North Carolina House Bill 444, introduced on March 18, 2025, proposes significant changes to the laws governing homeowners’ associations (“HOAs”) and condominium associations across the state. These reforms aim to enhance transparency, accountability, and fairness in HOA operations. Below is a summary of the bill’s key provisions:

1. Amendments to HOA Declarations Apply Only to Future Transfers

One of the most notable changes in the bill is that amendments to an HOA’s declaration will only apply to property owners who acquire their units or lots after the amendment takes effect. Current owners will not be subject to new amendments until they sell or transfer their property.

2. Limits on Management Contracts

The bill would restrict HOAs from entering into management contacts exceeding one year in length. Additionally, such contracts cannot include automatic renewal clauses requiring more than 30 days’ notice for nonrenewal. If automatically renewed, the management contracts must be terminable with 60 days’ notice.

3. Regulation of Parking on Public Roads

The bill would limit an HOA’s authority to regulate parking on public streets unless the local government or the North Carolina Department of Transportation has expressly delegated that authority to the HOA. This delegation must be renewed every five years.

4. Transparency in Association Financial Records

HOAs will be required to maintain detailed financial records and make them reasonably available to homeowners. They must provide annual income and expense statements within 75 days of the fiscal year’s close. Homeowners are also granted the right to inspect management contracts under reasonable conditions.

5. New Budget Approval Requirements

Proposed HOA budgets would need to be ratified by homeowners, with additional requirements for expense increases. Any budget that increases common expense liabilities by more than 10% must receive majority approval from homeowners. Mid-year increases exceeding 5% also require approval.

6. Regulation of HOA Fees and Fines

The bill will subject HOAs to stricter regulations on the fees they may charge homeowners. Specifically:

• Fees for lender questionnaires or statements of unpaid assessments are capped at $200, with an expedited processing fee limit of $100.
• HOAs may not impose additional fees on property transfers beyond what is explicitly authorized in the bill.
• Violations of these provisions will be considered unfair and deceptive trade practices.

7. Fair Processes for Architectural and Property Change Approvals

HOAs will be required under the new bill to implement fair and transparent processes when reviewing homeowner requests for property modifications. Decisions must be made within 90 days and issued in writing, with clear explanations provided if a request is denied. Homeowners must also be given a path for reconsideration.

8. Strengthened Due Process for HOA Fines and Privilege Suspensions

Before imposing fines or suspending services, HOAs would be required to provide homeowners with notice, a hearing, and an opportunity to be heard. Fines would be capped at $100 per violation, with a maximum total fine of $2,500 for continued violations.

9. Pre-Litigation Mediation for HOA Disputes

Disputes between homeowners and HOAs must now go through mediation before litigation can proceed. This requirement aims to encourage amicable resolutions and reduce costly legal disputes.

10. Enhanced Oversight by the Department of Justice

The North Carolina Department of Justice will be responsible for collecting and reporting complaints related to HOA disputes. These complaints will be included in an annual public report to enhance transparency and hold associations accountable.

Conclusion

House Bill 444 introduces substantial reforms to North Carolina’s HOA laws, with an emphasis on homeowner rights, financial transparency, and fair governance. We will continue to monitor legislative developments, including any revisions to the bill. If passed, HOA boards will need to act quickly to familiarize themselves with the changes to ensure compliance. If you have any questions about HOA governance or how House Bill 444 could impact your HOA covenants or bylaws, please contact our office.