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FAQ's About NC Homeowner & Condominium Associations - Part I

by Jim Slaughter

Based on "State Laws Affecting Common Interest Communities Frequently Asked Questions ("FAQs") Project" for the College of Community Association Lawyers. Jim Slaughter is a member of the College of Community Association Lawyers and currently serves on the national CCAL Board of Governors.

Answers current as of spring 2016.
  Go to Part II.


GENERAL

1. What state statutes apply to Common Interest Communities in your state?

North Carolina has several layers of community association laws. The NC Condominium Act (Chapter 47C) applies to condominiums created on or after October 1, 1986. The NC Planned Community Act (Chapter 47F) applies to most planned communities (HOA’s) created on or after January 1, 1999. Approximately one-third of both chapters are retroactive and apply to associations created before the operative dates of the statutes. Finally, the NC Nonprofit Act (Chapter 55A) may apply to any incorporated community association (as most are) and the issue is not specifically addressed in the Condominium or Planned Community Acts.

 

2. Are Common Interest Communities required to incorporate? Can they be incorporated? Advantages/Disadvantages?

Planned communities created on or after January 1, 1999, and governed by the NC Planned Community Act must incorporate no later than the date the first lot is conveyed. (NCGS § 47F-3-101) There is no comparable condominium statute. However, any condominium or older planned community may incorporate as a nonprofit and most do.

 

3. Is there a state agency which has authority to regulate and oversee the affairs of Common Interest Communities? What is the scope of its power and authority?

There is no agency that specifically regulates or oversees the affairs of community associations. Various state agencies, including the Attorney General’s office, occasionally become involved in certain community association issues.

 

4. On the state level, what are the annual reporting requirements of a Common Interest Community, if any, and to whom?

For incorporated community associations, there are certain annual reports required by the Secretary of State’s office as with other nonprofit corporations.

 

MEMBERSHIP MEETINGS

5. Is an Annual Meeting of Members required?

Both the NC Planned Community Act (NCGS § 47F-3-108(a)) and the NC Condominium Act (NCGS § 47C-3-108(a)) require that a meeting of the association be held at least once each year. These two statutes apply retroactively to older associations.

 

6. How are Special Meetings of the Members called?

The NC Planned Community Act (NCGS § 47F-3-108(a)) allows special meetings to be called by the president, a majority of the executive board, or by lot owners having ten percent of the votes in the association (or any lower percentage specified in the bylaws). The NC Condominium Act (NCGS § 47C-3-108(a)) has almost identical language, but requires unit owners having 20 % of the votes in the association (or any lower percentage specified in the bylaws). These two statutes apply retroactively to older associations.

 

7. What are the Notice Requirements for Membership Meetings?

Planned communities must provide not less than 10 nor more than 60 days notice sent by hand-delivery or prepaid U.S. mail to the mailing address of each lot or to any other mailing address designated in writing by the lot owner, or sent by electronic means, including by electronic mail to an electronic mailing address designated in writing by the lot owner. (NCGS § 47F-3-108(a)) Condominium associations must provide not less than 10 nor more than 50 days notice sent by hand-delivery or prepaid U.S. mail to the mailing address of each unit or to any other mailing address designated in writing by the unit owner, or sent by electronic means, including by electronic mail to an electronic mailing address designated in writing by the unit owner. (NCGS § 47C-3-108(a)) These two statutes apply retroactively to older associations.

 

8. What are Quorum Requirements for Membership Meetings?

For planned communities created on or after January 1, 1999, and governed by the NC Planned Community Act, a quorum (unless the bylaws provide otherwise) is present throughout any meeting if persons entitled to cast 10% of the votes of the association are present in person or by proxy at the beginning of the meeting. (NCGS § 47F-3-109(a)) For condominium associations created on or after October 1, 1986, a quorum (unless the bylaws provide otherwise) is present throughout any meeting if persons entitled to cast 20% of the votes of the association are present in person or by proxy at the beginning of the meeting. (NCGS § 47C-3-109(a))

 

Under the NC Planned Community Act, if business cannot be conducted because a quorum is not present, the meeting may be adjourned to a later date by a majority vote of those present in person or by proxy. Notwithstanding any provision to the contrary in the declaration or the bylaws, the quorum requirement at the next meeting is one half of the quorum requirement applicable to the meeting adjourned for lack of a quorum. This provision continues to reduce the quorum by fifty percent (50%) from the previous meeting until such time as a quorum is present and business can be conducted. (NCGS § 47F-3-109(c))

 

For older incorporated associations not governed by the Acts, a quorum (unless the articles of incorporation or bylaws provide otherwise) is ten percent (10%) of the votes entitled to be cast. (NCGS § 55A-7-22(a)) Once a member is represented for any purpose at a meeting, the member is deemed present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting unless a new record date is or must be set for that adjourned meeting.

 

9. Can Members use Proxies? Absentee Ballots? Mail Ballots?

North Carolina has many statutes governing proxies:

 

§ 47F-3-110 & 47C-3-110 (for later associations only)
Voting; proxies.
  1. If only one of the multiple owners of a lot is present at a meeting of the association, the owner who is present is entitled to cast all the votes allocated to that lot. If more than one of the multiple owners are present, the votes allocated to that lot may be cast only in accordance with the agreement of a majority in interest of the multiple owners, unless the declaration or bylaws expressly provide otherwise. Majority agreement is conclusively presumed if any one of the multiple owners casts the votes allocated to that lot without protest being made promptly to the person presiding over the meeting by any of the other owners of the lot. (b) Votes allocated to a lot may be cast pursuant to a proxy duly executed by a lot owner. If a lot is owned by more than one person, each owner of the lot may vote or register protest to the casting of votes by the other owners of the lot through a duly executed proxy. A lot owner may not revoke a proxy given pursuant to this section except by actual notice of revocation to the person presiding over a meeting of the association. A proxy is void if it is not dated. A proxy terminates 11 months after its date, unless it specifies a shorter term.

     

    § 55A-7-24.  Proxies. (Nonprofit Act governing older associations)

    (a)       Unless the articles of incorporation or bylaws prohibit or limit proxy voting, a member may vote in person or by proxy. A member may appoint one or more proxies to vote or otherwise act for him by signing an appointment form, either personally or by his attorney in fact. A photocopy, telegram, cablegram, facsimile transmission, or equivalent reproduction of a writing appointing one or more proxies, shall be deemed a valid appointment form within the meaning of this section. In addition, if and to the extent permitted by the nonprofit corporation, a member may appoint one or more proxies (i) by an electronic mail message or other form of electronic, wire, or wireless communication that provides a written statement appearing to have been sent by the member, or (ii) by any kind of electronic or telephonic transmission, even if not accompanied by written communication, under circumstances or together with information from which the nonprofit corporation can reasonably assume that the appointment was made or authorized by the member.

    (b)       An appointment of a proxy is effective when received by the secretary or other officer or agent authorized to tabulate votes. An appointment is valid for 11 months unless a different period is expressly provided in the appointment form.

    (c)       An appointment of a proxy is revocable by the member unless the appointment form conspicuously states that it is irrevocable and the appointment is coupled with an interest. An appointment made irrevocable under this subsection shall be revocable when the interest with which it is coupled is extinguished. A transferee for value of an interest subject to an irrevocable appointment may revoke the appointment if he did not have actual knowledge of its irrevocability.

    (d)       The death or incapacity of the member appointing a proxy does not affect the right of the corporation to accept the proxy's authority unless notice of the death or incapacity is received by the secretary or other officer or agent authorized to tabulate votes before the proxy exercises authority under the appointment.

    (e)       A revocable appointment of a proxy is revoked by the person appointing the proxy:

  1. Attending any meeting and voting in person; or signing and delivering to the secretary or other officer or agent authorized to tabulate proxy votes either a writing stating that the appointment of the proxy is revoked or a subsequent appointment form.

(f)        Subject to G.S. 55A-7-27 and to any express limitation on the proxy's authority appearing on the face of the appointment form, a corporation is entitled to accept the proxy's vote or other action as that of the member making the appointment.

 

The NC Nonprofit Act provides that unless prohibited or limited by the articles of incorporation or bylaws, any action that may be taken at a meeting of members may be taken without a meeting if the corporation delivers a written ballot to every member entitled to vote on the matter that (1) sets forth each proposed action; and (2) provides an opportunity to vote for or against each proposed action. The number of votes cast by ballot must equals or exceeds the quorum required to be present at a meeting authorizing the action, and all solicitations for votes by written ballot must indicate the time by which the ballot must be received by the corporation to be counted. (NCGS § 55A-7-08)

 

10. Can Members Raise Concerns or Issues at a Membership Meeting?

The NC Planned Community and Condominium Acts do not prohibit members from raising concerns or issues at an annual meeting for discussion, but there are statutory limitations on the business that can be transacted. Both the NC Planned Community Act (NCGS § 47F-3-108(a)) and the NC Condominium Act (NCGS § 47C-3-108(a)) require that the notice of any meeting state the time and place of the meeting and the items on the agenda, including the general nature of any proposed amendment to the declaration or bylaws, any budget changes, and any proposal to remove a director or officer. In addition, only business mentioned in the call can be transacted at a special meeting.

 

11. Can Non-Members attend Membership Meetings? (Attorneys of Members? Guests of Members? Local or National Media representatives?)

Nothing in the NC Planned Community or NC Condominium Act gives non-members the right to attend membership meetings of a community association, but such issue could be addressed in the governing documents of the association or by a vote of the members. Generally, however, a member can send anyone (whether another member or non-member) as a proxy to an association membership meeting.

 

BOARD MEETINGS

12. Are Boards of Directors required to hold Regular Board Meetings?

Both the NC Planned Community Act (NCGS § 47F-3-108(b)) and the NC Condominium Act (NCGS § 47C-3-108(b)) provide that the executive board shall meet as provided in the bylaws. These statutes apply retroactively to older associations.

 

13. How are Special Meetings of the Board called?

Neither the NC Planned Community Act (NCGS § 47F-3-108(b)) nor the NC Condominium Act (NCGS § 47C-3-108(b)) addresses the issue of calling special meetings of the board, and this issue is generally covered in the governing documents. However, for incorporated associations, the NC Nonprofit Act provides that unless the articles of incorporation or bylaws provide otherwise, the presiding officer of the board, the president, or 20% of the directors may call and give notice of a special meeting of the board. (NCGS § 55A-8-22(c)).

 

14. What are the Notice requirements for Board meetings? Are Members required to be notified as well?

Neither the NC Planned Community Act (NCGS § 47F-3-108(b)) nor the NC Condominium Act (NCGS § 47C-3-108(b)) addresses the issue of notice for board meetings, but simply note that meetings of the executive board shall be held as provided in the bylaws.

 

However, for incorporated associations, the NC Nonprofit Act provides that regular meetings of the board may be held without notice of the date, time, place, or purpose of the meeting, unless the articles of incorporation or bylaws provide otherwise. The NC Nonprofit Act provides that special meetings of the board of directors shall be held upon such notice as is provided in the articles of incorporation or bylaws, or in the absence of any such provision, upon notice sent by any usual means of communication not less than five days before the meeting. The notice need not describe the purpose of the special meeting unless required by the Nonprofit Act, the articles of incorporation, or the bylaws. (NCGS § 55A-8-22).

 

15. What constitutes a quorum for Board Meetings?

For planned communities created on or after January 1, 1999, and subject to the NC Planned Community Act, a quorum (unless the bylaws specify a larger percentage) is present throughout any meeting of the board if persons entitled to cast 50% of the votes are present at the beginning of the meeting. (NCGS § 47F-3-109(b)) For condominium associations created on or after October 1, 1986, a quorum (unless the bylaws specify a larger percentage) is present throughout any meeting of the board if persons entitled to cast 50% of the votes on that board are present at the beginning of the meeting. (NCGS § 47C-3-109(b))

For older associations, the NC Nonprofit Act provides that except as otherwise provided in the Nonprofit Act, the articles of incorporation, or the bylaws, a quorum of a board of directors consists of a majority of the directors in office immediately before a meeting begins, but in no event fewer than one third of the number of directors in office. NCGS § 55A-8-24(a).

 

16. Can Board Members use Proxies?

No. While there is no statute on point, it is generally understood that board members cannot transfer by proxy their fiduciary board responsibilities.

