House Bill 165-First Edition

GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 2011

H 1

HOUSE BILL 165

Short Title: Planned Community & Condo Act Amends.		(Public)
Sponsors:	Representatives McGee, Weiss, Earle, and Howard (Primary Sponsors). For a complete list of Sponsors, see Bill Information on the NCGA Web Site.
Referred to:	Judiciary Subcommittee A.

February 24, 2011

A BILL TO BE ENTITLED

AN ACT To amend the planned community act and the condominium act to add or enhance consumer protection provisions, including provisions related to discretion in enforcement by homeowners associations, processes required for imposition of special assessments, open meetings, record keeping, use of alternative dispute resolution, additional limitations on foreclosure, Declarant control, and DISCLOSURE OF INFORMATION ABOUT HOMEOWNERS ASSOCIATIONs TO POTENTIAL PURCHASERS, as recommended by the house select committee on homeowners associations.

The General Assembly of North Carolina enacts:

PART I. AMENDMENTS TO PLANNED COMMUNITY ACT

SECTION 1. Article 3 of Chapter 47F of the General Statutes is amended by adding a new section to read:

"§ 47F-3-102.1. Enforcement determinations; factors.

(a) An executive board may determine whether to take enforcement action by exercising the association's power to impose sanctions or commencing an action for a violation of the declaration, bylaws, or rules and regulations of the association, including whether to compromise any claim for unpaid assessments or other claim made by or against it. An executive board does not have a duty to take enforcement action if it determines that, under the facts and circumstances presented one of the following factors exists:

(1) The association's legal position does not justify taking any or further enforcement action.

(2) The covenant, restriction, or rule being enforced is, or is likely to be construed as, inconsistent with law.

(3) Although a violation may exist or may have occurred, it is not so material as to be objectionable to a reasonable person or to justify expending the association's resources.

(4) It is not in the association's best interests to pursue an enforcement action.

(b) An executive board's determination not to pursue enforcement under one set of circumstances does not prevent the executive board from taking enforcement action under another set of circumstances, but the executive board may not be arbitrary or capricious in taking enforcement action."

SECTION 2.(a) G.S. 47F-3-103(c) is repealed.

SECTION 2.(b) Article 3 of Chapter 47F of the General Statutes is amended by adding a new section to read:

"§ 47F-3-107.2. Adoption of budgets; special assessments.

(a) The executive board, at least annually, shall adopt a proposed budget for the planned community for consideration by the lot owners. Not later than 30 days after adoption of a proposed budget, the executive board shall provide to all the lot owners a summary of the budget, including any reserves, and a statement of the basis on which any reserves are calculated and funded. Simultaneously, the board shall set a date not less than 10 days or more than 60 days after providing the summary for a meeting of the lot owners to consider ratification of the budget. Unless at that meeting a majority of all lot owners or any larger number specified in the declaration reject the budget, the budget is ratified, whether or not a quorum is present. If a proposed budget is rejected, the budget last ratified by the lot owners continues until the lot owners ratify a subsequent budget.

(b) The executive board, at any time, may propose a special assessment. Except as otherwise provided in subsection (c) of this section, the assessment is effective only if the executive board follows the procedures for ratification of a budget described in subsection (a) of this section and the lot owners do not reject the proposed assessment.

(c) If the executive board determines by a two-thirds vote that a special assessment is necessary to respond to an emergency, the special assessment shall become effective immediately in accordance with the terms of the vote. The executive board may spend the funds paid on account of the emergency assessment only for the purposes described in the vote. Notice of the emergency assessment must be provided promptly to all lot owners."

SECTION 3. G.S. 47F-3-108 reads as rewritten:

"§ 47F-3-108. Meetings.

(a) An association shall hold a meeting of lot owners annually at a time, date, and place stated in or fixed in accordance with the bylaws. ~~A meeting of the association shall be held at least once each year.~~ Special meetings of the association may be called by the president, a majority of the executive board, or by lot owners having ten percent (10%), or any lower percentage specified in the bylaws, of the votes in the association. Not less than 10 nor more than 60 days in advance of any meeting, the secretary or other officer specified in the bylaws shall cause notice to be hand-delivered or sent prepaid by United States 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 over the Internet, to an electronic mailing address designated in writing by the lot owner. If the association does not notify lot owners of a special meeting within 30 days after the requisite number or percentage of lot owners request the secretary to do so, the requesting members may directly notify all the lot owners of the meeting. The notice of any meeting shall 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. Only matters described in a meeting notice may be considered at a special meeting.

~~(b)~~ Meetings of the executive board shall be held as provided in the bylaws. 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.

(c) Except as otherwise provided in the bylaws, meetings of the association and the executive board shall be conducted in accordance with the most recent edition of Robert's Rules of Order Newly Revised. Unless the declaration or bylaws otherwise provide, meetings of the association and the executive board may be conducted by telephonic, video, or other conferencing process if both of the following conditions are met:

(1) The meeting notice states the conferencing process to be used and provides information explaining how lot owners may participate in the conference directly or by meeting at a central location or conference connection.

(2) The process provides all lot owners the opportunity to hear or perceive the discussion and to comment as provided in subsection (d) of this section.

(d) Lot owners must be given a reasonable opportunity at any meeting, including meetings of the executive board, to comment regarding any matter affecting the planned community or the association.

(e) Meetings of the executive board and committees of the association authorized to act for the association must be open to the lot owners except during executive sessions. The executive board and those committees may hold an executive session only during a regular or special meeting of the board or a committee. No final vote or action may be taken during an executive session. An executive session may be held only for any of the following purposes:

(1) To consult with the association's attorney concerning legal matters.

(2) To discuss existing or potential litigation or mediation, arbitration, or administrative proceedings.

(3) To discuss labor or personnel matters.

(4) To discuss contracts, leases, and other commercial transactions to purchase or provide goods or services currently being negotiated, including the review of bids or proposals, if premature general knowledge of those matters would place the association at a disadvantage.

(5) To prevent public knowledge of the matter to be discussed if the executive board or committee determines that public knowledge would violate the privacy of any person.

(f) For purposes of this section, a gathering of board members at which the board members do not conduct association business is not a meeting of the executive board. The executive board and its members may not use incidental or social gatherings of board members or any other method to evade the open meeting requirements of this section.

(g) During the period of declarant control, the executive board shall meet at least four times a year. At least one of those meetings must be held at the planned community or at a place convenient to the community. After termination of the period of declarant control, all executive board meetings must be at the planned community or at a place convenient to the community unless the lot owners amend the bylaws to vary the location of those meetings.

(h) Unless the meeting is included in a schedule given to the lot owners or the meeting is called to deal with an emergency, the secretary or other officer specified in the bylaws shall give notice of each executive board meeting to each board member and to the lot owners. The notice must be given not less than 10 days nor more than 60 days before the meeting and must state the time, date, place, and agenda of the meeting.

(i) If any materials are distributed to the executive board before the meeting, the executive board at the same time shall make copies of those materials reasonably available to lot owners, except that the board need not make available copies of unapproved minutes or materials that are to be considered in executive session.

