GENERAL ASSEMBLY OF NORTH CAROLINA
HOUSE BILL 882
Short Title: Comm. Mgr. Licensing & Planned Comm. Act Chgs.
Representatives Jordan, R. Moore, and Iler (Primary Sponsors).
For a complete list of Sponsors, refer to the North Carolina General Assembly Web Site.
Judiciary II, if favorable, Finance.
April 15, 2015
A BILL TO BE ENTITLED
AN ACT to regulate community association property managers by establishing a licensing procedure with the north carolina real estate commission and to make various changes to the planned community act.
The General Assembly of North Carolina enacts:
PART I. COMMUNITY ASSOCIATION PROPERTY MANAGEMENT ACT
SECTION 1.(a) G.S. 93A‑16(a) reads as rewritten:
"(a) There is hereby created a special fund to be
known as the "Real Estate Education and Recovery Fund" which shall be
set aside and maintained by the North Carolina Real Estate Commission. The fund
shall be used in the manner provided under this Article for the payment of
unsatisfied judgments where the aggrieved person or community association has
suffered a direct monetary loss by reason of certain acts committed by any real
broker.broker, community association property manager, or
members of the community association's executive board. The Commission may
also expend money from the fund to create books and other publications, courses,
forms, seminars, and other programs and materials to educate licensees and the
public in real estate subjects. However, the Commission shall make no
expenditures from the fund for educational purposes if the expenditure will
reduce the balance of the fund to an amount less than two hundred thousand
SECTION 1.(b) Chapter 93A of the General Statutes is amended by adding a new Article to read:
"Community Association Property Management.
"§ 93A‑95. Title.
This Article shall be known as the "Community Association Property Management Act."
"§ 93A‑96. Purpose.
(a) The General Assembly finds that a community association as described under and subject to Chapters 47C and 47F of the General Statutes that in whole or in part burdens or pertains to real property in this State is deemed to be an interest in real estate, and as such shall be governed by the laws of this State relating to real estate.
(b) The General Assembly further finds that managing a community association by collecting and handling assessments and other funds and managing property of the community association are deemed to be real estate transactions. If a community association is not properly managed, the improper management can adversely affect the real estate through foreclosure of the community association member's property or bankruptcy of the community association. Improper management may also affect the rights of the community association members as consumers and property owners. It is the purpose and intent of this Article to protect the public from persons unqualified to provide community association management and from unprofessional conduct by persons regulated pursuant to this Article.
"§ 93A‑97. Definitions.
The following definitions apply in this Article:
(1) Commission. The North Carolina Real Estate Commission.
(2) Community association. Common interest ownership associations as described in and subject to Chapters 47C and 47F of the General Statutes.
(3) Community association property management. Services provided to a community association for remuneration for any of the following so long as the bylaws of the community association specifically provide that the executive board of the community association is permitted to delegate the authority:
a. Collecting assessments and controlling and disbursing funds for a community association.
b. Assisting a community association in preparing budgets or other financial documents.
c. Advising and assisting a community association in obtaining insurance.
d. Assisting in the noticing and conducting meetings upon approval of the members.
"§ 93A‑98. Rule‑making authority.
The Commission shall have the authority to administer this Article and adopt rules consistent with the provisions of this Article and the laws of this State. The Commission may prescribe the forms and procedures for submitting information to the Commission under this Article.
"§ 93A‑99. License required.
On or after October 1, 2015, it shall be unlawful for any person in this State to act as a community association property manager, directly or indirectly engage in the business of community association property management, hold oneself out to be a community association property manager, or use the title "Licensed Community Association Property Manager" without first obtaining a real estate broker license from the Commission as provided in Article 1 of this Chapter.
"§ 93A‑100. Limitations on brokers acting as managing agents.
(a) The Commission shall not issue a license to provide community association property management to a partnership, association, corporation, limited liability company, or other business entity.
(b) A licensee shall not, within the practice of community association property management, exercise control over any of the following:
(1) The reserves or investment accounts of a community association.
(2) An operating account of a community association unless (i) allowed under a contract approved by the executive board of the community association and (ii) duplicate financial statements concerning the account are sent by the institution holding the account to the licensee and the community association's executive board at a separate address.
