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NC Community Association Legislative Update – June 21, 2022

NC Community Association Legislative Update – June 21, 2022

Due to other more pressing issues, several important bills impacting community associations were not addressed by the General Assembly in 2021. Those proposals have seen quick action this week, been adopted, and sent to the Governor for signature.

Senate Bill 278’s(“SB278”) important features include that it: (1) “rescues” many older associations from concerns about the Marketable Title Act due to appellate decisions in 2021, (2) makes clear the NC Condominium Act applies to older condos when pursuing unpaid assessments, and (3) changes how condominiums are created. (The bill also has provisions on reimbursement for expenditures made by spouses on joint property that has nothing to do with community associations, but that’s the way the legislative process sometimes works). Reminder: the bill will not become effective until signed by the Governor, but that is anticipated to happen quickly.

MARKETABLE TITLE ACT FIXES

As you may recall, two decisions from the NC Court of Appeals in 2021 held that most filed property restrictions, other than those requiring a property be used for residential use only, are wiped out after 30 years by the NC Marketable Title Act. (See Harmony Taylor’s blogs at New NC Appellate Case: C Investments 2, LLC v Auger (Covenants and Real Property Marketable Title Act and New NC Appellate Case: Williams v Reardon (Covenants and Real Property Marketable Title Act – Part 2) While those cases did NOT involve associations, the decisions threw into doubt all HOA and condos created prior to 1991. Senate Bill 336 fixes those concerns by providing that the Marketable Title Act does NOT apply to:

  • condominiums created under NCGS 47C (the NC Condominium Act) or older condominiums created under NCGS 47A (the Unit Ownership Act),
  • cooperatives as defined in the Planned Community Act, or
  • residential planned communities to which any provisions of the NC Planned Community Act apply. To prevent situations where a declaration suggests an association exists but none was ever created, the bill provides that the exemption to the MTA will not apply to associations created prior to January 1, 1999 unless the planned community “is governed by an owners’ association in existence as of July 1, 2022.” In other words, for older documents there actually has to be an association to be protected from the provisions of the Marketable Title Act.

The Marketable Title Act provisions are effective as of July 1, 2022.

TAKEAWAY: Older community associations no longer have to worry that court decisions have wiped out some or all of their declaration provisions.

A number of lawyers representing various stakeholders were involved in the drafting of these legislative fix, which was intended to prevent an unintended consequence of the Marketable Title Act. Our firm was heavily involved in the drafting. Special recognition must be given to the NC Legislative Action Committee (NC-LAC). The NC-LAC is a committee of the Community Associations Institute. The NC-LAC monitors and influences legislation that affects community associations and its members talk with legislators on issues of concern to HOAs and condos. Two of my partners, Steve Black and Harmony Taylor have served as LAC volunteers. To properly do its job, the NC-LAC needs funds for letters, mailings and other costs. Please consider a contribution to the NC-LAC by visiting 12 Reasons Why You Should Donate to NC-LAC.


CONDOMINIUM ACT FIXES

Another case from the NC Court of Appeals in 2021 cast doubt on the ability of pre-October 1, 1986 condominiums to use the provisions of the NC Condominium Act to pursue unpaid assessments. (See Michael Taliercio’s blog New NC Appellate Case: Executive Office Park of Durham Association, Inc. v Rock (Older Condo Collections) SB278 fixes this concern by amending the NC Condominium Act to provide that the provisions of the Act apply “notwithstanding any conflicting provisions in the articles of incorporation, the declaration, or the bylaws and notwithstanding any references in those documents to Chapter 47A of the General Statutes.”

TAKEAWAY: Older condominiums can rely on the assessment collection provisions of the NC Condominium Act regardless of the age of the association and regardless of the language of the Declaration.

The older condo assessment provisions are effective upon the bill becoming law.


CHANGES TO HOW CONDOMINIUMS ARE CREATED

Though more esoteric, SB278 also amends the NC Condominium Act as to the required contents of and recordation process for condominium declarations. For instance, no Declaration or amendment adding units may be recorded “unless all structural components and mechanical systems of all buildings containing or comprising any units thereby created are substantially completed in accordance with building design plans.”

Since the original provisions of declarations are mainly of concern to developers and drafting attorneys (and the changes get into such specifics as an “upper limiting boundary with reference to established datum . . .”), I’ll just note here that there are important changes. See the legislation for the specific language.

The condominium declaration provisions are effective upon the bill becoming law.


For read the full bill, visit www.ncleg.gov/BillLookUp/2021/SB%20278.


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