(j) Unless the declaration or bylaws otherwise provide, the executive board may meet by telephonic, video, or other conferencing process if both of the following conditions are met:

(2) The process provides all lot owners the opportunity to hear or perceive the discussion and to comment as provided in subsection (d) of this section.

(k) After termination of any period when the declarant controls the association, lot owners may amend the bylaws to vary the procedures for meetings described in subsection (j) of this section.

(l) Instead of meeting, the executive board may act by unanimous consent as documented in a record authenticated by all its members. The secretary promptly shall give notice to all lot owners of any action taken by unanimous consent. After termination of the period of declarant control, the executive board may act by unanimous consent only to undertake ministerial actions or to implement actions previously taken at a meeting of the executive board.

(m) Even if an action by the executive board is not in compliance with this section, it is valid unless set aside by a court. A challenge to the validity of an action of the executive board for failure to comply with this section may not be brought more than 60 days after the minutes of the executive board of the meeting at which the action was taken are approved or the record of that action is distributed to lot owners, whichever is later."

SECTION 4. G.S. 47F-3-116 reads as rewritten:

"§ 47F-3-116. Lien for assessments.

(a) Any assessment levied against a lot remaining unpaid for a period of 30 90 days or longer shall constitute a lien on that lot 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 herein. Prior to filing a claim of lien, the association must make reasonable and diligent efforts to ensure that its records contain the lot owner's current mailing address. No fewer than 15 days prior to filing the lien, the association shall mail a statement of the assessment amount due and an offer to accept payments in installments as provided by subsection (e2) of this section by first-class mail to the physical address of the lot and the lot owner's address of record with the association, and, if different, to the address for the lot owner shown on the county tax records and the county real property records for the lot. If the lot owner is a corporation, the statement shall also be sent by first-class mail to the mailing address of the registered agent for the corporation. Unless the declaration otherwise provides, fees, charges, late charges, and other charges imposed pursuant to G.S. 47F-3-102, 47F-3-107, 47F-3-107.1, and 47F-3-115 are enforceable as assessments under this section. Except as provided in subsections (a1) and (a2) of this section, the ~~association~~ association, acting through the executive board, may foreclose the claim of lien in like manner as a mortgage on real estate ~~under power of sale~~under Article 2A of Chapter 45 of the General ~~Statutes.~~Statutes, if the assessment remains unpaid for 90 days or more and the lot owner has failed to accept or comply with the proposed installment plan. The association shall not foreclose the claim of lien unless the executive board votes to commence the proceeding against the specific lot.

(a1) An association may not foreclose an association assessment lien under Article 2A of Chapter 45 of the General Statutes 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 imposed by the association. The association, however, may enforce the lien by judicial foreclosure as provided in Article 29A of Chapter 1 of the General Statutes.

(a2) An association shall not levy, charge, or attempt to collect a service, collection, consulting, or administration fee from any lot owner unless the fee is expressly allowed in the declaration. Any lien securing a debt consisting solely of these fees may only be enforced by judicial foreclosure as provided in Article 29A of Chapter 1 of the General Statutes.

(b) The lien under this section is prior to all liens and encumbrances on a lot except (i) liens and encumbrances (specifically including, but not limited to, a mortgage or deed of trust on the lot) recorded before the docketing of the claim of lien in the office of the clerk of superior court, and (ii) liens for real estate taxes and other governmental assessments and charges against the lot. This subsection does not affect the priority of mechanics' or materialmen's liens.

(b1) An association shall apply any payments made by the lot owner in the following priority:

(1) Unpaid assessments.

(2) Late charges associated with the assessment.

(3) Attorneys' fees and other collection charges.

(4) Fees, fines, interest, and associated late fees.

(c) A lien for unpaid assessments is extinguished unless proceedings to enforce the lien are instituted within three years after the docketing of the claim of lien in the office of the clerk of superior court.

(d) This section does not prohibit other actions to recover the sums for which subsection (a) of this section creates a lien or prohibit an association taking a deed in lieu of foreclosure.

(e) A judgment, decree, or order in any action brought under this section shall include costs and reasonable attorneys' fees for the prevailing party. If the lot owner does not contest the collection of debt and enforcement of a lien after the expiration of the 15-day period following notice as required in subsection (e1) of this section, then reasonable attorneys' fees shall not exceed one thousand two hundred dollars ($1,200), not including costs or expenses incurred. The collection of debt and enforcement of a lien remain uncontested as long as the lot owner does not dispute, contest, or raise any objection, defense, offset, or counterclaim as to the amount or validity of the debt and lien asserted or the association's right to collect the debt and enforce the lien as provided in this section. The attorneys' fee limitation in this subsection shall not apply to judicial foreclosures or to proceedings authorized under subsection (d) of this section or G.S. 47F-3-120.

(e1) A lot owner may not be required to pay attorneys' fees and court costs until the lot owner is notified in writing of the association's intent to seek payment of attorneys' fees and court costs. The notice must be sent by first-class mail to the property address and, if different, to the mailing address for the lot owner in the association's records. The association must make reasonable and diligent efforts to ensure that its records contain the lot owner's current mailing address. The notice shall set out the outstanding balance due as of the date of the notice and state that the lot owner has 15 days from the mailing of the notice by first-class mail to pay the outstanding balance without the attorneys' fees and court costs. If the lot owner pays the outstanding balance within this period, then the lot owner shall have no obligation to pay attorneys' fees and court costs. The notice shall also inform the lot owner of the opportunity to contact a representative of the association to discuss a payment schedule for the outstanding balance as provided in subsection (e2) of this section and shall provide the name and telephone number of the representative.

(e2) The ~~association, acting through its executive board and in the board's sole discretion, may agree to~~association shall allow payment of an outstanding balance in ~~installments.~~accordance with an installment plan. An installment plan under this subsection shall consist of equal periodic payments made over a reasonable time based on the amount of the outstanding balance. The accumulation of late charges associated with the outstanding balance shall cease when the lot owner agrees to make payments in accordance with an installment plan. ~~Neither the association nor the lot owner is obligated to offer or accept any proposed installment schedule.~~The association shall mail a statement of the assessment amount due and an offer to accept payments under a proposed installment plan in accordance with subsection (a) of this section. If the lot owner accepts the proposed installment plan and subsequently fails to comply with the terms of the plan, the association may file a claim of lien in accordance with subsection (a) of this section when a scheduled payment remains unpaid for 30 days or longer. Reasonable administrative fees and costs for accepting and processing installments may be added to the outstanding balance and included in an installment payment schedule. Reasonable attorneys' fees may be added to the outstanding balance and included in an installment schedule only after the lot owner has been given notice as required in subsection (e1) of this section.

(f) Where the holder of a first mortgage or first deed of trust of record, or other purchaser of a lot obtains title to the lot as a result of foreclosure of a first mortgage or first deed of trust, such purchaser and its heirs, successors, and assigns, shall not be liable for the assessments against such lot which became due prior to the acquisition of title to such lot by such purchaser. Such unpaid assessments shall be deemed to be common expenses collectible from all the lot owners including such purchaser, its heirs, successors, and assigns.

