Bipartisan House Committee Aims to Limit HOA Authority in NC

In the ever-evolving landscape of North Carolina's real estate, homeowner associations (HOAs) play a pivotal role in managing community affairs and maintaining property values.

However, recent findings by the NC State House Select Committee have highlighted critical areas for improvement to ensure the rights and obligations of both associations and their members are balanced and transparent.

This article delves into the Committee's findings and the proposed legislative amendments aimed at fostering a more equitable and efficient relationship between homeowners and their associations.

Streamlining Access to Association Records

One of the significant issues identified is the unreasonable delays faced by members in accessing association records. To address this, the Committee recommends amending G.S. 47C-3-118 and G.S. 47F-3-118 to mandate that associations provide requested records for inspection within 30 days. Moreover, to prevent undue burdens on associations, these amendments will limit the financial records provision to those created within three years of the request. This change aims to reduce common expense liabilities and ensure members have timely access to pertinent association records.

Safeguarding Against Unapproved Assessment Increases

The Committee also found that associations could significantly increase assessments for common expenses without a majority vote from all owners. The proposed amendments to G.S. 47C-3-103 and G.S. 47F-3-103 seek to empower homeowners by requiring a majority vote for any proposed budget that increases the previous year's assessments by more than 10% or any executive board actions that raise the budgeted common expense liability by over 5%. This measure is designed to enhance budgetary transparency and homeowner involvement in financial decisions.

Preventing Unjust Home Foreclosures

Alarmingly, the Committee discovered instances where homeowners lost their properties due to nonjudicial foreclosures over relatively minor past-due assessments. To prevent such disproportionate actions, amendments to G.S. 47C-3-116 and G.S. 47F-3-116 are recommended to restrict nonjudicial foreclosures unless specific conditions are met, including a minimum lien amount of $2,500 or 6 months of assessments, whichever is less, and the provision of a reasonable payment plan opportunity to the homeowner. These changes aim to protect homeowners from losing their homes over minor financial delinquencies.

Encouraging Mediation to Resolve Disputes

Another area of concern is the underutilization of prelitigation mediation due to parties refusing to participate. The Committee suggests amending G.S. 7A-38.3F to mandate mediation for disputes between associations and members, thereby fostering a more amicable and cost-effective resolution process before resorting to civil action. This requirement is expected to decrease litigation costs and encourage collaborative dispute resolution.

Enhancing Educational Resources and Dispute Resolution

Finally, the Committee emphasizes the need for more educational resources on the rights and obligations of associations and their members. It proposes that the Department of Justice be tasked with providing these resources online, receiving and forwarding complaints, collecting dispute data, and summarizing this information in an annual report. This initiative aims to inform and equip both parties better, potentially reducing disputes and highlighting areas needing legislative attention.

The NC State House Select Committee's findings and recommendations mark a significant step towards improving the governance and operation of homeowner associations in North Carolina. By implementing these legislative changes, the state aims to foster a more transparent, fair, and responsive framework for managing community living spaces. For real estate professionals, staying abreast of these developments is crucial to advising clients accurately and ensuring the healthy functioning of associations within their communities.

Do you think that the power of HOAs needs to be limited in our state? Sound off in the comments below or share with a colleague in an upcoming CE Class!

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References

House Select Committee on Homeowners' Associations. (2024). Report to the 2024 Session of the 2023 General Assembly of North Carolina (February 28, 2024).