Like everything else during this past year of COVID, the legislative process has also been different. Usually by now in the first year of a new session of the General Assembly, a number of bills that could affect North Carolina HOAs and condominiums would have been introduced. Some would move forward, and some not. In contrast, this have been a fairly quiet year for community association proposals. Almost certainly that’s because of the focus and attention on economic and health issues. That said, there are a few proposed bills that, if adopted, would impact community associations.
Yesterday, May 13, 2021 was the “crossover deadline” in the NC General Assembly. That’s the day that on which bills not related to taxes or spending or is exempt from crossover (for one of about 8 reasons) must have passed one chamber to be eligible for consideration during the two-year legislative session. Otherwise, they are likely dead and not going anywhere. However, in terms of the legislative process, “dead” doesn’t always mean “completely dead.” A News & Observer story once noted that legislative “rules are made to be circumvented, so there are many ways to keep legislation alive.” (Sidelined proposals sometimes appear later as amendments or “technical corrections” in other bills that passed crossover.)
With the crossover deadline behind us, now is a good time to which bills are still active that could impact North Carolina’s homeowner or condominium associations.
The first set of proposals below passed at least one chamber by crossover deadline or is likely not subject to crossover, and the proposals are still subject to consideration. The second set of proposals did not cross a chamber by crossover and are likely not exempt from crossover rules, so the proposals are likely dead for the two-year session.
Community Association Bills That Are Still Subject to Consideration in 2021 or 2022:
(1) Senate Bill 410: Nonprofit Electronic Business/Remote Meetings was filed on March 30, 2021, by Sen. Amy Galey (Alamance, Guilford), Sen. Jim Perry (Lenoir, Wayne), Sen. Michael Lazzara (Jones, Onslow), and Sen. Julie Mayfield (Buncombe). SB 410 was referred to committee, passed the Senate, and has been referred to the Committee On Rules, Calendar, and Operations of the House. (SB 410 is a similar but competing bill to HB 320.)
The bill would make various changes to the NC Nonprofit Corporation Act to allow great use of electronic communications and virtual meetings. Specifically, SB 410 would:
- allow transactions by electronic means unless limited by the articles of incorporation, bylaws, or act of the board of directors
- allow communications and business with members if the members has designated an email address to be used for communication
- allow the board to determine to hold a membership meeting “solely by means of remote communication.”
- allow action to be taken by members through written ballot deliverd to the emmbers or by electronic ballot. Members would have to be given the opportunity to vote on proposed actions by written ballot or electronic voting, or both.
- allow participation by members during virtual membership meetings so long as measures have been implemented to verify each person participating remotely as a member is a member and to allow members a reasonable opportunity to participate and vote in the meeting.
The bill has various other changes to align the concepts of electronic participation or virtual meetings with the current Nonprofit Corporation Act.
The full bill can be found at https://www.ncleg.gov/BillLookUp/2021/S410 and, if adopted, would take effect immediately.
(2) House Bill 320: Modernize Remote Access was filed on March 16, 2021, by Rep. Destin Hall (Caldwell); Rep. Michael Bradford (Mecklenburg), Rep. Erin Paré (Wake), Rep. Julia Howard (Davie, Rowan), Rep. Jake Johnson (Henderson, Polk, Transylvania), Rep. Brenden Jones (Columbus, Craven), Rep. Keith Kidwell (Beaufort, Craven), Rep. Charles Miller (Brunswick, New Hanover), Rep. Howard Penny (Harnett), Rep. Shelly Willingham (Edgecombe, Martin), and Rep. Michael Wray (Halifax, Northampton). HB 320 passed the House, and has been referred to the Committee on Rules and Operations of the Senate. (HB 320 is a similar but competing bill to SB 410.)
The bill would make numerous changes to both the NC For-Profit and Nonprofit Corporation Acts to allow greater use of “remote meetings” through virtual means. Specifically, HB 320 would:
- allow transactions by electronic means unless limited by the articles of incorporation, bylaws, or act of the board of directors
- allow communications and business with members if the members has designated an email address to be used for communication
- allow the board to determine to hold a membership meeting “solely by means of remote communication.”
- allow action to be taken by members through written ballot delivered to the members or by electronic ballot. Members would have to be given the opportunity to vote on proposed actions by written ballot or electronic voting, or both.
- allow participation by members during virtual membership meetings so long as measures have been implemented to verify each person participating remotely as a member is a member and to allow members a reasonable opportunity to participate and vote in the meeting.
The bill have various other changes to align the concepts of electronic participation or virtual meetings with the current Nonprofit Corporation Act.
The full bill can be found at https://www.ncleg.gov/BillLookUp/2021/H320 and, if adopted, would take effect immediately.
(3) House Bill 842: Clarify the Law Governing Deed Restrictions on Solar Collectors was filed on May 4, 2021 by Rep. Harry Warren (Rowan), Bobby Hanig (Currituck, Dare, Hyde, Pamlico), Rep. Howard Penny (Harnett), Rep. Jerry Carter (Rockingham), Rep. John Ager (Buncombe), Rep. John Autry (Mecklenburg), Rep. Susan Fisher (Buncombe), Rep. Pricy Harrison, (Guilford), Rep. Rachel Hunt (Mecklenburg), Rep. Marcia Morey (Durham), Rep. William Richardson (Cumberland), Rep. Jaso Saine (Lincoln), Rep. John Sauls (Harnett, Lee), Rep. Larry Strickland (Harnett, Lee), Rep. Sam Watford (Davidson). HB 842 was referred to the Committee on Energy and Public Utilities, reported favorably, and subsequently passed the House and referred to the Senate for consideration. The bill has been referred to the Committee on Rules and Operations of the Senate. HB 842 would remove the authority of a planned community or condominium over placement of solar panels/collectors through its architectural restrictions. 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 it has the effect of “reducing the operating efficiency” of the solar collector by more than 10%.
The full bill can be found at https://www.ncleg.gov/BillLookUp/2021/H842
(4) House Bill 531: Timeshare Act Changes was filed on April 5, 2021 by
Rep. Julia Howard (David, Rowan), Rep. Kelly Hastings (Cleveland, Gaston), Rep. Timothy Moffitt (Henderson), Rep. Kyle Hall (Rockingham, Stokes, Surry), Rep. John Bradford (Mecklenburg), Rep. Jerry Carter (Rockingham), Rep. Terry Garrison (Granville, Vance, Warren), Rep. Howard Hunter (Gates, Hertford, Pasquotank), Rep. Phil Shepard (Onslow), Rep. Steve Tyson (Craven), Rep. Shelly Willingham (Edgecombe, Martin), and Rep. Michael Wray (Halifax, Northampton). HB 521 makes major changes to the timeshare laws in North Carolina. Rather than try to summarize this 44 page bill here, if you have interest the full bill can be found at https://www.ncleg.gov/BillLookUp/2021/H531
(5) Senate Bill 336: Condominium Declaration Requirement Changes was filed on March 26, 2021 by Sen. Warren Daniel (Avery, Burke, Caldwell). SE 336 passed the Senate and has been referred to the Committee on Rules, Calendar, and Operations of the House. The bill would provide that as to declarations of condominium, any unit not specifically described by an upper limiting boundary would be deemed to include “so much of the land and air above the unit as would be attributed to a noncondominium parcel of land under the common or statutory law applicable to such noncondominium parcel of land.” And any unit not specifically described by a lower limiting elevation boundary would be deemed to include “so much of the land and air below the unit as would be attributed to a noncondominium parcel of land under the common or statutory law applicable to such noncondominium parcel of land.”
The bill would also provide that no declaration of condominium could be filed “unless all structural components and mechanical systems of all buildings containing or comprising any units thereby created are substantially completed in accordance with building design plans of an architect licensed under the provisions of Chapter 83A of the General Statutes or an engineer registered under the provisions of Chapter 89C of the General Statutes, as evidenced by a recorded certificate of completion executed by the architect or engineer.”
The full bill can be found at https://www.ncleg.gov/BillLookUp/2021/S336
Community Association Bills That Likely Cannot Be Considered in 2021 or 2022 (Likely Dead, But See Caveat at Top):
(1) House Bill 826: HOA/Condo Crime & Fidelity Insurance Policies was filed on May 5, 2021 by Rep. Jason Saine (Lincoln), Rep. Jake Johnson (Henderson, Polk, Transylvania), Rep. Jay Adams (Catawba), Rep. Edward Goodwin (Bertie, Camden, Chowan, Perquimans, Tyrrell, Washington), Rep. Jeffrey McNeely (Iredell), and Rep. Michael Ray (Halifax, Northampton). This bill is identical to legislation introduced in the 2019 and 2017 Session (see prior legislative updates for more details), and was referred to the House Committee on Insurance.
HB 826 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 826 would take effect on January 1, 2022. 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/2021/H826
(2) House Bill 696 (companion Senate Bill 540): Various Changes to Nonprofit Corporation Act was filed on April 27, 2021, and would make numerous changes to the NC Nonprofit Corporation Act (Chapter 55A). One small change would require all nonprofit corporation boards of directors to consist of at least three members. Rather than try to summarize this 15 page bill here, if you have interest the full bill can be found at https://www.ncleg.gov/BillLookUp/2021/H696
(3) Senate Bill 427: Discharge of Discriminatory Covenants was introduced on March 31, 2021 by Sen. Julie Mayfield (Buncombe) and Sen. Natalie Murdock (Durham), and was referred to the Committee on Rules and Operations of the Senate. The bill would have established a process for the discharge and release of discriminatory/prohibited deed restrictions.
The full bill can be found at https://www.ncleg.gov/BillLookUp/2021/S427
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. My law partner Harmony Taylor serves as a volunteer to 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. If there are developments on these or other relevant legislative proposals, additional information will be posted.