(g) A claim of lien shall set forth the name and address of the association, the name of the record owner of the lot at the time the claim of lien is filed, a description of the lot, and the amount of the lien claimed. The first page of the claim of lien shall contain the following statement in print that is in boldface, capital letters and no smaller than the largest print used elsewhere in the document: "THIS DOCUMENT CONSTITUTES A LIEN AGAINST YOUR PROPERTY, AND IF THE LIEN IS NOT PAID, THE HOMEOWNERS ASSOCIATION MAY PROCEED WITH FORECLOSURE AGAINST YOUR PROPERTY IN LIKE MANNER AS A MORTGAGE UNDER NORTH CAROLINA LAW." The person signing the claim of lien on behalf of the association shall attach to and file with the claim of lien a certificate of service attesting to the attempt of service on the record owner, which service shall be attempted in accordance with G.S. 1A-1, Rule 4(j) for service of a copy of a summons and a complaint. If the actual service is not achieved, the person signing the claim of lien on behalf of the association shall be deemed to have met the requirements of this subsection if service has been attempted pursuant to both of the following: (i) G.S. 1A-1, Rule 4(j)(1) c., d., or e.; and (ii) by mailing a copy of the lien by regular, first-class mail, postage prepaid to the physical address of the lot and the lot owner's address of record with the association, and, if different, to the address for the lot owner shown on the county tax records and the county real property records for the lot. In the event that the owner of record is not a natural person, and actual service is not achieved, the person signing the claim of lien on behalf of the association shall be deemed to have met the requirements of this subsection if service has been attempted once pursuant to the applicable provisions of G.S. 1A-1, Rule 4(j)(3) through G.S. 1A-1, Rule 4(j)(9)."

SECTION 5.(a) G.S. 47F-3-118 reads as rewritten:

"§ 47F-3-118. Association records.

(a) The association shall keep financial records sufficiently detailed to enable the association to comply with this Chapter. 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 of the General Statutes. If the bylaws do not specify particular records to be maintained, the association shall keep accurate records of all cash receipts and expenditures and all assets and liabilities. The association must retain the following:

(1) Detailed records of receipts and expenditures affecting the operation and administration of the association and other appropriate accounting records.

(2) Minutes of all meetings of its lot owners and executive board, including executive sessions, a record of all actions taken by the lot owners or executive board without a meeting, and a record of all actions taken by a committee in place of the executive board on behalf of the association.

(3) The names of lot owners in a form that permits preparation of a list of the names of all lot owners and the addresses at which the association communicates with them, in alphabetical order showing the number of votes each owner is entitled to cast.

(4) Its original or amended organizational documents, bylaws and all amendments to them, and all rules currently in effect.

(5) All financial statements and tax returns of the association for the past three years.

(6) A list of the names and addresses of its current executive board members and officers.

(7) Its most recent annual income and expense statement and balance sheet as required by subsection (a1) of this section.

(8) Financial and other records sufficiently detailed to enable the association to comply with other requirements of law.

(9) Copies of current contracts to which it is a party.

(10) Records of executive board or committee actions to approve or deny any requests for design or architectural approval from lot owners.

(11) Ballots, proxies, and other records related to voting by lot owners for one year after the election, action, or vote to which they relate.

(a1) In addition to any specific information that is required by the bylaws to be assembled and reported to the lot owners at specified times, the association shall make an annual income and expense statement and balance sheet available to all lot owners at no charge and within 75 days after the close of the fiscal year to which the information relates. 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 lot owners present and voting in person or by proxy at any annual meeting or any special meeting duly called for that purpose.

(b) The association, upon written request, shall furnish to a lot owner or the lot owner's authorized agents a statement setting forth the amount of unpaid assessments and other charges against a lot. The statement shall be furnished within 10 business days after receipt of the request and is binding on the association, the executive board, and every lot owner.

~~(c)~~ In addition to the limitations of Article 8 of Chapter 55A of the General Statutes, no financial payments, including payments made in the form of goods and services, may be made to any officer or member of the association's executive board or to a business, business associate, or relative of an officer or member of the executive board, except as expressly provided for in the bylaws or in payments for services or expenses paid on behalf of the association which are approved in advance by the executive board.

(d) Subject to subsections (e) and (f) of this section, all records retained by an association must be available for examination and copying by a lot owner or the owner's authorized agent as follows:

(1) During reasonable business hours or at a mutually convenient time and location.

(2) Upon 15 days' notice in a request reasonably identifying the specific records of the association requested.

(e) Records retained by an association may be withheld from inspection and copying to the extent that they concern one of the following matters:

(1) Personnel, salary, and medical records relating to specific individuals.

(2) Contracts, leases, and other commercial transactions to purchase or provide goods or services currently being negotiated.

(3) Existing or potential litigation or mediation, arbitration, or administrative proceedings.

(4) Existing or potential matters involving federal, State, or local administrative or other formal proceedings before a governmental tribunal for enforcement of the declaration, bylaws, or rules and regulations.

(5) Communications with the association's attorney which are otherwise protected by the attorney-client privilege or the attorney work product doctrine.

(6) Information the disclosure of which would violate law other than this act.

(7) Records of an executive session of the executive board.

(8) Individual lot files other than those of the requesting owner.

(f) An association may charge a reasonable fee for providing copies of any records under this section and for supervising the lot owner's inspection.

(g) A right to copy records under this section includes the right to receive copies by photocopying or other means, including copies through an electronic transmission if available upon request by the lot owner.

(h) An association is not obligated to compile or synthesize information.

(i) Information provided pursuant to this section may not be used for commercial purposes."

SECTION 5.(b) G.S. 47F-3-103 is amended by adding a new subsection to read:

"(g) In addition to the limitations of Article 8 of Chapter 55A of the General Statutes, no financial payments, including payments made in the form of goods and services, may be made to any officer or member of the association's executive board or to a business, business associate, or relative of an officer or member of the executive board, except as expressly provided for in the bylaws or in payments for services or expenses paid on behalf of the association which are approved in advance by the executive board."

SECTION 6. Article 3 of Chapter 47F of the General Statutes is amended by adding a new section to read:

"§ 47F-3-120.1. Alternative dispute resolution allowed.

Parties to a dispute arising under this Chapter, an association's declaration, bylaws, or rules and regulations may agree to resolve the dispute by any form of binding or nonbinding alternative dispute resolution, except that a declarant may agree with the association to do so only after the period of declarant control has expired. Parties electing to use alternative dispute resolution for disputes arising under this Chapter shall use only mediators certified by the Dispute Resolution Commission. An agreement to submit to any form of binding alternative dispute resolution must be in a record authenticated by the parties."

SECTION 7. G.S. 47F-1-103 is amended by adding two new subdivisions to read:

"§ 47F-1-103. Definitions.

In the declaration and bylaws, unless specifically provided otherwise or the context otherwise requires, and in this Chapter:

(1) ~~Reserved.~~"Affiliate of a declarant" means any person who controls, is controlled by, or is under common control with a declarant. A person "controls" a declarant if the person (i) is a general partner, officer, director, or employer of the declarant, (ii) directly or indirectly or acting in concert with one or more other persons, or through one or more subsidiaries, owns, controls, holds with power to vote, or holds proxies representing more than twenty percent (20%) of the voting interests in the declarant, (iii) controls in any manner the election of a majority of the directors of the declarant, or (iv) has contributed more than twenty percent (20%) of the capital of the declarant. A person "is controlled by" a declarant if the declarant (i) is a general partner, officer, director, or employer of the person, (ii) directly or indirectly or acting in concert with one or more other persons, or through one or more subsidiaries, owns, controls, holds with power to vote, or holds proxies representing more than twenty percent (20%) of the voting interests in the person, (iii) controls in any manner the election of a majority of the directors of the person, or (iv) has contributed more than twenty percent (20%) of the capital of the person. Control does not exist if the powers described in this paragraph are held solely as security for an obligation and are not exercised.

…

(14) "Dispose" or "disposition" means a voluntary transfer to a purchaser of any legal or equitable interest in a lot, but the term does not include the transfer or release of a security interest."

SECTION 8.(a) G.S. 47F-3-103(d) reads as rewritten:

"§ 47F-3-103. Executive board members and officers.

…

(d) ~~The~~ Subject to subsection (d1) of this section, the declaration may provide for a period of declarant control of the association, during which period a declarant, or persons designated by the declarant, may appoint and remove the officers and members of the executive board. Regardless of the period provided in the declaration, a period of declarant control terminates no later than the earlier of (i) 120 days after conveyance of seventy-five percent (75%) of the lots (including lots which may be created pursuant to special declarant rights) to lot owners other than a declarant, (ii) two years after all declarants have ceased to offer lots for sale in the ordinary course of business, or (iii) two years after any development right to add new lots was last exercised. A declarant may voluntarily surrender the right to appoint and remove officers and members of the executive board before termination of that period, but in that event the declarant may require, for the duration of the period of declarant control, that specified actions of the association or executive board, as described in a recorded instrument executed by the declarant, be approved by the declarant before they become effective."

SECTION 8.(b) G.S. 47F-3-103 is amended by adding a new subsection to read:

"(d1) Not later than 60 days after conveyance of twenty-five percent (25%) of the lots (including lots which may be created pursuant to special rights) to lot owners other than a declarant, at least one member and not less than twenty-five percent (25%) of the members of the executive board shall be elected by lot owners other than a declarant. Not later than 60 days after conveyance of fifty percent (50%) of the lots (including lots which may be created pursuant to special declarant rights) to lot owners other than a declarant, not less than thirty-three percent (33%) of the members of the executive board shall be elected by lot owners other than the declarant."

SECTION 8.(c) G.S. 47F-3-104 reads as rewritten:

"§ 47F-3-104. Transfer of special declarant rights.

~~Except for transfer of declarant rights pursuant to foreclosure,~~ no(a) No special declarant right (G.S. 47F-1-103(28)) may be transferred except by an instrument evidencing the transfer recorded in every county in which any portion of the planned community is located. The instrument is not effective unless executed by the transferee.

(b) Upon transfer of any special declarant right, the liability of a transferor declarant is as follows:

(1) A transferor is not relieved of any obligation or liability arising before the transfer, including, but not limited to, liability or obligations relating to warranties. Lack of privity does not deprive any lot owner of standing to bring an action to enforce any obligation of the transferor.

(2) If the successor to any special declarant right is an affiliate of a declarant pursuant to G.S. 47F-1-103, the transferor is jointly and severally liable with the successor for any obligation or liability of the successor which relates to the planned community.

(3) If a transferor retains any special declarant right but transfers other special declarant rights to a successor who is not an affiliate of the declarant, the transferor is liable for any obligations or liabilities imposed on a declarant by this Chapter or by the declaration relating to the retained special declarant rights and arising after the transfer.

(4) A transferor has no liability for any act or omission or any breach of a contractual or warranty obligation arising from the exercise of a special declarant right by a successor declarant who is not an affiliate of the transferor.

(c) Unless otherwise provided in a mortgage instrument or deed of trust, in case of foreclosure or a mortgage, tax sale, judicial sale, sale by a trustee under a deed of trust, or sale under Bankruptcy Code or receivership proceedings, of any lots owned by a declarant, or real estate in a lot subject to development rights, a person acquiring title to all the real estate being foreclosed or sold, but only upon the person's request, succeeds to all special declarant rights related to that real estate held by that declarant, or only to any rights reserved in the declaration and held by that declarant to maintain models, sales offices, and signs. The judgment or instrument conveying title shall provide for transfer of only the special declarant rights requested.

(d) Upon foreclosure, tax sale, judicial sale, sale by a trustee under a deed of trust, or sale under Bankruptcy Code or receivership proceeding, of all lots and other real estate in the planned community owned by a declarant, the declarant ceases to have any special declarant rights.

(e) The liabilities and obligations of persons who succeed to special declarant rights are as follows:

(1) A successor to any special declarant right who is an affiliate of a declarant is subject to all obligations and liabilities imposed on the transferor related to the planned community.

(2) A successor to any special declarant right, other than a successor described in subdivision (3) of this subsection who is not an affiliate of a declarant, is subject to all obligations and liabilities:

a. On a declarant, which relate to the declarant's exercise or nonexercise of special declarant right; or

b. On the declarant's transferor, other than:

1. Misrepresentation by any prior declarant;

2. Warranty obligations on improvements made by any previous declarant or made before the planned community was created;

3. Breach of any fiduciary obligation by any previous declarant or the declarant's appointees to the executive board; or

4. Any liability or obligation imposed on the transferor as a result of the transferor's acts or omissions after the transfer.

(3) A successor to all special declarant rights held by the successor's transferor who is not an affiliate of that declarant and who succeeded to those rights pursuant to a deed in lieu of foreclosure or a judgment or instrument conveying title to lots under subsection (c) of this section, may declare his or her intention in a recorded instrument to hold those rights solely for transfer to another person. Thereafter, until transferring all special declarant rights to any person acquiring title to any lot owned by the successor, or until recording an instrument permitting exercise of all those rights other than the right held by the transferor to control the executive board in accordance with the provisions of G.S. 47F-3-103(d) for the duration of any period of declarant control, any attempted exercise of those rights is void. So long as a successor declarant may not exercise special declarant rights under this subsection, the successor declarant is not subject to any liability or obligation as a declarant other than liability for his or her acts and omissions under G.S. 47F-3-103(d)."

SECTION 8.(d) G.S. 47F-3-105 reads as rewritten:

"§ 47F-3-105. Termination of contracts and leases of declarant.

If entered into before the executive board elected by the lot owners pursuant to G.S. 47F-3-103(e) takes office, ~~any contract or lease affecting or related to the planned community~~(i) any management contract, employment contract, or lease of recreational or parking areas or facilities, (ii) any other contract or leases between the association and a declarant or an affiliate of a declarant, or (iii) any contract or lease that is not bona fide or was unconscionable to the lot owners at the time entered into under the circumstances then prevailing, may be terminated without penalty by the association at any time after the executive board elected by the lot owners pursuant to G.S. 47F-3-103(e) takes office upon not less than 90 days' notice to the other party. Notice of the substance of the provisions of this section shall be set out in each contract entered into by or on behalf of the association before the executive board elected by the lot owners takes office. Failure of the contract to contain such a provision shall not affect the rights of the association under this section."

SECTION 8.(e) G.S. 47F-3-111 reads as rewritten:

"§ 47F-3-111. Tort and contract liability.

