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

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 I.


ADMINISTRATION (CONTINUED)

31. Does the Association have the authority to adopt rules and regulations? By law or by statute?

Both the NC Planned Community Act (NCGS § 47F-3-102(1)) and the Condominium Act (NCGS § 47C-3-102(1)) provide that unless the articles of incorporation or the declaration expressly provides to the contrary, the association may adopt and amend rules and regulations. These two statutes apply retroactively to older associations.

 

32. Does the Association have the authority to assess charges or fines for violations by Members? Does the Association have the right to suspend the right of use of the common elements or common areas in the event of a violation? To suspend the right of a Member to vote or otherwise participate in the Association in the event of a violation?

Both the NC Planned Community Act (NCGS § 47F-3-102(12)) and the NC Condominium Act (NCGS § 47C-3-102(12)) provide that the association, after notice and opportunity to be heard, may impose reasonable fines or suspend privileges or services provided by the association (except rights of access) for reasonable periods for violations of the declaration, bylaws, and rules and regulations of the association. The procedures for fines and suspension of services is further defined in NCGS § 47F-3-107.1 for planned communities and NCGS § 47C-3-107.1 for condominiums. These two statutes apply retroactively to older associations.

Generally, the right of a member to vote is not considered to be suspendable unless clearly defined in the declaration (which typically gives an owner the right to vote).

 

33. Is there a requirement to have an internal administrative Complaint or Dispute Process? Is it mandatory and/or a prerequisite to other legal action?

There is no statutory requirement to have an internal administrative complaint or dispute process. However, both the NC Planned Community Act (NCGS § 47F-3-107.1) and the NC Condominium Act (NCGS § 47C-3-107.1) require that certain steps be taken prior to the imposition of fines or suspension of planned community privileges or services.

NCGS § 7A-38.3F mandates that associations notify members each year of the right to request voluntary mediation of disputes; however, either party may decline mediation. (NOTE: Disputes related solely to a member’s failure to timely pay an association assessment or any fines or fees associated with the levying or collection of an association assessment are not covered by the mediation statute.)

 

34. Does any applicable statute provide for the removal of a Board Member, several Board members, or the entire Board? Under what conditions? Who decides upon their successors and when?

Both the Planned Community Act (NCGS § 47F-3-103) and the Condominium Act (NCGS § 47C-3-103) provide that notwithstanding any provision of the declaration or bylaws to the contrary, the owners, by a majority vote (67% vote for condominium associations) of all persons present and entitled to vote at any meeting of the owners at which a quorum is present, may remove any member of the executive board with or without cause, other than a member appointed by the declarant. Any proposal to remove a director must be include in the notice of the meeting. (NCGS § 47F-3-108(a); NCGS § 47C-3-108(a)) The executive board is authorized to fill vacancies in its membership for the unexpired portion of any term. (NCGS § 47F-3-103(b); NCGS § 47C-3-103(b)) Generally, it is understood that if the entire board of directors is removed at a meeting, the members would need to fill the vacancies for the unexpired portion of the term. These two statutes apply retroactively to older associations.

 

35. Can an association be placed into receivership by a Court under state law?

Neither the NC Planned Community Act nor the Condominium Act has provisions for receivership. The NC Nonprofit Act has provisions for receivership of nonprofit corporations pertaining to judicial proceedings brought to dissolve a corporation. (NCGS § 55A-14-32)

 

36. Does state statute provide for condemnation of common property?

For planned communities created on or after January 1, 1999, and governed by the NC Planned Community Act, if part of the common elements is acquired through eminent domain, the portion of the award attributable to the common elements taken must be paid to the association. Unless otherwise provided in the declaration, any portion of the award attributable to the acquisition of a limited common element must be apportioned among the owners of the lots to which that limited common element was allocated at the time of acquisition based on their allocated interest in the common elements before the taking. (NCGS § 47F-1-107(d)) Almost identical statutory language exists for condominium associations, which also applies retroactively to older associations. (NCGS § 47C-1-107(d))

 

UNIT/LOT OWNER ISSUES

37. What action(s) can an association take in the event of non-payment of association assessments? Is foreclosure an option? Under what circumstances? (Please address judicial and non-judicial foreclosure.)

For collection of delinquent assessments, both the NC Planned Community Act (NCGS § 47F-3-116) and the NC Condominium Act (NCGS § 47C-3-116) permit an association to foreclose a claim of lien in like matter as a mortgage or deed of trust on real estate under power of sale, as provided in Article 2A of Chapter 45 of the General Statutes. Numerous statutory steps are required both before and following the filing of the claim of lien. If the debt securing the lien consists solely of fines imposed by the association, interest on unpaid fines, or attorneys’ fees incurred by the association solely associated with fines, the association may not use this process, but must enforce the lien by judicial foreclosure as provided in Article 29A of Chapter 1 of the North Carolina General Statutes. The statutes governing collection of assessments apply retroactively to older associations.

 

38. Are there state laws that regulate whether a Member can be assessed a charge or otherwise fined by my association for violations? What violations trigger this authority? What procedures must be followed?

 

  1. What actions can the association take to collect these charges or fines;

  2. Can my association foreclosure on my property for non-payment of these charges or fines?

Both the NC Planned Community Act (NCGS § 47F-3-107.1) and the NC Condominium Act (NCGS § 47C-3-107.1) provide that unless a specific procedure for the imposition of fines or suspension of planned community privileges or services is provided for in the declaration, a hearing must be held before the executive board or an adjudicatory panel appointed by the executive board. Any adjudicatory panel appointed by the executive board must be composed of members of the association who are not officers of the association or members of the executive board. The lot owner charged must be given notice of the charge, an opportunity to be heard and to present evidence, and notice of the decision. If it is decided that a fine should be imposed, a fine not to exceed $100 may be imposed for the violation and without further hearing, for each day more than five days after the decision that the violation occurs. The lot owner may appeal the decision of an adjudicatory panel to the full executive board by delivering written notice of appeal to the executive board within 15 days after the date of the decision, which may affirm, vacate, or modify the prior decision of the adjudicatory body. The statutes governing violation hearings apply retroactively to older associations.

 

As discussed in Question #37, if the debt securing a lien consists solely of fines, interest on unpaid fines, or attorneys’ fees incurred by the association solely associated with fines, the association can only enforce such a lien by judicial foreclosure as provided in Article 29A of Chapter 1 of the North Carolina General Statutes.

 

39. What, if any, other internal administrative enforcement options can the association take in the event of a violation of the state statute, association's governing documents, or the rules and regulations of the association?

Both the NC Planned Community Act (NCGS § 47F-3-107.1) and the NC Condominium Act (NCGS § 47C-3-107.1) permit an association to suspend planned community privileges or services following a hearing as outlined in Question #38. The statutes governing violation hearings apply retroactively to older associations.

Also, for planned communities created on or after January 1, 1999, and governed by the NC Planned Community Act, there is a statutory provision for a hearing when damage by a lot owner to the common elements or by the association to a lot is less than the jurisdictional amount for a small claims hearing. In such instances, any aggrieved party may request that a hearing be held before an adjudicatory panel appointed by the executive board (if the executive board fails to appoint an adjudicatory panel, hearings are held before the executive board). Such a panel must accord to the party charged with causing damages notice of the charge, an opportunity to be heard and to present evidence, and notice of the decision. This panel may assess liability against each lot owner charged or against the association not in excess of the jurisdictional amount established for small claims. (NCGS § 47F-3-107(d))

 

For condominium associations created on or after October 1, 1986, the bylaws of the association may provide for a hearing before an adjudicatory panel when the claim involves damage by a unit owner to the common elements or by the association to a unit of $500 or less. Such a panel must accord to the party charged with causing damages notice of the charge, an opportunity to be heard and to present evidence, and notice of the decision. This panel may assess a liability for each damage incident not in excess of $500 against each unit owner charged or against the association. (NCGS § 47C-3-107(d))

 

40. Does any applicable statute regulate the flying of the American Flag?

Both the NC Planned Community Act (NCGS § 47F-3-121) and the NC Condominium Act (NCGS § 47C-3-121) forbid the regulation or prohibition of the display of the flag of the United State or North Carolina, except in limited instances based on the language of the restriction and whether the restriction was registered prior to or after October 1, 2005. The statutes governing the display of flags apply retroactively to older associations.

 

41. Does any applicable statute regulate solar panels? Clotheslines?

NCGS § 22B-20 (“Deed Restrictions and Other Agreements Prohibiting Solar Collectors”) makes void and unenforceable, except in listed instances, any deed restriction, covenant, or similar binding agreement that runs with the land that would prohibit, or have the effect of prohibiting, the installation of a solar collector for a residential property. The statute applies to “residential property,” but specifically excludes any condominium located in a multi-story building containing units having horizontal boundaries.

