney to review your operating agreement?  Perhaps, but not for the reasons you may think. 

As three of the most significant changes to the Old LLC Statute, the New LLC Statute (1) introduces and emphasizes the concept of “company officials” as an alternative to managers, (2) introduces and emphasizes the concept of “economic interest owner” as distinguished from members, and (3) provides that the New LLC Statute (other than seven enumerated exceptions) may be “supplemented, varied, disclaimed, or nullified” by the operating agreement.

1.  New Definition:  “Company Officials”

The New LLC Statute provides that “company officials”, such as directors and officers, can be used by LLCs as the decision makers for the LLC in lieu of managers.  But the use of directors and officers in an LLC is not new to the New LLC Statute.  The New LLC Statute simply places greater emphasis than the Old LLC Statute on its use as a possible alternative to managers.

The ability to use directors and officers in lieu of managers underscores just how flexible the governance of LLCs can be.  In determining the appropriate decision-making structure of your LLC, it is important to consider whether the use of directors and officers in lieu of managers is, in practice, more efficient (or burdensome) in carrying out your day-to-day management.  Even more important is determining the decision-making authority of the members of your LLC in relation to that of its managers (if manager-managed) or directors and officers, as the case may be.  For example, are there major decisions that should require member approval instead of manager approval?

2.  New Definition: “Economic Interest Owner”

Similar to the definition of “company officials”, the definition of “economic interest owner” is new to the New LLC Statute, but the concept is not.    Under the Old LLC Statute, this concept was referred to as an “assignee”.  Like an assignee, an “economic interest owner” only has the economic rights of a member but not the non-economic rights, such as management rights, derivative action rights, and rights to information.  In contrast, a “member” has both economic and non-economic rights in the LLC.

The concept of “economic interest owner” is most relevant in the context of the buy-sell provisions of your operating agreement.  In general, involuntary events may cause a transfer of a member’s interest in the LLC (e.g. the death of member).  Your operating agreement hopefully provides an efficient way to address these situations, often referred to as buy-sell events.  As a related matter, your operating agreement in general should provide that any recipient of the transferred membership interest is merely an economic interest owner, not a member of the LLC (unless admitted pursuant to the member substitution or permitted transferee provisions of the operating agreement).

3.  Use of Operating Agreement to nullify New LLC Statute 

The phrase “except as otherwise provided in . . . a written operating agreement, . . .” was used throughout the Old LLC Statute.  This meant that the section of Old LLC Statute that this ubiquitous phrase preceded would apply to your LLC, unless your operating agreement contained express language to prevent or otherwise modify its application to your LLC.  In lieu of the repeated use of this phrase, the New LLC Statute more-succinctly and comprehensively provides that the New LLC Statute (other than seven enumerated exceptions) may be “supplemented, varied, disclaimed, or nullified” by the operating agreement.  Here again, this is not a concept that is new to the New LLC Statute.

More importantly, you need to understand those instances in which you do not want the New LLC Statute to apply to your LLC and draft your operating agreement accordingly.  For example, you generally want the bankruptcy of an individual member to automatically trigger that member’s withdrawal from the LLC but there are instances in which you may not want this to automatically happen.  Your operating agreement needs to account for these situations.

In summary, you do not need to make an appointment with your attorney to review your operating agreement solely based on the New LLC Statute, but if you have not addressed the issues described above with your attorney to assure that your operating agreement properly fits your business, now is the time to do so.   

Please contact me if I can assist you in any way with your North Carolina LLC  (; 828-254-8800).


Rick Jackson is an Attorney with the law firm of McGuire, Wood & Bissette, P.A.   He works primarily with small to mid-size businesses: technology and manufacturing companies; property owners, developers, and homeowner associations; medical and dental practices and hospitals; restaurants and breweries; agricultural and natural product businesses; and nonprofits.




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: