NC Community Association Legislative Update – April 23, 2019

Community Association Legislation

It must be spring in North Carolina—both flowers and legislative proposals that would impact HOAs and condos are springing up!

For those of you who attended the NC-CAI Community Association Legal Workshop in Wilmington this past week, you heard my law partner Steve Black comment on several pending community-association bills. When I spoke at the NC-CAI Community Association Law Evening in Greenville the NEXT NIGHT, 3 more proposals had been filed! Now there are at least 12 legislative proposal that would impact North Carolina’s HOAs and condos.

The increased filing is due to several legislative deadlines this month. Tuesday, April 2 was the NC Senate deadline for filing public bills and resolutions. Today, Tuesday, April 23 at 3 pm was the NC House deadline for filing most bills and resolutions (other than appropriations or finance bills). That means that generally the deadlines for filing most bills in North Carolina is now done. While there are still a few ways to introduce proposals with significant support, now seems a good time to take a look at this Session’s proposals that would impact HOAs or condos. All of the following proposals, if adopted, would directly impact North Carolina’s community associations. (NOTE: The following are PROPOSALS that have not yet been adopted by either Chamber.)

(1) House Bill 189: Workers’ Comp/Sole Proprietors Must Have Coverage was filed on February 26, 2019 by Rep. Kelly Alexander (Mecklenburg) and referred to the Commerce Committee, and, if it receives a favorable report, will be referred to the Committee on Rules, Calendar and Operations of the House. While HB 189 is not an HOA/condo bill, it references the Planned Community Act and Condo Act, so it’s mentioned here. The bill would require a “sole proprietor performing any work” to maintain workers’ compensation insurance; however, the current law and this bill note that the definition of an “employee” does not include any person elected or appointed as a board member, director or committee member under the Planned Community Act or Condominium Act “who performs only voluntary service” and “receives no remuneration.” If adopted, HB 189 might require workers’ compensation insurance for sole proprietor managers or employees,  but does not appear to make any changes to the current law concerning what to do about board members. (For background information, see Must North Carolina HOA and Condominium Associations Have Workers’ Compensation Insurance? and North Carolina HOA & Condo Association Insurance Requirements & Considerations.)

The full bill can be found at https://www.ncleg.gov/BillLookUp/2019/H189

(2) Senate Bill 362: Annual Report Standardization was filed on March 26, 2019 by Sen. Jim Perry (Lenoir, Wayne) and Sen. Andy Wells (Alexander, Catawba) and, after being reported favorably out of the Committee on Judiciary, was referred to the Committee on Rules and Operations of the Senate. The bill would revise the submission of annual reports to the Secretary of State, including those of nonprofit corporations.

The full bill can be found at https://www.ncleg.gov/BillLookUp/2019/S362

(3) Senate Bill 465: Reduce Speed in Residential Subdivisions was filed on April 2, 2019 by Sen. Ted Alexander (Cleveland, Gaston, Lincoln) and Sen. Eddie Gallimore (Davidson, Montgomery) and referred to the Committee on Rules and Operations of the Senate. SB 465 would limit the speed on residential subdivision roads of one mile or less to 25 miles per hour unless two-thirds of the owners in the subdivision petition the Department of Transportation for a higher limit and the DOT determines the higher speed reasonable and safe under existing conditions.

The full bill can be found at https://www.ncleg.gov/BillLookUp/2019/S465

(4) House Bill 594: HOAs – Leased Properties was filed on April 3, 2019 by Rep. William Richardson (Cumberland), Rep. Kyle Hall (Rockingham/Stokes, Surry), Rep. Destin Hall (Caldwell), Rep.  George Cleveland (Onslow), Rep. Edward Goodwin (Bertie, Camden, Chowan, Perquimans, Tyrrell, Washington), and Rep. Shelly Willingham (Edgecombe, Martin). The bill was referred to the Committee on Judiciary and, if it receives a favorable report, will be referred to the Committee on Rules, Calendar and Operations of the House.  HB 594 would provide that any amendment to an HOA declaration that restricts or limits “the ability of a lot owner to lease a lot within the planned community” would not be effective as to anyone who currently owns a lot in the planned community. In other words, all current homeowners would be grandfathered as to any lease restrictions, and any such amendments would only apply to future property owners. The bill does not apply to condominiums.

The full bill can be found at https://www.ncleg.gov/BillLookUp/2019/HB%20594

(5) House Bill 750: Clarify Deed Restrictions/Solar Collectors was filed on April 15, 2019 by Rep. John Szoka (Cumberland), Rep. Wayne Sasser (Cabarrus, Stanly), Rep. Bobby Hanig (Currituck, Dare, Hyde, Pamlico), Rep. John Ager (Buncombe), Rep. Kelly Alexander (Mecklenburg), Rep. Allison Dahle (Wake), Rep. Pricy Harrison, (Guilford), and Rep. Chuck McGrady (Henderson). The bill was referred to the Committee on Energy and Public Utilities and, if it receives a favorable report, will be referred to the Committee on Rules, Calendar and Operations of the House. HB 750 would remove the authority a planned community or condominium has over placement of solar panels/collectors. Specifically, the bill would prohibit any deed restriction or covenant that has the effect of prohibiting solar collectors. While a deed restriction or covenant could still regulate location or screening of a solar collector on the owner’s property, such provisions would be invalid if they “reduce the operating efficiency” of the solar collector by more than 10%.

The full bill can be found at https://www.ncleg.gov/BillLookUp/2019/H750

(6) House Bill 806: HOA/Condo Crime & Fidelity Insurance Policies was filed on April 16, 2019 by Rep. Larry Strickland (Harnett, Johnston) and Rep. Jason Saine (Lincoln) and was referred to the Committee on Insurance and, if it receives a favorable report, will be referred to the Committee on Rules, Calendar and Operations of the House. This bill is identical to legislation introduced in the 2017 Session (see NC Community Association Legislative Update – Fidelity Coverage & Audits for more details)

HB 806 would:

  • Require HOA/Condo Crime and Fidelity Coverage. HOA or condo associations with annual assessments for common expenses of at least $25,000 or with $25,000 or more total funds invested or on deposit would have to obtain and maintain a crime and fidelity insurance policy. The policy would have to provide coverage in the amount of 125% of the total funds on deposit or invested by the executive board plus 125% of the annual budget of the unit owners’ association as of the last day of the association’s last fiscal year, but not more than one million dollars. In addition, any management company or agent to an HOA or condo association would have to obtain and maintain a crime and fidelity insurance policy. The policy would have to provide coverage in the amount of the total annual budgets of all clients of the management agent or company, but not more than two million dollars.
  • Require HOA/Condo Financial Audits. HOA or condo associations with annual revenues or expenditures or total accounts balances of $150,000 or more would be required to have an annual independent financial audit conducted by a Certified Public Accountant (CPA). The audit would have to be completed no later than one year after the end of the fiscal year and made available upon request to lot owners within 30 days after completion.

If adopted, HB 806 would take effect on January 1, 2020. The crime and fidelity bond provisions would apply to all planned communities and condominiums, whenever created. The audit provisions would apply to all planned communities whenever created and to all condominium associations created on or after October 1, 1986 (older condominiums already have statutory audit requirements). The full bill can be found at https://www.ncleg.gov/BillLookUp/2019/HB%20806

(7) House Bill 877: HOA and Condo Declaration Amendments was filed on April 16, 2019 by Rep. Frank Iler (Brunswick). The bill would amend the NC Planned Community Act and the NC Condominium Act to reduce the vote required to amend a declaration from 67% of the votes in the association to “more than fifty percent (50%).” If enacted, the bill would apply to all planned communities whenever created, but only to condominiums created by the filing of a declaration on or after October 1, 1986.