 

17. Which meetings of the Board of Directors are open to all homeowners?

There is no statutory requirement that specific meetings of the Board are open to all homeowners. However, both the NC Planned Community Act (NCGS § 47F-3-108(b)) and the NC Condominium Act (NCGS § 47C-3-108(b)) provide as follows:

At regular intervals, the executive board meeting shall provide lot owners an opportunity to attend a portion of an executive board meeting and to speak to the executive board about their issues or concerns. The executive board may place reasonable restrictions on the number of persons who speak on each side of an issue and may place reasonable time restrictions on persons who speak.

These two statutes apply retroactively to older associations.

 

18. Does a Member have the right to address the Board of Directors during the meeting?

Both the NC Planned Community Act (NCGS § 47F-3-108(b)) and the NC Condominium Act (NCGS § 47C-3-108(b)) provide as follows:

At regular intervals, the executive board meeting shall provide lot owners an opportunity to attend a portion of an executive board meeting and to speak to the executive board about their issues or concerns. The executive board may place reasonable restrictions on the number of persons who speak on each side of an issue and may place reasonable time restrictions on persons who speak.

These two statutes apply retroactively to older associations.

 

19. Can the Board of Directors meet in Closed or Executive Session? If so, for what purposes?

There are no statutory prohibitions on the executive board meeting in closed session for any reason.

 

20. Are Minutes of Board Meetings required? When can Members see the minutes of such meetings?

Both the NC Planned Community Act (NCGS § 47F-3-118(a)) and the NC Condominium Act (NCGS § 47C-3-118(a)) provide that minutes of the executive board shall be made reasonably available for examinations by owners, which would certainly suggest that such minutes must be kept. These two statutes apply retroactively to older associations.

 

21. Does a Member have a right to audio- or video-records meetings of the Board? Under what circumstances or conditions?

There is no statutory right for a member to audio or video-record meetings of the executive board.

 

22. Can Non-Members attend Board Meetings?

Both the NC Planned Community Act (NCGS § 47F-3-108(b)) and the NC Condominium Act (NCGS § 47C-3-108(b)) provide as follows:

At regular intervals, the executive board meeting shall provide lot owners an opportunity to attend a portion of an executive board meeting and to speak to the executive board about their issues or concerns. The executive board may place reasonable restrictions on the number of persons who speak on each side of an issue and may place reasonable time restrictions on persons who speak.

These two statutes apply retroactively to older associations.



GO TO PART II
ADMINISTRATION

23. Does a Member have a right to review books and records of the Association?

  1. If so, what books and records can be reviewed?

  2. Can the Member obtain copies of the books and records requested?

  3. Does a Member have to pay for copies of the books and records?

  4. Are there books and records which the Association can withhold or otherwise prevent a Member from reviewing?

Both the NC Planned Community Act (NCGS § 47F-3-118(a)) and the NC Condominium Act (NCGS § 47C-3-118(a)) provide that all financial and other records, including records of meetings of the association and executive board, shall be made reasonably available for examination by any lot owner and the lot owner’s authorized agents as required in the bylaws and Chapter 55A (the Nonprofit Act). The Nonprofit Act provides greater detail on the rights of members as to records, distinguishing between those records available upon request (i.e., governing documents, actions adopted by the members, minutes of membership meetings, written communications to the members, names and addresses of board members) and other records which may be available depending on the circumstances. (NCGS § 55A-16-01 through § 55A-16-01) A corporation may impose a reasonable charge, covering the costs of labor and material, for producing for inspection or copying any records provided to the member; however, the charge may not exceed the estimated cost of production or reproduction of the records. NCGS § 55A-16-03.

 

24. What are the Reserve requirements in the State? Are Reserve Studies mandated?

What reporting requirements does the Association have with respect to the status of the Reserves, the Reserve Accounts or the funding of the Reserves?

There is no statutory reserve or reserve study requirement in the NC Planned Community Act. The NC Condominium Act provides that the public offering statement must include a statement of the amount, or a statement that there is no amount, included in the budget as a reserve for repairs and replacement. NCGS § 47C-4-103(a)(5).