(a) Neither the association nor any lot owner except the declarant is liable for that declarant's torts in connection with any part of the planned community which that declarant has the responsibility to maintain.

(b) An action alleging a wrong done by the association shall be brought against the association and not against a lot owner.

(c) If an action is brought against the association for a wrong which occurred during any period of declarant control, and if the association gives the declarant who then controlled the association reasonable notice of and an opportunity to defend against the action, such declarant is liable to the association for the following:

(1) For all tort losses not covered by insurance carried by the association suffered by the association or that lot owner.

(2) For all losses which the association would not have incurred but for a breach of contract. Nothing in this subsection shall be construed to impose strict or absolute liability upon the declarant for wrongs or actions which occurred during the period of declarant control.

~~(c)~~(d) In any case where the declarant is liable to the association under this section, the declarant is also liable for all litigation expenses, including reasonable attorneys' fees, incurred by the association. Any statute of limitation affecting the association's right of action under this section is tolled until the period of declarant control terminates. A lot owner is not precluded from bringing an action contemplated by this section because the person is a lot owner or a member of the association."

SECTION 9.(a) G.S. 47F-3-102(13) reads as rewritten:

"§ 47F-3-102. Powers of owners' association.

Unless the articles of incorporation or the declaration expressly provides to the contrary, the association may:

…

(13) Impose reasonable charges in connection with the preparation and recordation of documents, including, without limitation, amendments to the declaration, certificates required by G.S. 47F-4-103(b), or statements of unpaid assessments;

…."

SECTION 9.(b) Chapter 47F of the General Statutes is amended by adding a new Article to read:

"Article 4.

"Disclosures to Purchasers.

"§ 47F-4-101. Applicability; waiver.

(a) This Article applies to the disposition of all lots that are part of a planned community subject to this Chapter, except as provided in subsection (b) of this section or as modified or waived by agreement of purchasers of lots in a planned community in which all lots are restricted to nonresidential use.

(b) No disclosure certificate as provided for in G.S. 47F-4-103 need be prepared or delivered in the case of a disposition which is any of the following:

(1) Gratuitous.

(2) Pursuant to court order.

(3) By a government or governmental agency.

(4) By foreclosure or deed in lieu of foreclosure.

(5) To a dealer.

(6) Subject to cancellation at any time and for any reason by the purchaser without penalty.

(7) Of property restricted to nonresidential purposes.

"§ 47F-4-102. Purchaser's right to cancel.

(a) A person required to deliver a disclosure certificate pursuant to G.S. 47F-4-103(a) shall provide a purchaser with a copy of the certificate before conveyance of the lot, and not later than the date of any contract of sale. Unless a purchaser is given the disclosure certificate more than five days before execution of a contract for the purchase of the lot, the purchase contract is voidable by the purchaser until the certificate has been provided and for five days thereafter or until conveyance, whichever first occurs.

(b) A purchaser who elects to cancel a contract pursuant to subsection (a) of this section may do so by hand delivering notice thereof to the seller or by mailing notice thereof by prepaid United States mail to the seller or to the seller's agent for service of process. Cancellation is without penalty, and all payments made by the purchaser before cancellation must be refunded promptly.

"§ 47F-4-103. Disclosures to be made to purchasers.

(a) Unless exempt under G.S. 47F-4-101(b), a seller of lot that is part of a planned community shall furnish to a purchaser before the earlier of conveyance or transfer of the right to possession of the lot, a copy of the declaration, other than any plats and plans, the bylaws, the rules or regulations of the association, and a certificate containing all of the following:

(1) A statement disclosing the effect on the proposed disposition of any right of first refusal or other restraint on the free alienability of the lot held by the association.

(2) A statement setting forth the amount of the periodic common expense assessment and any unpaid common expense or special assessment currently due and payable from the owner who is selling the lot.

(3) A statement of any other fees payable by the owner who is selling the lot.

(4) A statement of any capital expenditures approved by the association for the current and succeeding fiscal years.

(5) A statement of the amount of any reserves for capital expenditures and of any portions of those reserves designated by the association for any specified projects.

(6) The most recent regularly prepared balance sheet and income and expense statement, if any, of the association.

(7) The current operating budget of the association.

(8) A statement of any unsatisfied judgments against the association and the status of any pending suits in which the association is a defendant.

(9) A statement describing any insurance coverage provided for the benefit of lot owners.

(10) A statement as to whether the executive board has given or received written notice that any existing uses, occupancies, alterations, or improvements in or to the lot or to the limited common elements assigned thereto violate any provision of the declaration.

(11) A statement as to whether the executive board has received written notice from a governmental agency of any violation of environmental, health, or building codes with respect to the lot, the limited common elements assigned thereto, or any other portion of the planned community which has not been cured.

(12) A statement of the remaining term of any leasehold estate affecting the planned community and the provisions governing any extension or renewal thereof.

(13) A statement of any restrictions in the declaration affecting the amount that may be received by a lot owner upon sale, condemnation, casualty loss to the lot or the planned community, or termination of the planned community.

(14) In a cooperative, an accountant's statement, if any was prepared, as to the deductibility for federal income tax purposes by the lot owner of real estate taxes and interest paid by the association.

(15) A statement describing any pending sale or encumbrance of common elements.

(16) A statement disclosing the effect on the lot to be conveyed of any restrictions on the owner's right to use or occupy the lot or to lease the lot to another person.

(b) The association, within 10 days after a request by a lot owner, shall furnish a certificate containing the information and copies of all documents necessary to enable the lot owner to comply with this section. A lot owner providing a certificate pursuant to subsection (a) is not liable to the purchaser for any erroneous information provided by the association and included in the certificate.

(c) A purchaser is not liable for any unpaid assessment or fee greater than the amount set forth in the certificate. A lot owner is not liable to a purchaser for the failure or delay of the association to provide the certificate in a timely manner."

SECTION 9.(c) The North Carolina Real Estate Commission shall revise the Residential Property Disclosure Statement developed by it pursuant to G.S. 47E-4 to provide a place for disclosure by sellers of the existence of any homeowners association with responsibility for enforcing rules and regulations relating to the real property and the existence of any restrictive covenants affecting the real property, regardless of whether such restrictive covenants are currently violated by any condition of the real property.

SECTION 10. This Part is effective when it becomes law and applies to all (i) planned communities created in this State on or after that date, which contain more than 20 residential lots and (ii) planned communities created in this State before that date, which contain more than 20 residential lots, except that the act applies only with respect to events and circumstances occurring on or after that date and does not invalidate existing provisions of the declaration, bylaws, or plats or plans of those planned communities. The declaration, bylaws, or plats and plans of any planned community created before the effective date of this act may be amended to achieve any result permitted by this act, regardless of what applicable law provided before that date.

PART II. AMENDMENTS TO CONDOMINIUM ACT

SECTION 11. Article 3 of Chapter 47C of the General Statutes is amended by adding a new section to read:

"§ 47C-3-102.1. Enforcement determinations; factors.

(1) The association's legal position does not justify taking any or further enforcement action.

(2) The covenant, restriction, or rule being enforced is, or is likely to be construed as, inconsistent with law.

