MEMORIAL DAY OFFICE CLOSURE – Our offices will be closed from noon on Friday, May 24th and will reopen Tuesday, May 28th. Have a safe holiday!

Homeowners

CAMS Blog

NC Community Association Legislative Update – May 10, 2019

Yesterday, May 9, 2019 was the “crossover deadline” in the North Carolina General Assembly. In short, that means that bills not related to taxes or spending must have passed one chamber to be eligible for consideration during the two-year legislative session. CAVEAT: In terms of legislation, “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.” (For example, proposals sometimes appear later as “technical corrections” in other bills.)

Still, with the crossover deadline behind us, now is a good time to revisit my last legislative blog (NC Community Association Legislative Update – April 23, 2019) to see 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 and are still subject to consideration.  The second set is likely not subject to the crossover deadline and could still be considered. The third set of proposals did not cross a chamber by crossover, are likely not exempt from crossover rules, and are likely dead for the two-year session.  (But reread the “dead” caveat above.) 

Community Association Bills That Passed One Chamber by Crossover Deadline:

(1) 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 does not apply to condominiums, but would place restrictions on the type of rental amendments a planned community can adopt. THE WORDING OF HB 594 HAS BEEN AMENDED SINCE THE LAST UPDATE.

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

(2) 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). 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

(3) 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

(4) 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. THIS BILL HAS BEEN AMENDED SIGNIFICANTLY, and is now HB 620/SB 840 and titled “Street Database/Manual/Public Record Except.” The bill would require a “public street information database” and the state to update its “Subdivision Roads Minimum Construction Standards Manual.” The full bill can be found at https://www.ncleg.gov/BillLookUp/2019/H620

Community Association Bills Likely Not Subject to Crossover Deadline (Could Possibly Be Considered in 2019 or 2020):

(1) 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

Community Association Bills That Did Not Pass Either Chamber by Crossover Deadline (Likely Dead, But See Caveat at Top):

For more details and the legislative history on any of the following proposals, visit NC Community Association Legislative Update – April 23, 2019.

(1) House Bill 189: Workers’ Comp/Sole Proprietors Must Have Coverage. The full bill can be found at https://www.ncleg.gov/BillLookUp/2019/H189

(2) Senate Bill 465: Reduce Speed in Residential Subdivisions. The full bill can be found at https://www.ncleg.gov/BillLookUp/2019/S465

(3) House Bill 750: Clarify Deed Restrictions/Solar Collectors. The full bill can be found at https://www.ncleg.gov/BillLookUp/2019/H750

(4) House Bill 877: HOA and Condo Declaration Amendments. The full bill can be found at https://www.ncleg.gov/BillLookUp/2019/HB%20877

(5) Roads Bills.

§  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). The full bill can be found at https://www.ncleg.gov/BillLookUp/2019/S480

§  House Bill 448: Planning/Development Changes (An Act to Reorganize, Consolidate, Modernize, and Clarify Statutes Regarding Local Planning and Development Regulations). 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). The full bill can be found at https://www.ncleg.gov/BillLookUp/2019/S422

Article provided by Jim Slaughter, who serves on the North Carolina Chapter Board of the Community Associations Institute and served as 2014 national President of CAI’s College of Community Association Lawyers.  Article was originally posted here.