HB 920 — Condominium Association Changes.

ThePage 4 House Bill 920-First Edition General Assembly Of North Carolina Session 2019 Upon petition and hearing pursuant to this section, the clerk of superior court shall have jurisdiction over matters set forth in G.S.

47C-2-117(f) regarding ownership of marketable title of the common elements or units and may,may upon consideration of pleadings and such other matters as the court mayin its exercise of equityallow, order (i) reformation,reform, in whole or in part, of any provision of the condominium instruments and (ii) correctioncorrect of mistakes or any other error in the condominium instruments that may exist with respect to the declaration for any other purpose set forth in G.S.

(b) A complaintpetition filed by the unit owners' association with the court setting forth any inconsistency or error made in the condominium instruments, or the necessity for any change therein, shall be deemed sufficient basis for the reformation, in whole or in part, of the condominium instruments, provided that all of the following requirements have been met:

(1) The unit owners' association has made at least three good-faith attempts to convene a duly called meeting of the unit owners' association to present for consideration amendments to the condominium instruments for the reasons specified in the complaint,petition, and where the attempts to convene a duly called House Bill 920-Second Edition Page 5 General Assembly Of North Carolina Session 2019 meeting have been unsuccessful as evidenced by an affidavit verified by oath of the principal officer of the unit owners' association.

(2) Where the declarant of the condominium still owns a unit or continues to have any special declarant rights in the condominium, the declarant has joined in the complaintpetition of the unit owners' association.

(3) A copycopyof of the complaintpetition has been servedsent inat accordanceleast with30 Ruledays 4(j),before 4(j1),the orRule4(j5)oftheNorthpetition CarolinaRulesofCivilis Procedurefiled, onas evidenced byan affidavit verified byoath of the principal officer of the unit owners' association, to all unit owners and all beneficiaries of a deed of trust or mortgagees of record for a unit in the condominium.

(4) The complaintpetition notifiesprovides thesufficient notice to a recipient thatof if(i) the recipientright doesto notobject timelyor responddispute tothe petition, (ii) the complaint30-day pursuanttime tolimit Articlefor 3submitting ofa thewritten Northobjection Carolinaor Rulesdispute, ofand Civil(iii) Procedure,the thentheaddresses reliefand soughtfacsimile maybenumbers grantedof bythethe clerkofexecutive superiorboard court.and the authorized attorney.

(5) No written responseobjectionor objectingdispute toof or disputing the petitionpetitionis is received within 45 days from the date the last person to be served was served with the complaintpetition as evidencedbyanaffidavitevidenced verifiedbyoathoftheprincipalby an affidavit verified by oath of the principal officer of the unit owners' association.

(c) IfEach the response of any person served with the complaintpetition objectsthat wishes to object to or disputesdispute the complaint,petition themust actiondo shallso bein transferredwriting sent or delivered to the civilexecutive docketboard within 30 days after the notice of the superiorpetition courtis forprovided furtherto proceedings.that person or entity.

(d)In Anycomplying unitwith ownerany orrequirement beneficiaryoffor aobjecting deedto ofor trustdisputing orthe mortgageepetition, ofthe awritten condominiumobjection unitor indispute themust condominiumbe objectingaddressed to orthe disputingexecutive theboard complaintand shalldelivered haveby standingat toleast participateone inof the reformationfollowing action.methods:

No(1) reformationDelivering pursuanta copy to this section shall affect the rights,executive priorityboard ofby thehanding lien,it orto otherwise materially impair or affect any condominium unit as collateral for a deedmember of trustthe orexecutive mortgage,board or affectby aleaving beneficiaryit ofat athe deedexecutive ofboard's trustoffice orwith mortgagee's right to foreclose on a condominiummember unitoftheexecutiveboardoramanagingemployeeoftheunitowners'association. as collateral without the duly acknowledged written consent of the beneficiary of the deed of trust or mortgagee.

(e)(2) NothingMailing containeda incopy thisto sectionthe shallauthorized preventattorney's ormailing precludeaddress anyprovided unit owner or owners, at any time, from filing an action in superior court for judicial reformation related to the title,notice formation, or construction of theintent. condominium declaration, plat or plans, to establish marketable title to the owner's or owners' unit or units.