(3) Although a violation may exist or may have occurred, it is not so material as to be objectionable to a reasonable person or to justify expending the association's resources.

(4) It is not in the association's best interests to pursue an enforcement action.

SECTION 12.(a) G.S. 47C-3-103(c) is repealed.

SECTION 12.(b) Article 3 of Chapter 47C of the General Statutes is amended by adding a new section to read:

"§ 47C-3-107.2. Adoption of budgets; special assessments.

(a) The executive board, at least annually, shall adopt a proposed budget for the condominium for consideration by the unit owners. Not later than 30 days after adoption of a proposed budget, the executive board shall provide to all the unit owners a summary of the budget, including any reserves, and a statement of the basis on which any reserves are calculated and funded. Simultaneously, the board shall set a date not less than 10 days or more than 60 days after providing the summary for a meeting of the unit owners to consider ratification of the budget. Unless at that meeting a majority of all unit owners or any larger number specified in the declaration reject the budget, the budget is ratified, whether or not a quorum is present. If a proposed budget is rejected, the budget last ratified by the unit owners continues until the unit owners ratify a subsequent budget.

SECTION 13. G.S. 47C-3-108 reads as rewritten:

"§ 47C-3-108. Meetings.

(a) An association shall hold a meeting of unit owners annually at a time, date, and place stated in or fixed in accordance with the bylaws. ~~A meeting of the association shall be held at least once each year.~~ Special meetings of the association may be called by the president, a majority of the executive board, or by unit owners having twenty percent (20%) or any lower percentage specified in the bylaws of the votes in the association. Not less than 10 nor more than 50 days in advance of any meeting, the secretary or other officer specified in the bylaws shall cause notice to be hand-delivered or sent prepaid by United States 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 over the Internet, to an electronic mailing address designated in writing by the unit owner. If the association does not notify unit owners of a special meeting within 30 days after the requisite number or percentage of unit owners request the secretary to do so, the requesting members may directly notify all the unit owners of the meeting. The notice of any meeting must 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. Only matters described in a meeting notice may be considered at a special meeting.

~~(b)~~ Meetings of the executive board shall be held as provided in the bylaws. At regular intervals, the executive board meeting shall provide unit owners an opportunity to attend a portion of an executive board meeting and to speak to the executive board about their issues and 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.

(c) Except as otherwise provided for in the bylaws, meetings of the association and executive board shall be conducted in accordance with the most recent edition of Robert's Rules of Order Newly Revised. Unless the declaration or bylaws otherwise provide, meetings of the association and the executive board may be conducted by telephonic, video, or other conferencing process if both of the following conditions are met:

(1) The meeting notice states the conferencing process to be used and provides information explaining how unit owners may participate in the conference directly or by meeting at a central location or conference connection.

(2) The process provides all unit owners the opportunity to hear or perceive the discussion and to comment as provided in subsection (d) of this section.

(d) Unit owners must be given a reasonable opportunity at any meeting, including meetings of the executive board, to comment regarding any matter affecting the condominium or the association.

(e) Meetings of the executive board and committees of the association authorized to act for the association must be open to the unit owners except during executive sessions. The executive board and those committees may hold an executive session only during a regular or special meeting of the board or a committee. No final vote or action may be taken during an executive session. An executive session may be held only for any of the following purposes:

(1) To consult with the association's attorney concerning legal matters.

(2) To discuss existing or potential litigation or mediation, arbitration, or administrative proceedings.

(3) To discuss labor or personnel matters.

(5) To prevent public knowledge of the matter to be discussed if the executive board or committee determines that public knowledge would violate the privacy of any person.

(g) During the period of declarant control, the executive board shall meet at least four times a year. At least one of those meetings must be held at the condominium or at a place convenient to the condominium. After termination of the period of declarant control, all executive board meetings must be at the condominium or at a place convenient to the condominium unless the unit owners amend the bylaws to vary the location of those meetings.

(h) Unless the meeting is included in a schedule given to the unit owners or the meeting is called to deal with an emergency, the secretary or other officer specified in the bylaws shall give notice of each executive board meeting to each board member and to the unit owners. The notice must be given not less than 10 days nor more than 60 days before the meeting and must state the time, date, place, and agenda of the meeting.

(i) If any materials are distributed to the executive board before the meeting, the executive board at the same time shall make copies of those materials reasonably available to unit owners, except that the board need not make available copies of unapproved minutes or materials that are to be considered in executive session.

(j) Unless the declaration or bylaws otherwise provide, the executive board may meet by telephonic, video, or other conferencing process if both of the following conditions are met:

(2) The process provides all unit owners the opportunity to hear or perceive the discussion and to comment as provided in subsection (d) of this section.

(k) After termination of any period when the declarant controls the association, unit owners may amend the bylaws to vary the procedures for meetings described in subsection (j) of this section.

(l) Instead of meeting, the executive board may act by unanimous consent as documented in a record authenticated by all its members. The secretary promptly shall give notice to all unit owners of any action taken by unanimous consent. After termination of the period of declarant control, the executive board may act by unanimous consent only to undertake ministerial actions or to implement actions previously taken at a meeting of the executive board.

SECTION 14. G.S. 47C-3-116 reads as rewritten:

"§ 47C-3-116. Lien for assessments.

(a) Any assessment levied against a unit remaining unpaid for a period of 30 90 days or longer shall constitute a lien on that 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 unit is located in the manner provided herein. Prior to filing a claim of lien, the association must make reasonable and diligent efforts to ensure that its records contain the unit owner's current mailing address. No fewer than 15 days prior to filing the lien, the association shall mail a statement of the assessment amount due and an offer to accept payments in installments as provided by subsection (e2) of this section by first-class mail to the physical address of the unit and the unit owner's address of record with the association, and, if different, to the address for the unit owner shown on the county tax records and the county real property records for the unit. If the unit owner is a corporation, the statement shall also be sent by first-class mail to the mailing address of the registered agent for the corporation. Unless the declaration otherwise provides, fees, charges, late charges and other charges imposed pursuant to G.S. 47C-3-102, 47C-3-107, 47C-3-107.1, and 47C-3-115 are enforceable as assessments under this section. Except as provided in subsections (a1) and (a2) of this section, the ~~association~~ association, acting through the executive board, may foreclose the claim of lien in like manner as a mortgage on real estate ~~under power of sale~~ under Article 2A of Chapter 45 of the General ~~Statutes.~~Statutes, if the assessment remains unpaid for 90 days or more and the unit owner has failed to accept or comply with the proposed installment plan. The association shall not foreclose the claim of lien unless the executive board votes to commence the proceeding against the specific unit.

(a2) An association shall not levy, charge, or attempt to collect a service, collection, consulting, or administration fee from any unit owner unless the fee is expressly allowed in the declaration. Any lien secured by debt consisting solely of these fees may only be enforced by judicial foreclosure as provided in Article 29A of Chapter 1 of the General Statutes.

(b) The lien under this section is prior to all other liens and encumbrances on a unit except (i) liens and encumbrances (specifically including, but not limited to, a mortgage or deed of trust on the unit) recorded before the docketing of the lien in the office of the clerk of superior court, and (ii) liens for real estate taxes and other governmental assessments or charges against the unit. This subsection does not affect the priority of mechanics' or materialmen's liens.