(c) A licensee shall not give legal advice in violation of laws governing the practice of law under Chapter 84 of the General Statutes.
(d) A licensee shall not give financial advice in violation of the laws governing certified public accountants under Chapter 93 of the General Statutes.
"§ 93A‑101. Fidelity bond required.
(a) Every community association property manager engaged in community association property management shall at all times be covered by a fidelity bond or an insurance policy complying with the provisions of this section.
(b) A fidelity bond required by this section shall be in an amount of at least twenty thousand dollars ($20,000) and comply with all of the following:
(1) Be written by an insurance company authorized to write fidelity bonds in this State.
(2) Cover the community association property manager and all or a portion of the employees and protect all or a portion of the community association funds in the custody of the community association property manager.
(3) Provide that the insurance company issuing the bond may not cancel, substantially modify, or refuse to renew the bond without giving 30 days' prior written notice to the executive board of the community association, except in the case of nonpayment of premiums, in which case 10 days' prior written notice shall be given to the executive board.
(4) Contain any other provisions as may be required by the Commission.
(c) A licensee shall furnish the Commission proof of required bond coverage before engaging in community association property management activities and upon license renewal if the licensee continues to engage in community association property management activities.
"§ 93A‑102. Contracts for broker services.
Every contract entered into by a licensed broker and a community association to provide community association property management services shall be in writing and contain all of the following conditions:
(1) The contract shall expire one year from the date the contract is entered into. However, the contract may contain a clause to permit the contract to continue on a monthto‑month basis upon the expiration of the original term.
(2) The contract shall contain a clause allowing the community association to cancel the contract for any reason by providing at least 60 days' notice to the licensed broker.
(3) The contract shall provide for a notice of cancellation with proper notice before the expiration of the contract and prior to contract renewal.
"§ 93A‑103. Registration of community associations.
(a) Each community association shall register with the Commission annually. The Commission shall provide the proper form for registration. To register, a community association shall provide all of the following:
(1) The name and address of the community association.
(2) The names, addresses, and phone numbers of members of the community association's executive board.
(3) The name and address of the agent for service of process.
(4) The name of the licensee broker who has control of the funds of the community association.
(5) The name of the community association property manager's bond company or insurance company.
(6) Any other information the Commission deems necessary.
(b) The registration form shall be accompanied by a certified check for a fee in the amount of one hundred dollars ($100.00) to cover the cost of registration, education, and advising the community associations on matters related to the real estate functions of a community association or any changes to the registration.
(c) The community association shall be required to make any corrections or modifications to the original information provided in the registration to the Commission within 15 days from the date of registration.
"§ 93A‑104. Education required; community association board members.
Within 60 days after election to a community association's executive board, a board member shall complete a minimum of four hours of education on the laws related to community associations under Chapters 47C and 47F of the General Statutes, the provisions of this Article, rules adopted by the Commission, and any other matters the Commission deems relevant. The education required by this section shall be provided by the Commission. The community association shall pay to the Commission a fee for the course in the amount of seventy‑five dollars ($75.00) for each individual board member taking the course. The Commission may provide an online education course to meet the requirements of this section."
SECTION 1.(d) G.S. 47C‑3‑103 reads as rewritten:
"§ 47C‑3‑103. Executive board members and officers.
(h) If a member elected to the executive board fails to comply with the educational requirement provided in G.S. 93A‑104, then the board member shall submit a written notice of resignation to the board. The failure of a member to resign shall be deemed to be a breach of fiduciary duty and the duty of good faith to the association and its members as provided in subsection (a) of this section and the board member shall be subject to discipline pursuant to G.S. 47C‑3‑107.1 and subsection (b) of this section."
SECTION 1.(e) G.S. 47F‑3‑103 reads as rewritten:
"§ 47F‑3‑103. Executive board members and officers.
(g) If a member elected to the executive board fails to comply with the educational requirement provided in G.S. 93A‑104, then the board member shall submit a written notice of resignation to the board. The failure of a member to resign shall be deemed to be a breach of the duty of good faith to the association as provided in subsection (a) of this section and the board member shall be subject to discipline pursuant to G.S. 47F‑3‑107.1 and subsection (b) of this section."