The full bill can be found at https://www.ncleg.gov/BillLookUp/2019/HB%20877

(8) House Bill 920: Condominium Association Changes was filed on April 16, 2019 by Rep. Jon Hardister (Guilford), Rep. Deston Hall (Caldwell), and Rep. Kyle Hall (Rockingham, Stokes, Surry).  The bill would make several changes to the NC Condominium Act regarding the creation of condominiums and the contents and amendment of condominium declarations, including:

  • Condominium plats and plans would no longer require the certification by an architect or engineer
  • If no time limit is placed on developer or special declarant rights, those would expire 7 years from when the declaration was recorded; however, if the declaration so provides, a 67% vote of the association (excluding the Declarant) could extend such development or special declarant rights for up to 10 years
  • Any amendments proposed by the board that are subsequently adopted to (a) cure ambiguity or establish marketable title; (b) conform to loan requirements; (c) comply with statutes or ordinances; or (d) make reasonable accommodations as to disabilities shall relate back and be considered adopted as of the original recording date of the declaration.
  • A process is provided by which a county clerk where a condominium is located could reform the declaration to “resolve ambiguities, errors or inconsistencies” or to correct “scrivener’s errors.”

HB 920 would apply to all condominiums created by the filing of a declaration on or after October 1, 1986.

The full bill can be found at https://www.ncleg.gov/BillLookUp/2019/HB%20920

(9) Roads Bills. Several bills have been filed related to roads, particularly subdivision roads. Because some of these proposals are highly technical, I’m listing just bill number, title and a link (but if any move forward, I’ll provide more information):

  • Senate Bill 480: Subdivision Streets/DOT Acceptance (An Act to Make Changes to State Law Concerning the Acceptance of Subdivision Streets by the Department of Transportation, to Require the Department to Compile a County Public Street Information Database, and to Regularly Update and Publish the Subdivision Roads Manual) was filed on April 2, 2019 by 8 Senate members and was referred to the Committee on Rules and Operations of the Senate. The full bill can be found at https://www.ncleg.gov/BillLookUp/2019/S480
  • House Bill 620: Subdivision Streets/DOT Acceptance (An Act to Make Changes to State Law Concerning the Acceptance of Subdivision Streets by the Department of Transportation, to Require the Department to Compile a County Public Street Information Database, and to Regularly Update and Publish the Subdivision Roads Manual) was filed on April 4, 2019 by 7 House members and was referred to the Committee on Transportation and, if it receives a favorable report, will be referred to the Committee on Rules, Calendar and Operations of the House. The full bill can be found at https://www.ncleg.gov/BillLookUp/2019/H620
  • House Bill 448: Planning/Development Changes (An Act to Reorganize, Consolidate, Modernize, and Clarify Statutes Regarding Local Planning and Development Regulations) was filed on March 25, 2019, and referred to the Committee on Judiciary and, if it receives a favorable report, will be referred to the Committee on Rules, Calendar and Operations of the House. The full bill can be found at https://www.ncleg.gov/BillLookUp/2019/H448
  • Senate Bill 422: Planning/Development Changes (An Act to Reorganize, Consolidate, Modernize, and Clarify Statutes Regarding Local Planning and Development Regulations) was filed on March 28, 2019, and referred to the Committee on Rules and Operations of the Senate. The full bill can be found at https://www.ncleg.gov/BillLookUp/2019/S422

FYI, the NC Legislative Action Committee (NC-LAC) is a committee of the Community Associations Institute. The NC-LAC monitors and influences legislation that affects community associations and its members talk with legislators on issues of concern to HOAs and condos. Two of our firm’s attorneys, Steve Black and Harmony Taylor, serve as volunteers on the LAC. To properly do its job, the NC-LAC needs funds for letters, mailings and other costs. Please consider a contribution to the NC-LAC by visiting 12 Reasons Why You Should Donate to the NC-LAC.

If you have specific questions on any of the above bills, feel free to contact me or another attorney at our firm. As there are developments on any of these legislative proposals, additional information will be posted.