(b1) An association shall apply any payments made by the unit owner in the following priority:

(1) Unpaid assessments.

(2) Late charges associated with the assessment.

(3) Attorneys' fees and other collection charges.

(4) Fees, fines, interest, and associated late fees.

(c) A lien for unpaid assessments is extinguished unless proceedings to enforce the lien are instituted within three years after the docketing thereof in the office of the clerk of superior court.

(d) This section does not prohibit actions to recover sums for which subsection (a) creates a lien or prohibit an association taking a deed in lieu of foreclosure.

(e) A judgment, decree, or order in any action brought under this section shall include costs and reasonable attorneys' fees for the prevailing party. If the unit owner does not contest the collection of debt and enforcement of a lien after the expiration of the 15-day period following notice as required in subsection (e1) of this section, then reasonable attorneys' fees shall not exceed one thousand two hundred dollars ($1,200), not including costs or expenses incurred. The collection of debt and enforcement of a lien remain uncontested as long as the unit owner does not dispute, contest, or raise any objection, defense, offset, or counterclaim as to the amount or validity of the debt and lien asserted or the association's right to collect the debt and enforce the lien as provided in this section. The attorneys' fee limitation in this subsection shall not apply to judicial foreclosures or proceedings authorized under subsection (d) of this section or G.S. 47C-4-117.

(e1) A unit owner may not be required to pay attorneys' fees and court costs until the unit owner is notified in writing of the association's intent to seek payment of attorneys' fees and court costs. The notice must be sent by first-class mail to the property address and, if different, to the mailing address for the unit owner in the association's records. The association must make reasonable and diligent efforts to ensure that its records contain the unit owner's current mailing address. The notice shall set out the outstanding balance due as of the date of the notice and state that the unit owner has 15 days from the mailing of the notice by first-class mail to pay the outstanding balance without the attorneys' fees and court costs. If the unit owner pays the outstanding balance within this period, then the unit owner shall have no obligation to pay attorneys' fees and court costs. The notice shall also inform the unit owner of the opportunity to contact a representative of the association to discuss a payment schedule for the outstanding balance as provided in subsection (e2) of this section and shall provide the name and telephone number of the representative.

(e2) The ~~association, acting through its executive board and in the board's sole discretion, may agree to~~ association shall allow payment of an outstanding balance in ~~installments.~~ accordance with an installment plan. An installment plan under this subsection shall consist of equal periodic payments made over a reasonable time based on the amount of the outstanding balance. The accumulation of late charges associated with the outstanding balance shall cease when the unit owner agrees to make payments in accordance with an installment plan. ~~Neither the association nor the unit owner is obligated to offer or accept any proposed installment schedule.~~The association shall mail a statement of the assessment amount due and an offer to accept payments under a proposed installment plan in accordance with subsection (a) of this section. If the unit owner accepts the proposed installment plan and subsequently fails to comply with the terms of the plan, the association may file a claim of lien in accordance with subsection (a) of this section when a scheduled payment remains unpaid for 30 days or longer. Reasonable administrative fees and costs for accepting and processing installments may be added to the outstanding balance and included in an installment payment schedule. Reasonable attorneys' fees may be added to the outstanding balance and included in an installment schedule only after the unit owner has been given notice as required in subsection (e1) of this section.

(f) Where the holder of a first mortgage or first deed of trust of record, or other purchaser of a unit, obtains title to the unit as a result of foreclosure of a first mortgage or first deed of trust, such purchaser, and its heirs, successors and assigns, shall not be liable for the assessments against such unit which became due prior to acquisition of title to such unit by such purchaser. Such unpaid assessments shall be deemed to be common expenses collectible from all the unit owners including such purchaser, and its heirs, successors and assigns.

(g) A claim of lien shall set forth the name and address of the association, the name of the record owner of the lot at the time the claim of lien is filed, a description of the lot, and the amount of the lien claimed. The first page of the claim of lien shall contain the following statement in print that is in boldface, capital letters and no smaller than the largest print used elsewhere in the document: "THIS DOCUMENT CONSTITUTES A LIEN AGAINST YOUR PROPERTY, AND IF THE LIEN IS NOT PAID, THE HOMEOWNERS ASSOCIATION MAY PROCEED WITH FORECLOSURE AGAINST YOUR PROPERTY IN LIKE MANNER AS A MORTGAGE UNDER NORTH CAROLINA LAW." The person signing the claim of lien on behalf of the association shall attach to and file with the claim of lien a certificate of service attesting to the attempt of service on the record owner, which service shall be attempted in accordance with G.S. 1A-1, Rule 4(j) for service of a copy of a summons and a complaint. If the actual service is not achieved, the person signing the claim of lien on behalf of the association shall be deemed to have met the requirements of this subsection if service has been attempted pursuant to both of the following: (i) G.S. 1A-1, Rule 4(j)(1) c., d., or e.; and (ii) by mailing a copy of the lien by regular, first-class mail, postage prepaid to the physical address of the unit and the unit owner's address of record with the association, and, if different, to the address for the unit owner shown on the county tax records and the county real property records for the unit. In the event that the owner of record is not a natural person, and actual service is not achieved, the person signing the claim of lien on behalf of the association shall be deemed to have met the requirements of this subsection if service has been attempted once pursuant to the applicable provisions of G.S. 1A-1, Rule 4(j)(3) through G.S. 1A-1, Rule 4(j)(9)."

SECTION 15.(a) G.S. 47C-3-118 reads as rewritten:

"§ 47C-3-118. Association records.

(a) The association shall keep financial records sufficiently detailed to enable the association to comply with this chapter. All financial and other records, including records of meetings of the association and executive board, shall be made reasonably available for examination by any unit owner and the unit owner's authorized agents as required by the bylaws and by Chapter 55A of the General Statutes if the association is a nonprofit corporation. If the bylaws do not specify particular records to be maintained, the association shall keep accurate records of all cash receipts and expenditures and all assets and liabilities.The association must retain the following:

(1) Detailed records of receipts and expenditures affecting the operation and administration of the association and other appropriate accounting records.

(2) Minutes of all meetings of its unit owners and executive board including executive sessions, a record of all actions taken by the unit owners or executive board without a meeting, and a record of all actions taken by a committee in place of the executive board on behalf of the association.

(3) The names of unit owners in a form that permits preparation of a list of the names of all unit owners and the addresses at which the association communicates with them, in alphabetical order showing the number of votes each owner is entitled to cast.

(4) Its original or amended organizational documents, bylaws and all amendments to them, and all rules currently in effect.

(5) All financial statements and tax returns of the association for the past three years.

(6) A list of the names and addresses of its current executive board members and officers.

(7) Its most recent annual income and expense statement and balance sheet as required by subsection (a1) of this section.

(8) Financial and other records sufficiently detailed to enable the association to comply with other requirements of law.

(9) Copies of current contracts to which it is a party.

(10) Records of executive board or committee actions to approve or deny any requests for design or architectural approval from unit owners.

(11) Ballots, proxies, and other records related to voting by unit owners for one year after the election, action, or vote to which they relate.