PART II. PLANNED COMMUNITY ACT CHANGES
SECTION 2.(a) Article 3 of Chapter 47F of the General Statutes is amended by adding the following new sections to read:
"§ 47F‑2‑105. Contents of the declaration.
(a) The declaration for a planned community shall contain all of the following:
(1) The name of the common interest community and the association and a statement that the common interest community is a planned community.
(2) The name of every county in which any portion of the common interest community is situated.
(3) A legal description of the real estate included in the common interest community.
(4) A statement of the maximum number of lots that the declarant reserves the right to create.
(5) A description of the boundaries of each lot created by the declaration, including the lot's identifying number.
(6) A description of any limited common elements and any real estate that is or must become a common element.
(7) A description of any development rights and other special declarant rights reserved by the declarant, together with a legal description of the real estate to which each of those rights applies and a time limit within which each of those rights must be exercised.
(8) If any development right may be exercised with respect to different parcels of real estate at different times, a statement to that effect together with all of the following:
a. A statement fixing the boundaries of the affected parcels and the order in which the affected parcels will be subjected to the exercise of each development right or an affirmative statement that no assurances are made by the declarant with respect to the exercise of development rights.
b. A statement as to whether, if a development right is exercised in any portion of the real estate subject to that development right, the development right will be reserved and applied to the remaining portions of the subject real estate.
(9) All conditions or limitations under which the rights described in subdivision (7) of this subsection may be exercised or will lapse.
(10) The allocation to each lot of the allocated common interest expense and votes as provided for under G.S. 47F‑2‑106.
(11) The recording information for all easements and licenses (i) appurtenant to or included in the common interest community or (ii) to which any portion of the common interest community may become subject by virtue of a reservation in the declaration.
(12) Any authorization that entitles the association to establish and enforce construction and design criteria and aesthetic standards.
(13) A provision allowing for members to adopt (i) rules for the establishment and enforcement of construction and design criteria and aesthetic standards and (ii) procedures for enforcement of those criteria and standards, including approval of applications, establishment of a reasonable time for review of applications, and the consequences of the association's failure to timely respond.
(14) Any other matters the declarant deems appropriate and that are consistent with this Chapter.
"§ 47F‑2‑106. Allocation of common expense liabilities and votes.
(a) The declaration shall allocate the common expense liabilities of the association and a portion of the total association votes to each lot and shall state the formulas used to establish those allocations. Allocation of expenses and votes to lots owned by the declarant shall be equal to and established in the same manner as all other lots subject to the declaration.
(b) A declarant shall not use class voting for the purpose of evading any limitation imposed on declarants by this Chapter. Lots owned by a declarant shall not constitute a class by virtue of their ownership by the declarant.
(c) With the exception of minor variations from rounding, the sum of the common expense liabilities allocated to all lots subject to the declaration shall equal one, if stated fractionally or, if stated as a percentage, one hundred percent (100%)."
SECTION 2.(b) G.S. 47F‑2‑117 reads as rewritten:
"§ 47F‑2‑117. Amendment of declaration.
(a) Except in cases of amendments that may be executed
by a declarant under the terms of the declaration or by certain lot owners
under G.S. 47F‑2‑118(b), and notwithstanding the content of
the declaration and any intention of the declarant, the declaration may be
amended only by affirmative vote or written agreement signed by lot owners of
lots to which at least sixty‑seven percent (67%) of the votes in the
association are allocated, or any larger majority the declaration
but not exceeding eighty percent (80%), or by the declarant if necessary
for the exercise of any development right. The declaration may specify a
smaller number only if all of the lots are restricted exclusively to
nonresidential use. To the extent the procedures and requirements for
amending the declaration conflict with the provisions of this section, this
section shall control. (b) No action to challenge the validity of
an amendment adopted pursuant to this section may be brought more than one year
after the amendment is recorded.
(c) Every amendment to the declaration shall be recorded in every county in which any portion of the planned community is located and is effective only upon recordation.
