Your Guide to North Carolina HOA Laws
- Understanding the Various State HOA Laws
- Diving into Specific HOA Laws in North Carolina
- Learn About Acts Prohibited by Debt Collectors
- NC HOA Laws and Regulations You Should Know
- Learn Laws about HOA Solar Panels
- Learn About Acts Related to Nonprofit Corporations
Similar to other business, companies and organizations, North Carolina HOA laws bind property management companies through specific regulations and concrete legal parameters. As the leader in the property management industry, FirstService Residential is committed to helping you board members familiarize themselves with these community management and HOA laws to better protect and serve your community.
As a board, it is imperative for HOA board members to stay aligned and keep HOA laws and regulations in mind when creating the goals and vision of a community.
This video identifies the importance of board alignment in more detail. Learn more here!
Understanding the Various State HOA Laws
An integral part of running a homeowners association is knowing the various laws that apply to your community. Making sure your association complies with these laws safeguards your HOA from potential liability. And while federal laws universally apply to all homeowners associations nationwide, some laws can vary depending on where your association is located.
At FirstService Residential, we are available for North Carolina's board members and residents across the state and are committed to helping them understand the ever-changing landscape of HOA laws throughout the state. Our localized and expert management teams can help you navigate the legal landscape and handle everything from emergency management and equipment maintenance to community newsletters and resident surveys. Our team serves various areas throughout the state, including: Charlotte, Raleigh, Durham, Asheville and various other local communities across North Carolina.
Similar to many other states, North Carolina has its own set of HOA laws& that govern community associations. FirstService Residential, the leading property management company, allows board members to better understand what these laws are.
Let’s break them down according to what type of association they relate to.
Understanding North Carolina HOA Laws for Condominiums
On the subject of condominium associations, there are two Acts that can apply. The first Act that applies to condo associations is the North Carolina Unit Ownership Act. This Act falls under the North Carolina General Statutes Chapter 47A. Compared to the previous Act, this one is much older and governs condo associations created prior to October 1, 1986. Unlike the Condominium Act, the Unit Ownership Act consists of more general provisions relating to condominium ownership.
The second act is the North Carolina Condominium Act, which falls under the North Carolina General Statutes Chapter 47C. This Act governs the creation, management and operation of condo associations created after October 1, 1986. Similar to the North Carolina Planned Community Act, certain provisions of this Act may also apply to condo associations created prior to that date unless the association specifically opts out of it in their declaration.
There are four articles under this act:
- Article 1 – General Provisions.
- Article 2 – Creation, Alteration, and Termination of Condominiums.
- Article 3 – Management of the Condominium.
- Article 4 – Protection of Purchasers.
Diving Into Specific HOA Laws in North Carolina
Here are some provisions to some of the most common topics for you to consider:
- Surplus Funds: Occasionally, communities will find themselves with surplus funds. When this occurs, board members must turn to their declaration for guidance. If their declaration doesn't have a ton of details on this issue, Section 47F-3-114 dictates that any surplus funds should be returned to the membership or deducted from future dues and assessments.
- Flags and Political Signs: According to Section 47F-3-121 of the Planned Community Act, associations may not restrict owners from displaying the United States flag or the state flag that measures no more than 4 x 6 ft. Of course, this is provided the owner displays the flag in compliance with Title 4 of the U.S. Code. The exception to this rule, though, is when an association uses appropriate language regulating or prohibiting flag displays within its declaration. Similar provisions exist when it comes to the display of political signs.
- Mediation Prior to Litigation: Typically, associations must inform members of their right to a mediation process when disputes arise. Associations must do this at least on a yearly basis. Additionally, Section 7A-38.3F encourages parties of a dispute to first go through mediation before turning to litigation. This, of course, does not apply to disputes concerning delinquencies.
- Inspection of Association Records: According to Section 47F-3-118 of the Planned Community Act, associations must keep detailed financial records and make them reasonably available to their members (or their authorized agents) for inspection. At a minimum, HOAs must keep accurate records of the association’s assets, liabilities, expenditures, and cash receipts. Additionally, associations must present all lot owners with the HOA’s annual balance sheet and income statement within 75 days following the end of the fiscal year.