(f)(3) Inanyactionbroughtunderthissection,thepersonprosecutingthereformationactionSending musta filecopy aby noticefacsimile ofto pendingthe litigationauthorized complyingattorney's withfacsimile Articlenumber 11provided ofin Chapterthe 1notice of theintent, Generalas Statutes.evidenced by a facsimile receipt confirmation.

(g)(d) TheAny periodunit prescribedowner foror thebeneficiaryof commencementa deed of atrust collateralor actionmortgagee contestingof a judgmentcondominium orderingunit reformationin orthe correctioncondominium underobjecting thisor sectiondisputing the petition shall behave onestanding yearto fromparticipate in the datereformation ofproceedings entrybefore the clerk of thesuperior judgment.court.

ThisNo subsectionreformation doespursuant notto applythis tosection anshall actionaffect forthe damagesrights, sustainedpriority byof the lien, or otherwise materially impair or affect any partycondominium unit as collateral for a resultdeed of trust or mortgage, or affect a beneficiary of a deed of trust or mortgagee's right to foreclose on a condominium unit as collateral without the reformationduly acknowledged written consent of the beneficiary of the deed of trust or correction."mortgagee." House Bill 920-First Edition Page 5 General Assembly Of North Carolina Session 2019 SECTION 4.

G.S.

47C-2-101 of the General Statutes reads as rewritten:

"§ 47C-2-101.

Execution and recordation of declaration.

(a) A declaration creating a condominium shall be executed in the same manner as a deed, shall be recorded in every county in which any portion of the condominium is located.

(b) A declaration or an amendment to a declaration adding units to a condominium, may not 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 the plans, as evidenced by a recorded certificate of completion condominium must contain a certificate executed by an architect licensed under the provisions of Chapter 83 [83A] 83A of the General Statutes or an engineer registered under the provisions of Chapter 89C of the General Statutes.Statutes stating that the plans for such building or buildings fully and accurately depict the structural components and mechanical systems of all buildings containing or comprising any units thereby created;

provided, however, that such requirement shall not apply to any unit or Page 6 House Bill 920-Second Edition General Assembly Of North Carolina Session 2019 portion of a unit, the boundaries of which comprise solely surface space, airspace, subterranean space, or any specified combination thereof, as provided in G.S.

47C-2-105(a)(5)." SECTION 5.

G.S.

47C-2-114(a) reads as rewritten:

"§ 47C-2-114.

Easement for encroachments.Monuments as boundaries.

(a) To the extent that any unit or common element encroaches on any other unit or common element, a valid easement for the encroachment exists.

The easement does not relieve a unit owner of liability in case of his willful misconduct nor relieve a declarant or any other person of liability for failure to adhere to the plats and plans.The existing physical boundaries of a unit or the physical boundaries of a unit reconstructed in substantial accordance with the description contained in the original declaration are its legal boundaries, rather than the boundaries derived from the description contained in the original declaration, regardless of vertical or lateral movement of the building or minor variance between those boundaries and the boundaries derived from the description contained in the original declaration.

This section does not relieve a unit owner of liability for willful misconduct or relieve a declarant or any other person of liability for failure to adhere to any plats and plans or, in a cooperative, for failure to adhere to any representation in the public offering statement.

(b) With respect to all condominiums created prior to October 1, 1986, the provisions of subsection (a) of this section shall be deemed to apply to such condominiums, unless an action asserting otherwise shall have been brought within six months from October 1, 1986." SECTION 6.

Article 1 of Chapter 47C of the General Statutes is amended by adding a new section to read:

"§ 47C-1-110.

Substantial compliance and marketability.

In all instances where a declarant intended to establish on the declarant's property a condominium pursuant to this chapter, as established by the recording of a declaration, plats and plans, and by the subsequent recording of a deed or deeds intending to convey any unit or units, but failed to substantially comply with this chapter due to defects in the drafting, execution, or recording of the declaration, plats or plans, title to any unit that has been constructed and so deeded by the declarant for at least four calendar years without legal challenge shall be deemed to be marketable notwithstanding such defects." SECTION 7.

G.S.

47C-3-103 reads as rewritten:

"§ 47C-3-103.

Executive board members and officers.