(d) Any amendment passed pursuant to the provisions of
this section or the procedures provided for in the declaration are presumed
enforceable.enforceable, unless the amendment conflicts
with the provisions of this Chapter or violates G.S. 47F‑1‑104(a)
or G.S. 47F‑2‑103(c).
SECTION 2.(c) G.S. 47F‑2‑120 reads as rewritten:
"§ 47F‑2‑120. Master associations.
(a) If the declaration for a planned community
provides that any of the powers described in G.S. 47F‑3‑102
are to be exercised by or may be delegated to a profit or nonprofit corporation
or unincorporated nonprofit association which exercises those or other
powers on behalf of one or more other planned communities or for the benefit of
the lot owners of one or more other planned communities, all provisions of this
act applicable to lot owners' associations apply to any such
or unincorporated association, except as modified by this section.
(b) Unless a master association is acting in the capacity of an association described in G.S. 47F‑3‑101, it may exercise the powers provided in G.S. 47F‑3‑102(a)(2) only to the extent expressly permitted in the declarations of the associations that are part of the master association or expressly described in the delegations of power from those associations to the master association.
(c) If the declaration of an association provides that the executive board may delegate certain powers to a master association, the members of the executive board shall have no liability for the acts or omissions of the master association with respect to the powers delegated.
(d) The rights and responsibilities of lot owners with respect to the lot owners' association provided in G.S. 47F‑3‑103, 47F‑3‑108, 47F‑3‑109, and 47F‑3‑110 apply to the conduct of a master association, to the extent that the persons who elect the board of the master association are lot owners within the meaning of this Chapter.
(e) Notwithstanding G.S. 47F‑3‑103 and regardless of whether the master association is also an association within the meaning of G.S. 47F‑3‑101, the certificate of incorporation or other instrument creating the master association and the declaration of each association shall provide for the election of the executive board of the master association upon termination of declarant control over a master association, in any of the following ways:
(1) All lot owners of all associations subject to the master association may elect all members of the executive board for the master association.
(2) All members of the executive boards of all associations subject to the master association may elect all members of the executive board for the master association.
(3) All lot owners of each association subject to the master association may elect members to fill specific seats on the executive board for the master association.
(4) All members of the executive boards of all associations subject to the master association may elect members to fill specific seats on the executive board for the master association."
SECTION 2.(d) G.S. 47F‑3‑101 reads as rewritten:
"§ 47F‑3‑101. Organization of owners' association.
A lot owners' association shall be incorporated no later than
the date the first lot in the planned community is conveyed. The membership of
the association at all times shall consist exclusively of all the lot owners
or, following termination of the planned community, of all persons entitled to
distributions of proceeds under G.S. 47F‑2‑118. Every
association created after the effective date of this Chapter shall be organized
as a nonprofit
corporation.corporation or as an unincorporated
SECTION 2.(e) G.S. 47F‑3‑103 reads as rewritten:
"§ 47F‑3‑103. Executive board members and officers.
The Subject to the provisions of
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. Notwithstanding the period provided in the declaration,
a period of declarant control terminates no later than the earlier of (i) 120 days
after conveyance of sixty‑seven percent (67%) of the lots, including lots
that may be created pursuant to a special declarant right, to lot owners other
than the declarant; (ii) two years after a declarant has 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. If a declarant voluntarily surrenders
the right to appoint and remove officers and members of the executive board
before termination of the period of control, the declarant may require that
certain actions of the association or executive board, specified by the
declarant, must be approved by the declarant before they become effective.
(d1) Not later than 60 days after the conveyance of twenty‑five percent (25%) of the lots, including lots that may be created pursuant to a special declarant right, to lot owners other than the declarant, at least one member, and not less than twenty‑five percent (25%) of the executive board, shall be elected by lot owners other than the declarant. Not later than 60 days after the conveyance of fifty percent (50%) of the lots, including lots which may be created pursuant to a special declarant right, to lot owners other than the declarant, not less than sixty‑three percent (63%) of the members of the executive board shall be elected by lot owners other than the declarant.