Pro tip: As important as it is to understand and adhere to these HOA laws and regulations, it is equally important to always keep them in mind when creating rules for your HOA or community association.
Learn About Acts Prohibited by Debt Collectors
The North Carolina Debt Collection Act (NCDCA) governs debt collection practices in the state. This Act protects consumers from unfair, deceptive, or abusive practices brought on by debt collectors. Under this Act, homeowners are considered consumers and HOA dues or fees as debts. It works similarly to the federal Fair Debt Collection Practices Act (FDCPA).
There is one key difference, though, between the FDCPA and the state’s debt collection laws. The FDCPA defines debt collectors as third parties that collect debt on behalf of others, whereas the NCDCA considers creditors as debt collectors, too. That means state-level debt collection laws also apply to creditors trying to collect their own debts, possibly including homeowners and condo associations as well.
The state’s Persons With Disabilities Protection Act offers protection to persons with physical or mental impairments from discrimination in places of public accommodations. Within the context of community associations, this applies to any common areas or spaces open to the general public. Associations must reasonably accommodate persons with disabilities and make these public areas accessible to them. It is similar to the federal Americans With Disabilities Act.
Fair Housing Laws
Housing discrimination victims can submit a complaint to the U.S. Department of Housing and Urban Development. Complaints must be filed within a year from the date of the act of housing discrimination. Alternatively, victims can also choose to file a private lawsuit within two years of the act in the federal district court.
The state’s Fair Housing Act protects certain classes of people from housing discrimination. According to this Act, housing providers, including community associations, cannot discriminate against people based on their race, color, national origin, sex, religion, familial status, or handicapping condition. In many ways, this Act functions similarly to the federal Fair Housing Act.
NC HOA Laws and Regulations You Should Know
- Federal Laws: In addition to state law regulations, the federal government has laws that govern the operation and management of common interest communities, condominiums, cooperatives and residential properties throughout the state.
- Unit Ownership Act, N.C. Gen. Stat. §§47A-1, et seq.: This Chapter applies to all condominiums created within the state before October 1, 1986.
- Condominium Act, N.C. Gen. Stat. §§ 47C-1-101, et seq.: The law governs, among other things, the creation, alteration, and termination; management and protection of purchasers of condominiums created after October 1, 1986.
- North Carolina Nonprofit Corporation Act, N.C. Gen. Stat. §§ 55A-1-01, et seq.: The statute governs nonprofits with regard to corporate structure and procedure. All lot owners' associations in the state must be incorporated. Every association created after January 1, 1999, must be organized as a nonprofit corporation § 47F-3-101. Condominium associations may organize as either for-profit or nonprofit corporations § 47C-3-101.
- Prelitigation mediation of condominium and homeowners association disputes, N.C. Gen. Stat. § 7A-38.3F. Community associations must notify members at least annually of their right to initiate a mediation. N.C. Gen. Stat. §7A-38.3F(j). Associations and members can contact the North Carolina Dispute Resolution Commission or the Mediation Network of North Carolina and request a mediator. N.C. Gen. Stat. §7A-38.3F(c). This provision does not apply if the dispute arises solely from a member's failure to pay assessments. N.C. Gen. Stat. §7A-38.3F(b).
- North Carolina Debt Collection Act (NCDCA), N.C. Gen. Stat. §§ 75-50, et seq.: The Act regulates debt collection practices at the state level and contains provisions similar to the federal Fair Debt Collection Practices Act (FDCPA). The NCDCA prohibits debt collectors from using unfair or deceptive practices when collecting a debt. HOA fees are considered "debts" under the FDCPA and the NCDCA, and homeowners are protected "consumers." Importantly, while the FDCPA only applies to those who regularly collect debts on behalf of others, the NCDCA applies to creditors attempting to collect their own debts, potentially including community associations under the right circumstances. N.C.G.S. §75-50(3). Victims can file a complaint with the state's Attorney General's Office, FTC or the CFPB.
Davis Lake Community v. Feldmann, 138 N.C. App. 292, 530 S.E.2d 865 (N.C. Ct. App. 2000). The court held that a homeowners' association trying to collect assessments owed to it, is a "debt collector" under the NCDCA.