(a1) In addition to any specific information that is required by the bylaws to be assembled and reported to the unit owners at specified times, the association shall make an annual income and expense statement and balance sheet available to all unit owners at no charge and within 75 days after the close of the fiscal year to which the information relates. 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 unit owners present and voting in person or by proxy at any annual meeting or any special meeting duly called for that purpose.

(b) The association, upon written request, shall furnish a unit owner or the unit owner's authorized agents a statement setting forth the amount of unpaid assessments and other charges against a unit. The statement shall be furnished within 10 business days after receipt of the request and is binding on the association, the executive board, and every unit owner.

(d) Subject to subsections (e) and (f) of this section, all records retained by an association must be available for examination and copying by a unit owner or the owner's authorized agent as follows:

(1) During reasonable business hours or at a mutually convenient time and location.

(2) Upon 15 days' notice in a request reasonably identifying the specific records of the association requested.

(e) Records retained by an association may be withheld from inspection and copying to the extent that they concern one of the following matters:

(1) Personnel, salary, and medical records relating to specific individuals.

(2) Contracts, leases, and other commercial transactions to purchase or provide goods or services currently being negotiated.

(3) Existing or potential litigation or mediation, arbitration, or administrative proceedings.

(5) Communications with the association's attorney which are otherwise protected by the attorney-client privilege or the attorney work-product doctrine.

(6) Information the disclosure of which would violate law other than this act.

(7) Records of an executive session of the executive board.

(8) Individual unit files other than those of the requesting owner.

(f) An association may charge a reasonable fee for providing copies of any records under this section and for supervising the unit owner's inspection.

(h) An association is not obligated to compile or synthesize information.

(i) Information provided pursuant to this section may not be used for commercial purposes."

SECTION 15.(b) G.S. 47C-3-103 is amended by adding a new subsection to read:

SECTION 16. Article 3 of Chapter 47C of the General Statutes is amended by adding a new section to read:

"§ 47C-3-120. Alternative dispute resolution allowed.

Parties to a dispute arising under this Chapter, an association's declaration, bylaws, or rules and regulations, may agree to resolve the dispute by any form of binding or nonbinding alternative dispute resolution, except that a declarant may agree with the association to do so only after the period of declarant control has expired. Parties electing to use alternative dispute resolution for disputes arising under this Chapter shall only use mediators certified by the Dispute Resolution Commission. An agreement to submit to any form of binding alternative dispute resolution must be in a record authenticated by the parties."

SECTION 17. G.S. 47C-4-101(b) reads as rewritten:

"§ 47C-4-101. Applicability; waiver.

…

(b) Neither a public offering statement nor a resale certificate need be prepared or delivered in the case of a disposition which ~~is:~~is classified as one or more of the following:

(1) ~~Gratuitous;~~Gratuitous.

(2) Pursuant to court ~~order;~~order.

(3) By a government or governmental ~~agency;~~agency.

(4) By foreclosure or deed in lieu of ~~foreclosure;~~foreclosure.

(5) To a person in the business of selling real estate who intends to offer those units to ~~purchasers; or~~purchasers.

(6) Subject to cancellation at any time for any reason by the purchasers without ~~penalty.~~penalty.

(7) Of property restricted to nonresidential purposes."

SECTION 18. G.S. 47C-4-109 reads as rewritten:

"§ 47C-4-109. Resales of units.

(a) Except in the case of a sale where delivery of a public offering statement is required, or unless exempt under G.S. 47C-4-101(b), a unit owner shall furnish to a prospective purchaser before the earlier of conveyance or transfer of the right of possession to the unit, ~~a statement setting forth the monthly common expense assessment and any other fees payable by unit owners.~~a copy of the declaration, other than any plats and plans, the bylaws, the rules or regulations of the association, and a certificate containing all of the following:

(1) A statement disclosing the effect on the proposed disposition of any right of first refusal or other restraint on the free alienability of the unit held by the association.

(2) A statement setting forth the amount of the periodic common expense assessment and any unpaid common expense or special assessment currently due and payable from the owner who is selling the unit.

(3) A statement of any other fees payable by the owner who is selling the unit.

(4) A statement of any capital expenditures approved by the association for the current and succeeding fiscal years.

(5) A statement of the amount of any reserves for capital expenditures and of any portions of those reserves designated by the association for any specified projects.

(6) The most recent regularly prepared balance sheet and income and expense statement, if any, of the association.

(7) The current operating budget of the association.

(8) A statement of any unsatisfied judgments against the association and the status of any pending suits in which the association is a defendant.

(9) A statement describing any insurance coverage provided for the benefit of unit owners.

(10) A statement as to whether the executive board has given or received written notice that any existing uses, occupancies, alterations, or improvements in or to the unit or to the limited common elements assigned thereto violate any provision of the declaration.

(11) A statement as to whether the executive board has received written notice from a governmental agency of any violation of environmental, health, or building codes with respect to the unit, the limited common elements assigned thereto, or any other portion of the condominium which has not been cured.

(12) A statement of the remaining term of any leasehold estate affecting the condominium and the provisions governing any extension or renewal thereof.

(13) A statement of any restrictions in the declaration affecting the amount that may be received by a unit owner upon sale, condemnation, casualty loss to the unit or the condominium, or termination of the condominium.

(14) In a cooperative, an accountant's statement, if any was prepared, as to the deductibility for federal income tax purposes by the unit owner of real estate taxes and interest paid by the association.

(15) A statement describing any pending sale or encumbrance of common elements.

(16) A statement disclosing the effect on the unit to be conveyed of any restrictions on the owner's right to use or occupy the unit or to lease the unit to another person.

(b) The association, within 10 days after a request by a unit owner, shall furnish a certificate containing the information and copies of all documents necessary to enable the unit owner to comply with this section. A unit owner providing a certificate pursuant to subsection (a) is not liable to the purchaser for any erroneous information provided by the association and included in the certificate.

(c) A purchaser is not liable for any unpaid assessment or fee greater than the amount set forth in the certificate prepared by the association. A unit owner is not liable to a purchaser for the failure or delay of the association to provide the certificate in a timely manner, but the purchase contract is voidable by the purchaser until the certificate has been provided and for five days thereafter or until conveyance, whichever first occurs."

SECTION 19. This Part is effective when it becomes law and applies to all (i) condominiums created in this State on or after that date and (ii) condominiums created in this State before that date, except that the act applies only with respect to events and circumstances occurring on after that date and does not invalidate existing provisions of the declaration, bylaws, or plats or plans of those condominiums. The declaration, bylaws, or plats and plans of any condominium created before the effective date of this act may be amended to achieve any result permitted by this act, regardless of what applicable law provided before that date.

PART III. GENERAL PROVISIONS

SECTION 20. The Consumer Protection Division of the Department of Justice shall provide general information to and receive complaints from the public regarding the implementation of this act. The Department of Justice shall compile all complaints relating to homeowners association into an annual report. The report shall be published on the Department's web site.

SECTION 21. If any section or provision of this act is declared unconstitutional or invalid by the courts, it does not affect the validity of this act as a whole or any part other than the part so declared to be unconstitutional or invalid.

SECTION 22. Except as provided in Sections 10 and 19, this act is effective when it becomes law.