SECTION 2.(f) G.S. 47F‑3‑114 reads as rewritten:
"§ 47F‑3‑114. Surplus funds.
Unless otherwise provided in the declaration, any surplus
funds of the association remaining after payment of or provision for common
the funding of a reasonable operating expense surplus,expenses and
any prepayment of reserves shall be paid to the lot owners in proportion to
their common expense liabilities or credited to them to reduce their future
common expense assessments."
SECTION 2.(g) 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. 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.retain
all of 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 the lot owners and executive board, other than 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 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) The association's original or restated organizational documents, the bylaws and all amendments to them, and all rules of the association currently in effect.
(5) All financial statements, audits, and tax returns of the association for the preceding three years.
(6) A list of the names and addresses of the association's current executive board members and officers.
(7) All financial and other records sufficiently detailed so as to enable the association or lot owner to comply with a required disclosure statement.
(8) Copies of current contracts to which the association is a party.
(9) All records of executive board or committee actions to approve or deny requests for design or architectural approval from unit owners.
(10) All ballots, proxies, and other records related to voting by unit owners for a period of one year following the election, action, or vote to which they relate.
(b) Subject to the provisions of subsections (c) and (d) of this section, all records retained by the association, including those records required pursuant to Chapter 55A of the General Statutes, shall be made available for inspection and copying by a lot owner or the lot owner's authorized agent. 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. An association is not obligated to compile or synthesize information. Information provided pursuant to this section shall not be used for commercial purposes. The association may charge a reasonable fee for providing copies of records pursuant to this section.
(c) Upon failure of the association to provide access to records requested pursuant to this section, the lot owner shall be entitled to receive ten dollars ($10.00) for each day that access to the records is denied. The fine imposed by this subsection shall constitute a claim for damages enforceable by the lot owner pursuant to the procedures established under G.S. 47F‑3‑107(d). A request made pursuant to this section shall be subject to all of the following requirements:
(1) Access to the records shall be during reasonable business hours or at a mutually convenient time and location.
(2) The requestor shall provide at least 10 days' written notice that reasonably identifies the specific records requested.
(d) Records retained by an association may be withheld from inspection and copying to the extent the documents contain any of the following:
(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) Information regarding existing or potential litigation or mediation, arbitration, or administrative proceedings.
(4) Information regarding 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.
(5) Communications with the association's attorney that are otherwise protected by the attorney‑client privilege or the attorney work‑product doctrine.
(6) Information that, if disclosed, would violate a State or federal law.
(7) Records of an executive session of the executive board.
(8) Files pertaining to an individual lot owner other than those of the requesting owner.
(e) 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.
(f) Notwithstanding the bylaws of the association, 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 an annual meeting or any special meeting duly called for that purpose.
(b)(g) 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)(h) 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
SECTION 2.(h) G.S. 47F‑3‑116 reads as rewritten:
(f) Except as provided in subsection (h) of this
section, the association, acting through the executive board, may foreclose a
claim of lien in like manner as a mortgage or deed of trust on real estate
under power of sale, as provided in Article 2A of Chapter 45 of the General
Statutes, if the assessment remains unpaid for 90 days or
provided that the claim of lien is against a lot that is not the primary
residence of the owner. The association shall not foreclose the claim of
lien unless the executive board votes to commence the proceeding against the
The following provisions and procedures shall be applicable to and complied with in every nonjudicial power of sale foreclosure of a claim of lien, and these provisions and procedures shall control to the extent they are inconsistent or in conflict with the provisions of Article 2A of Chapter 45 of the General Statutes:
(1) The association shall be deemed to have a power of sale for purposes of enforcement of its claim of lien.
(h) A claim of lien securing a debt consisting 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 may only be enforced by judicial foreclosure, as provided in Article 29A of Chapter 1 of the General Statutes. In addition, 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, and any claim of 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. A claim of lien against a lot that is the primary residence of the owner may only be enforced by judicial foreclosure, as provided in Article 29A of Chapter 1 of the General Statutes."
PART III. EFFECTIVE DATE
SECTION 3. This act is effective when it becomes law. Nothing in this act shall be construed as being applicable to or affecting any pending litigation.