No North Carolina state statute regulates clotheslines.

 

42. What are the rules regarding placement of satellite dishes or antennas on my property? (Link to the OTARD Fact Sheet.)

No North Carolina statutes govern the placement of satellite dishes or antennas on property beyond those contained in federal regulations.

 

43. What dispute resolution options do I have if I have a problem with the board?

NCGS § 7A-38.3F mandates that associations notify members each year of the right to request voluntary mediation of disputes; however, either party may decline mediation. (NOTE: Disputes related solely to a member’s failure to timely pay an association assessment or any fines or fees associated with the levying or collection of an association assessment are not covered by the mediation statute.)

 

44. What is the state law regarding recalling board members?

For planned communities created on or after January 1, 1999, and governed by the NC Planned Community Act: “Notwithstanding any provision of the declaration or bylaws to the contrary, the lot owners, by a majority vote of all persons present and entitled to vote at any meeting of the lot owners at which a quorum is present, may remove any member of the executive board with or without cause, other than a member appointed by the declarant.” NCGS § 47F-3-103.

For condominium associations created after October 1, 1986: “Notwithstanding any provision of the declaration or bylaws to the contrary, the unit owners, by at least sixty seven percent (67%) vote of all persons present and entitled to vote at any meeting of the unit owners at which a quorum is present, may remove any member of the executive board with or without cause, other than members appointed by the declarant.” NCGS § 47C-3-103

For incorporated associations, the NC Nonprofit Act has detailed provisions for removing directors, which would be applicable to older associations. In addition, some provisions, such as removal of directors by judicial proceeding under NCGS § 55A-8-10, would seem to be available to any incorporated association:

  

§ 55A-8-08.  Removal of directors elected by members or directors.
(a)       The members may remove one or more directors elected by them with or without cause unless the articles of incorporation provide that directors may be removed only for cause.
(b)       If a director is elected by a class, chapter or other organizational unit, or by region or other geographic grouping, the director may be removed only by that class, chapter, unit, or grouping.
(c)       Except as provided in subsection (i) of this section, a director may be removed under subsection (a) or (b) of this section, only if the number of votes cast to remove the director would be sufficient to elect the director at a meeting to elect directors.
(d)       If cumulative voting is authorized, a director shall not be removed:
(1)       If the number of votes; or
(2)       If the director was elected by a class, chapter, unit, or grouping of members, the number of votes of that class, chapter, unit, or grouping;
sufficient to elect the director under cumulative voting, if an election were then being held, is voted against the director's removal.
(e)       A director elected by members may be removed by the members only at a meeting called for the purpose of removing the director and the meeting notice shall state that the purpose, or one of the purposes, of the meeting is removal of the director.
(f)        In computing whether a director is protected from removal under subsections (b) through (d) of this section, it should be assumed that the votes against removal are cast in an election for the number of directors of the class to which the director to be removed belonged on the date of that director's election.
(g)       An entire board of directors may be removed under subsections (a) through (e) of this section.
(h)       A majority of the directors then in office or such greater number as is set forth in the articles of incorporation or bylaws may, subject to any limitation in the articles of incorporation or bylaws, remove any director elected by the board of directors; provided, however, that a director elected by the board to fill the vacancy of a director elected by the members may be removed by the members, but not the board.
(i)        Notwithstanding any other provision of this section, if, at the beginning of a director's term on the board of directors, the articles of incorporation or bylaws provide that the director may be removed by the board for missing a specified number of board meetings, the board may remove the director for failing to attend the specified number of meetings.  The director may be removed only if a majority of the directors then in office vote for the removal.
(j)        Notwithstanding any other provision of this section, the articles of incorporation or bylaws may provide that directors elected after the effective date of such provision shall be removed automatically for missing a specified number of board meetings.
(k)       The articles of incorporation may:
(1)       Limit the application of this section in the case of a charitable or religious corporation; and
(2)       Set forth the vote and procedures by which the board of directors or any person may remove with or without cause a director elected by the members or the board.