(a) Except as provided in the declaration, the bylaws, or in subsection (b) or in other provisions of this chapter, the executive board may act in all instances on behalf of the association.

In the performance of their duties, the officers and members of the executive board shall be deemed to stand in a fiduciary relationship to the association and the unit owners and shall discharge their duties in good faith, and with that diligence and care which ordinarily prudent men persons would exercise under similar circumstances in like positions.

Officers shall act according to the standards for officers of a nonprofit corporation set forth in G.S.

55A-8-42, and members shall act according to the standards for directors of a nonprofit set forth in G.S.

55A-8-30.

(b) The executive board may not act unilaterally on behalf of the association to amend the declaration (G.S.

47C-2-117), to terminate the condominium (G.S.

47C-2-118), or to elect members of the executive board or determine the qualifications, powers and duties, or terms of office of executive board members (G.S.

47C-3-103(e) and (f)), but the executive board may unilaterally fill vacancies in its membership for the unexpired portion of any term.

Notwithstanding any provision of the declaration or bylaws to the contrary, the unit owners, by at least sixty-seven percent (67%) a majority vote of all persons present and entitled to vote at any meeting of the unit owners at which a quorum is present, may remove any member of the executive board with or without cause, other than members appointed by the declarant.

(c) Within 30 days after adoption of any proposed budget for the condominium, the executive board shall provide a summary of the budget to all the unit owners, and shall set a date House Bill 920-Second Edition Page 7 General Assembly Of North Carolina Session 2019 for a meeting of the unit owners to consider ratification of the budget not less than 14 10 nor more than 30 60 days after mailing of the summary.

There shall be no requirement that a quorum be present at the meeting.

The budget is ratified unless at that meeting a majority of all the unit ownersor anylargervote specified in thedeclarationrejects the budget.

Intheevent the proposed budget is rejected, the periodic budget last ratified shall be continued until such time as the unit owners ratify a subsequent budget proposed by the executive board.

…." SECTION 8.

G.S.

47C-3-108 of the General Statutes reads as rewritten:

"§ 47C-3-108.

Meetings.

(a) A meeting of the association shall be held at least once each year.

Special meetings of the association may be called by the president, a majority of the executive board, or by unit owners having twentypercent (20%) or anylower percentage specified in the bylaws of the votes in the association.

Not less than 10 nor more than 50 60 days in advance of any meeting, the secretary or other officer specified in the bylaws shall cause notice to be hand-delivered or sent prepaid by United States mail to the mailing address of each unit or to any other mailing address designated in writing bythe unit owner, or sent byelectronic means, including byelectronic mail over the Internet, to an electronic mailing address designated in writing by the unit owner.

The notice of any meeting must state the time and place of the meeting and the items on the agenda, includingthe general natureof anyproposedamendmentto thedeclaration orbylaws,anybudget changes, and any proposal to remove a director or officer.

…." SECTION 9.

G.S.

47C-3-109 reads as rewritten:

"§ 47C-3-109.

Quorums.

(a) Unless the bylaws provide otherwise, a quorum is deemed present throughout any meeting of the association if persons entitled to cast twenty percent (20%) of the votes which may be cast for election of the executive board are present in person or by proxy at the beginning of the meeting.

(b) Unlessthebylawsspecifyalargerpercentage,aquorumisdeemedpresentthroughout any meeting of the executive board of persons entitled to cast fifty percent (50%) of the votes on that board are present at the beginning of the meeting.

(c) In the event business cannot be conducted at any meeting because a quorum is not present, that meeting may be adjourned to a later date by the affirmative vote of a majority of those present in person or by proxy.

Notwithstanding any provision to the contrary in the declaration or the bylaws, the quorum requirement at the next meeting shall be one-half of the quorum requirement applicable to the meeting adjourned for lack of a quorum.

This provision shall continue to reduce the quorum by fifty percent (50%) from that required at the previous meeting, as previously reduced, until such time as a quorum is present and business can be conducted." SECTION 10.

G.S.

47C-3-115 reads as rewritten:

"§ 47C-3-115.

Assessments for common expense.

… (e) If any common expense is caused by the misconduct of any unit owner, owner or occupant, the association may assess that expense exclusively against his unit.the unit of that owner or occupant.

…." SECTION 11.

Page 86 House Bill 920-Second920-First Edition