Reid v. Ayers, 138 N.C. App. 261, 531 S.E.2d 231 (N.C. Ct. App. 2000). The court held that attorneys engaged in debt collection on behalf of their clients are exempt from the NCDCA.
- North Carolina State Fair Housing Act (NCFHA), N.C. Gen. Stat. §§ 41A-1, et seq.: The law protects people's right to access all housing opportunities without discrimination based on race, color, religion, sex, national origin, handicapping condition, or familial status (the presence of children under the age of 18). See N.C. Gen. Stat. § 41A-4 (unlawful discriminatory housing practices, § 41A-3 (Definitions), and § 41A-6 (exemptions). See also, Persons With Disabilities Protection Act (PWDPA), N.C. Gen. Stat. §§ 168A, et seq., for associations with common elements open to the general public.
- The NCFHA and PWDPA provide state-level protections similar to the federal Fair Housing Act (FHA) and the Americans With Disabilities Act (ADA). Victims of housing discrimination can file a complaint with the Housing Discrimination Section of the North Carolina Civil Rights Division or HUD within one year from the date of the discriminatory act. Victims may also file a private lawsuit in the federal district court within two years of the discriminatory act.
Learn Laws About HOA Solar Panels
- Deed Restrictions, Covenants and Other Agreements Prohibiting Solar Collectors, N.C. Gen. Stat. § 22B-20. The purpose of the statute is to "protect the public health, safety, and welfare by encouraging the development and use of solar resources and by prohibiting deed restrictions, covenants, and other similar agreements that could have the ultimate effect of driving the costs of owning and maintaining a residence beyond the financial means of most owners." § 22B-20(a).
- In particular, this chapter voids any deed restriction, covenant, or similar binding agreement that effectively prohibits the installation of a solar collector for residential property (excluding condominiums created under Chapter 47A or 47C) subject to the deed restriction, covenant, or agreement. § 22B-20(b). The law permits associations to impose restrictions on the location or screening of solar collectors provided the deed restriction, covenant, or similar binding agreement does not have the effect of preventing the reasonable use of a solar collector for a residential property. § 22B-20(c). The law sets additional requirements for solar collectors that are visible by a person on the ground. § 22B-20(d).
Pro tip: Since solar panels are extremely common in this region, always keep in mind that you are clearly communicating about the rules, laws and regulations as they relate to solar panels to your residents. For more information on how to develop an effective community communications plan to increase transparency and alignment between your board and residents, click here.
Learn About Acts Related to Nonprofit Corporations
The Nonprofit Corporation Act, found under the General Statutes Chapter 55A, applies to nonprofit corporations in the state. The provisions of this Act relate more to the corporate structure and procedure of nonprofits.
This important act consists of the following articles:
- Article 1 – General Provisions.
- Article 2 – Organization.
- Article 3 – Purposes and Powers.
- Article 4 – Names.
- Article 5 – Office and Agent.
- Article 6 – Members and Memberships.
- Article 7 – Members’ Meetings and Voting; Derivative Proceedings.
- Article 8 – Directors and Officers.
- Article 10 – Amendment of Articles of Incorporation and Bylaws.
- Article 11 – Merger.
- Article 11A – Conversions.
- Article 12 – Transfer of Assets.
- Article 13 – Distributions.
- Article 14 – Dissolution.
- Article 14A – Reorganization.
- Article 15 – Foreign Corporations.
- Article 16 – Records and Reports.
- Article 17 – Transition and Curative Provisions.
On the other hand, condo associations can be arranged as not-for-profit corporations or for-profit corporations. These associations also have the option to remain as unincorporated nonprofit associations. It is worth noting that for-profit corporations, including condo associations that incorporate as such, must follow the state’s Business Corporation Act.
Many HOAs Could Use Support Navigating NC HOA Laws
Understanding the different NC HOA laws that apply to your association can come as a challenge. Considering the importance of abiding by these laws, though, all associations must make an effort to remain informed. If your HOA board finds it difficult, perhaps it is time to outsource the job to a trusted HOA management company.
As the leading property management company – coupled with the depth of resources and local knowledge of various areas throughout the area, FirstService Residential provides end-to-end property management solutions tailored to your community association’s individual needs.
Contact us online to connect with one of our local property management specialists today to learn more!