 

§ 55A-8-09.  Removal of designated or appointed directors.
(a)       A designated director may be removed by an amendment to the articles of incorporation or bylaws deleting or changing the provision containing the designation.
(b)       Except as otherwise provided in the articles of incorporation or bylaws:
(1)       An appointed director may be removed with or without cause by the person appointing the director;
(2)       The person removing the director shall do so by giving written notice of the removal to the director and to the corporation; and
(3)       A removal is effective when the notice is effective unless the notice specifies a future effective date.
(c)       Notwithstanding any other provision of this section, the articles of incorporation or bylaws may provide that directors appointed after the effective date of such provision shall be removed automatically for missing a specified number of board meetings.

 

§ 55A-8-10.  Removal of directors by judicial proceeding.
(a)       The superior court of the county where a corporation's principal office (or, if there is none in this State, its registered office) is located may remove any director of the corporation from office in a proceeding commenced either by the corporation or by its members holding at least ten percent (10%) of the votes entitled to be cast of any class of members, if the court finds that:
(1)       The director engaged in fraudulent or dishonest conduct, or gross abuse of authority or discretion, with respect to the corporation, or a final judgment has been entered finding that the director has violated a duty set forth in G.S. 55A-8-30 through G.S. 55A-8-33, and
(2)       Removal is in the best interest of the corporation.
(b)       The court that removes a director may bar the director from serving on the board of directors for a period prescribed by the court.
(c)       If members commence a proceeding under subsection (a) of this section, the corporation shall be made a party defendant.

  

AMENDMENT OF DOCUMENTS

45. Does state statute provide for the amendment of the association's documents?

  1. What percentage of the owners must approve?

  2. Is percentage based on those voting or totality of the number of owners?

  3. Is the vote taken at a meeting or is it required to be by written consent?

  4. Is mortgagee approval required? Is there a statutory process for obtaining mortgagee approval or providing for a presumptive mortgagee approval?

Generally, amendment of the association’s documents is governed by the documents.

 

For planned communities, except in cases of amendments that may be executed by a declarant under the terms of the declaration or by certain lot owners under G.S. 47F-2-118(b), the declaration may be amended only by affirmative vote or written agreement signed by lot owners of lots to which at least sixty seven percent (67%) of the votes in the association are allocated, or any larger majority the declaration specifies or by the declarant if necessary for the exercise of any development right. The declaration may specify a smaller number only if all of the lots are restricted exclusively to nonresidential use. (NCGS § 47F-2-117(a)) Further, NCGS § 47F-2-117(d) provides that “any amendment passed pursuant to the provisions of this section or the procedures provided for in the declaration are presumed valid and enforceable.” These provisions apply retroactively to older associations.

 

For condominium associations created on or after October 1, 1986, except in cases of amendments that may be executed by a declarant, the association, or certain unit owners, the declaration may be amended only by affirmative vote of or a written agreement signed by, unit owners of units to which at least sixty seven percent (67%) of the votes in the association are allocated or any larger majority the declaration specifies. The declaration may specify a smaller number only if all of the units are restricted exclusively to nonresidential use. (NCGS § 47C-2-117(a))

 

USE OF TECHNOLOGY

46. Other than a written document or by voting at a meeting, can a Common

Interest Community use the most advanced technology, including e-mail or the

Internet to:

  1. Provide notice to Members of any meeting?;

  2. Obtain votes of the Members?;

  3. Obtain the consents, acknowledgements or ratifications or Members

  4. Obtain the electronic signatures of Members?

Both the NC Planned Community Act (NCGS § 47F-3-108(a)) and the NC Condominium Act (NCGS § 47C-3-108(a)) permit notice of membership meetings to be sent by electronic means, including by electronic mail to an electronic mailing address, so long as designated in writing by the lot owner. In addition, consents, acknowledgements, and ratifications could be sent as an attachment to an e-mail. While the Uniform Electronic Transactions Act (NCGS § 66-315) might permit broader association use of electronic signatures, all parties would have to agree to conduct transactions by such means. Generally, there is no provision of the NC Planned Community Act or the NC Condominium Act to permit e-mail or internet voting.

 

The NC Nonprofit Act (NCGS § 55A-8-20) permits participation and voting at Board meetings by any means of communication by which all directors participating may simultaneously hear each other during the meeting. Also, action without a meeting (NCGS § 55A-8-21) may be permitted if all directors concur in writing, which has generally been interpreted to include e-mail or fax.


Go to Part I 

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.