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Homeowner association regulations proposal expected in short session

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(The Center Square) – Proposed changes to how North Carolina regulates homeowners’ associations expected to be introduced as a bill in the short session was reviewed by lawmakers on Tuesday.

Staff with the General Assembly’s Legislative Analysis Division outlined five recommendations from the Select Committee on Homeowners’ Associations in the House of Representatives following several hearings on a variety of complaints from the public.

The recommendations will be compiled in a report due to the Legislature by March 1, and accompanied by draft legislation, said Rep. Frank Iler, R-Brunswick.

Iler’s committee recommends implementing a 30-day deadline for associations to respond to records requests to address public complaints about delays, as well as a three-year lookback limitation on financial records that aligns with limits for nonprofits.

“There currently is … no set time,” said Bill Patterson, staff attorney for the Legislative Analysis Division.

The committee will recommend a vote from a majority of association members to increase assessments by more than 10%, or to take on large expenditures or liabilities after a budget is ratified. Patterson said the change would essentially flip the current process used that allows for budget increases unless a majority vote against.

A third recommendation centers on nonjudicial foreclosures for failure to pay assessments. It stems from public complaints about associations that have put liens on homes or attempted to seize them over relatively small debts, an issue that prompted unsuccessful legislation last session.

The committee suggests prohibiting nonjudical foreclosures to enforce liens when the amount is less than six months of assessments or $2,500, whichever is less. The change would require associations to offer installment schedules, and only allow for nonjudicial foreclosures if homeowners fail to accept the installment schedule or make payments.

The fourth recommendation would require prelitigation mediation for disputes that do not involve fines, fees or assessments, a move designed to resolve issues before they reach a courtroom.

“The model was the farm nuisance mediation requirement,” said Howard Marsilio, with the Legislative Analysis Division.

Marsilio said a fifth recommendation to task the Department of Justice with collecting and reporting on complaints about homeowners’ associations came from testimony from department officials that they lack express authority over those matters.

Democrats on the committee questioned whether the majority intended to provide funding for the justice department in draft legislation. Iler noted department officials confirmed they have the capability to track complaints, but the manpower needed to do so remains unclear.

“Resources required will be a discussion that will occur as this moves forward,” Marsilio said.

Lawmakers noted the recommendations address the bulk of complaints from the public in prior hearings, but future complaints collected by the Department of Justice could highlight other issues to address.

“Once we get the data back, we can see what else is there,” Iler said. “The volume will go up, and we’ll find out what types.”

Iler requested legislative leaders create a standing subcommittee under the House Commerce Committee to continue to review homeowners’ association issues. He set a select committee hearing for Feb. 28 to vote on the recommendations and proposed draft legislation.

The Center Square was unsuccessful with a request for comment from the Community Associations Institute that represents homeowners’ associations.

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