 

25. What are the resale disclosure requirements?

The Residential Property Disclosure Act (NCGS § 47E) requires owners of residential real estate to furnish potential purchasers a Residential Property and Owners’ Association Disclosure Statement. The Disclosure Statement is not required on the first sale of a dwelling that has never been inhabited. Several questions on the Disclosure Statement concern associations the property is subject to and any outstanding financial obligations, among other things.

 

26. Does the Membership by Vote or the Board of Directors establish the Assessment?

Varies. (See Question #27)

 

27. Is a budget required?

For planned communities created on or after January 1, 1999, and governed by the NC Planned Community Act:

Within 30 days after adoption of any proposed budget, the executive board shall provide to all the lot owners a summary of the budget and a notice of the meeting to consider ratification of the budget, including a statement that the budget may be ratified without a quorum. The executive board shall set a date for a meeting of the lot owners to consider ratification of the budget, such meeting to be held not less than 10 nor more than 60 days after mailing of the summary and notice. There shall be no requirement that a quorum be present at the meeting. The budget is ratified unless at that meeting a majority of all the lot owners in the association or any larger vote specified in the declaration rejects the budget. In the event the proposed budget is rejected, the periodic budget last ratified by the lot owners shall be continued until such time as the lot owners ratify a subsequent budget proposed by the executive board. NCGS § 47F-3-103(c)

 

For condominiums (regardless of when created):

Within 30 days after adoption of any proposed budget for the condominium, the executive board shall provide a summary of the budget to all the unit owners, and shall set a date for a meeting of the unit owners to consider ratification of the budget not less than 14 nor more than 30 days after mailing of the summary. There shall be no requirement that a quorum be present at the meeting. The budget is ratified unless at that meeting a majority of all the unit owners or any larger vote specified in the declaration rejects the budget. In the event the proposed budget is rejected, the periodic budget last ratified shall be continued until such time as the unit owners ratify a subsequent budget proposed by the executive board. NCGS § 47C-3-103(c)

 

28. Is an annual audit required?

There is no statutory annual audit requirement. However, both the NC Planned Community Act (NCGS § 47F-3-118(a)) and the NC Condominium Act (NCGS § 47C-3-118(a)) provide that notwithstanding the bylaws, a more extensive compilation, review, or audit of the association's books and records for the current or immediately preceding fiscal year may be required by a vote of the majority of the executive board or by the affirmative vote of a majority of the owners present and voting in person or by proxy at any annual meeting or any special meeting duly called for that purpose. These two statutes apply retroactively to older associations.

 

29. Does the State regulate the collection of assessments?

 

  1. What happens if a Member is delinquent in the payment of assessments?

  2. How can an association increase annual assessments?

  3. Under what circumstances can my association levy special assessments?

  4. Are there provisions related to additional assessments or adjustments in the budget or assessment level in the event of a deficit?

Both the NC Planned Community Act (NCGS § 47F-3-116) and the NC Condominium Act (NCGS § 47C-3-116) detail the process for collection of delinquent assessments. Generally, any assessment levied against a lot/unit remaining unpaid for a period of 30 days or longer constitutes a lien on the lot/unit when a claim of lien is filed of record in the office of the clerk of superior court of the county in which the lot is located in the manner provided by statute. Certain statutory steps are required both before and following the filing of the lien. The statutes governing collection of assessments apply retroactively to older associations.

There are no statutory requirements for the levying of annual or special assessments. However, see Question #27.

 

30. What authority does the association have to access a Unit or Lot? Under what circumstances?

For all planned communities, each lot owner shall afford to the association and when necessary to another lot owner access through the lot owner's lot or the limited common element allocated to the lot owner's lot reasonably necessary for any such maintenance, repair, or replacement activity. NCGS § 47F-3-107(a).   This statute applies retroactively to older planned communities. For condominium associations created on or after October, 1, 1986, each unit owner must afford to the association access through his unit as reasonably necessary for the maintenance, repair, or replacement of common elements. NCGS § 47C-3-107(a).


Go to Part II

Articles are intended to provide general information and are not legal advice or a legal opinion. Specific questions should be directed to an attorney at Black, Slaughter & Black, PA., or to another lawyer.