In addition to comprehensive statutes specifically applicable to condominiums and HOA’s, North Carolina associations are impacted by several federal laws and other generally applicable state statutes— depending, in part, on how the association is structured and the activity level of the community association.
The federal and North Carolina statutes likely to affect North Carolina HOAs, condo associations, cooperatives, and non-profits include:
PLANNED COMMUNITY ACT
The North Carolina Planned Community Act (“PCA”), N.C.G.S., Chapter 47F, governs the formation, management, powers, and operation of HOAs, is North Carolina’s law specifically governing homeowners’ associations in the state.
The statute applies to all planned communities created on or after January 1, 1999, except that a community with twenty or fewer lots is outside of the PCA unless it opts in by electing to be governed by the statute in its declaration. N.C.G.S. §47F-1-102.
However, certain provisions relating to interpreting a declaration, association powers, community upkeep, fines and suspension of rights, assessments, and display of political signs and flags are applicable to all associations unless an association that is otherwise exempt from the PCA expressly opts out with regard to the section. Id.
CONDOMINIUM ASSOCIATION LAWS
Condominium Act
The North Carolina Condominium Act (“NCCA”), N.C.G.S, Chapter 47C, applies to condo associations formed after October 1, 1986, except that certain provisions of the statute (e.g., sections governing declaration interpretation, association and board powers, fines and suspensions, and displays of political signs and flags) apply to earlier formed condominiums unless the community declaration opts out. N.C.G.S. §47C-1-102.
The NCCA includes language that largely mirrors the PCA, providing a comprehensive framework for, without limitation, formation, apportionment of interests, common expenses, and voting rights; association administration and powers; and purchaser protection. Many sections of the law are nearly identical to the PCA, though the NCCA often provides additional detail.
Unit Ownership Act
The North Carolina Unit Ownership Act, N.C.G.S., Chapter 47A is an older statute that applies to condominium associations formed earlier than October 1, 1986.
The Unit Ownership Act provides a more generalized framework for condominium ownership, with a structure that bears less of a resemblance to the PCA than does the NCCA.
Significantly, many sections of the NCCA apply to older condominiums that are otherwise governed by the Unit Ownership Act unless the association opts out of those sections.
NONPROFIT CORPORATION ACT
The North Carolina Nonprofit Corporation Act, N.C.G.S., Chapter 55A governs Nonprofit corporations in North Carolina with regard to corporate structure and procedure.
All homeowners’ associations in North Carolina must be incorporated, with associations formed after January 1, 1999, and subject to the PCA required to be organized as non-profit corporations. N.C.G.S. §47F-3-101. Except to the extent the PCA and Nonprofit Corporation Act are inconsistent or in conflict, the Nonprofit Corporation Act is considered as a supplement to the PCA. N.C.G.S. §47F-1-108.
Condominium associations may organize as either for-profit or not-for-profit corporations, or as unincorporated nonprofit associations. N.C.G.S., §47C-3-101. Condominium associations organized for-profit are governed by the North Carolina Business Corporation Act, N.C.G.S. §55-1-01, et. seq., with regard to their corporate governance.
COOPERATIVE ORGANIZATIONS ACT
The North Carolina Cooperative Organizations Act, N.C.G.S., Chapter 54, recognizes and provides a legal framework relating to cooperative ownership in North Carolina. A co-op in North Carolina can be organized for any lawful purpose, provided that the initial members of the organization file Articles of Organization with the Secretary of State. N.C.G.S. §54-113.
Real estate owned by a co-op is not a “planned community” subject to the PCA, though cooperatively owned real estate can be part of a planned community (i.e., a co-op can own real estate within a planned community). N.C.G.S. §47F-1-103(23).
Though not nearly as detailed as the PCA, the Cooperative Organizations Act provides a structure for cooperative ownership, including formation, management, voting, and owner rights. North Carolina co-ops also have the option of using a limited liability company or for-profit corporation structure.
FAIR HOUSING ACT
The Federal Fair Housing Act (FHA), 42 U.S.C. §3601, et. seq., was enacted to prevent housing discrimination based on “protected classes,” including race, color, religion, sex, familial status, and national origin. Disability was added as a “protected class” by a later amendment. 42 U.S.C. §3604.
Under the FHA, an association can incur legal liability for taking an adverse action affecting a person’s right to buy, rent, or enjoy the use of real estate based upon that individual’s membership in a protected class.
An adverse action can be express discrimination, such as exclusionary covenants preventing sales or leases to anyone within a protected class, or actions which might not include discrimination on the surface, but which result in a “disparate impact” on a protected group. See, e.g., Texas Dept. of Housing and Community Affairs v. Inclusive Communities Project, Inc., 135 S.Ct. 2507 (2015).
North Carolina’s Fair Housing Act, N.C.G.S., Chapter 41A, provides similar protections to the FHA but on the state level and is administered by the Housing Discrimination Section of the North Carolina Civil Rights Division. Learn more about the Fair Housing Act.
SERVICEMEMBERS CIVIL RELIEF ACT
The Servicemembers Civil Relief Act (SCRA), 50 U.S.C. §501, et. seq., is intended to protect members of the U.S. Army, Navy, Air Force, Coast Guard, and Marine Corps from collections actions and foreclosures during their time in service. The law protects servicemembers on active duty, activated reservists, and members of the national guard active for more than 30 consecutive days.
The SCRA prevents creditors from obtaining default judgments against servicemembers and allows civil actions to be stayed at the servicemember’s request or on the court’s own initiative. Lienholders, including HOA’s, cannot pursue non-judicial foreclosures, and, like other civil cases, judicial foreclosure sales cannot be awarded by default.
Learn more about the SCRA.
AMERICANS WITH DISABILITIES ACT
The Americans with Disabilities Act (ADA), 42 U.S.C.A. §§ 12101 et. seq., prohibits discrimination against disabled persons in employment, transportation, public accommodations, communications, and access to government programs and services.
An association with common elements accessible to the general public or that acts as an employer must ensure that its activities do not result in discrimination against disabled persons and must make “reasonable accommodations” necessary to allow individuals with disabilities access to facilities and/or employment.
Learn more about the ADA.
FAIR DEBT COLLECTION PRACTICES ACT
The Federal Fair Debt Collections Practices Act (FDCPA), 15 U.S.C. §1692, et seq., regulates the conduct of “debt collectors” collecting debts owed by “consumers” to third parties. HOA fees are considered “debts” under the FDCPA, and homeowners are protected “consumers.” Ladick v. Van Gemert, 146 F. 3d 1205 (10th Cir.1998); Thies v. Law Offices of William A. Wyman, 969 F. Supp. 604 (S.D. Cal. 1997).
An HOA collecting its own debts does not qualify as a “debt collector” and is therefore not regulated by the FDCPA. However, a third party – such as a collection agency, law firm, or property management company – attempting to collect fees owed to an association may qualify as a “debt collector” under the FDCPA.
North Carolina’s Debt Collection Act, N.C.G.S, Chapter 75, Article 2, regulates debt collection at the state level, providing consumer protections that are often analogous to the FDCPA. Importantly, the Debt Collection Act applies to creditors attempting to collect their own debts from consumers, potentially including community associations under the right circumstances. N.C.G.S. §75-50(3).
Learn more about the FDCPA.