GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1997

S	1 

SENATE BILL 801

Short Title: N.C. Planned Community Act. 	(Public)

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Sponsors: Senators Wellons; Hartsell and Miller.

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Referred to:  Commerce.

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April 10, 1997

A BILL TO BE ENTITLED
AN ACT TO ESTABLISH THE NORTH CAROLINA PLANNED COMMUNITY ACT.
The General Assembly of North Carolina enacts:
Section 1.  The General Statutes are amended by adding a new Chapter to read:
"Chapter 47E.
"North Carolina Planned Community Act.
"ARTICLE 1.
"General Provisions.
"§ 47E-1-101.  Short title.
This act shall be known and may be cited as the North Carolina Planned Community Act.
"§ 47E-1-102.  Applicability.
(a)	This act applies to all planned communities created within this State on or after October 1, 1997.
(b)	This act does not apply to a planned community created within this State on or after October 1, 1997:
(1)	Which contains no more than 12 lots (including all lots which may be added or created by the exercise of development rights) unless the declaration provides or is amended as permitted in subsection (e) of this section to provide that this act does apply to that planned community; or
(2)	In which all lots are restricted exclusively to nonresidential purposes and the declaration provides that this act does not apply to that planned community.
(c)	Except as provided in subsection (d) of this section, G.S. 47E-1-106 (Applicability of local ordinances, regulations, and building codes), G.S. 47E-1-107 (Eminent domain),  G.S. 47E-2-103 (Construction and validity of declaration and bylaws),  G.S. 47E-2-104 (Description of lots), G.S. 47E-3-102(a)(1) through (6) and (11) through (17) (Powers of owners' association),  G.S. 47E-3-107 (Upkeep of planned community; responsibility and assessments for damages),  G.S. 47E-3-107A (Procedures for fines and suspension of planned community privileges or services), G.S. 47E-3-111 (Tort and contract liability), G.S. 47E-3-112 (Conveyance or encumbrance of common elements), G.S. 47E-3-115 (Assessments for common expenses), G.S. 47E-3-116 (Lien for assessments), G.S. 47E-3-118 (Association records), and G.S. 47E-4-117 (Effect of violation on rights of action; attorneys' fees) apply to all planned communities created in this State before October 1, 1997.  These sections apply only with respect to events and circumstances occurring on or after October 1, 1997, and do not invalidate existing provisions of the declaration, bylaws, or plats and plans of those planned communities.  G.S. 47E-1-103 (Definitions) applies to all planned communities created in this State before October 1, 1997, to the extent necessary in construing any of the preceding sections.
(d)	A planned community created within this State before October 1, 1997, which contains no more than 12 lots (including all lots which may be added or created by the exercise of development rights) shall not be subject to this act.
(e)	Notwithstanding the provisions of subsections (c) and (d) of this section, the declaration of any planned community created before October 1, 1997, may be amended to provide that this entire act does apply to that planned community.  Such an amendment may be made under the provision of this act specifying procedures and requirements for amendment of declarations.  To the extent the procedures and requirements for amendment in the declaration conflict with the provisions of this act, this act shall control.
(f)	This act does not apply to planned communities or lots located outside this State.
"§ 47E-1-103.  Definitions.
In the declaration and bylaws, unless specifically provided otherwise or the context otherwise requires, and in this act:
(1)	'Affiliate of a declarant' means any person who controls, is controlled by, or is under common control with a declarant.  A person 'controls' a declarant if the person (i) is a general partner, officer, director, or employer of the declarant; (ii) directly or indirectly or acting in concert with one or more other persons, or through one or more subsidiaries, owns, controls, holds with power to vote, or holds proxies representing, more than twenty percent (20%) of the voting interest in the declarant; (iii) controls in any manner the election of a majority of the directors of the declarant; or (iv) has contributed more than twenty percent (20%) of the capital of the declarant.  A person 'is controlled by' a declarant if the declarant (i) is a general partner, officer, director, or employer of the person; (ii) directly or indirectly or acting in concert with one or more other persons, or through one or more subsidiaries, owns, controls, holds with power to vote, or holds proxies representing, more than twenty percent (20%) of the voting interest in the person; (iii) controls in any manner the election of a majority of the directors of the person; or (iv) has contributed more than twenty percent (20%) of the capital of the person.  Control does not exist if the powers described in this subdivision are held solely as security for an obligation and are not exercised.
(2)	'Allocated interests' means the common expense liability and votes in the association allocated to each lot.
(3)	'Association' or 'owners' association' means the association organized under G.S. 47E-3-101.
(4)	'Common elements' means any real estate within a planned community owned or leased by the association, other than a lot.
(5)	'Common expenses' means expenditures made by or financial liabilities of the association, together with any allocations to reserves.
(6)	'Common expense liability' means the liability for common expenses allocated to each lot pursuant to G.S. 47E-2-107.
(7)	'Condominium' means real estate, portions of which are designated for separate ownership and the remainder of which is designated for common ownership solely by the owners of those portions.  Real estate is not a condominium unless the undivided interests in the common elements are vested in the unit owners.
(8)	'Cooperative' means real estate owned by a corporation, trust, trustee, partnership, or unincorporated association, where the governing instruments of that organization provide that each of the organization's members, partners, stockholders, or beneficiaries is entitled to exclusive occupancy of a designated portion of that real estate.
(9)	'Declarant' means any person or group of persons acting in concert who (i) as part of a common promotional plan, offers to dispose of his or its interest in a lot not previously disposed of, or (ii) reserves or succeeds to any special declarant right.
(10)	'Declaration' means any instruments, however denominated, that create a planned community and any amendments to those instruments.
(11)	'Development rights' means any right or combination of rights reserved by a declarant in the declaration (i) to add real estate to a planned community; (ii) to create lots, common elements, or limited common elements within a planned community; (iii) to subdivide lots or convert lots into common elements; or (iv) to withdraw real estate from a planned community.
(12)	'Dispose' or 'disposition' means a voluntary transfer to a purchaser of any legal or equitable interest in a lot, but does not include the transfer or release of a security interest.
(13)	'Executive board' means the body, regardless of name, designated in the declaration to act on behalf of the association.
(14)	'Identifying number' means a symbol that identifies only one lot in a planned community.
(15)	'Initial seller' means the declarant, an affiliate of the declarant or any person or entity that acquires a lot for any purpose other than to use the lot for residential purposes.
(16)	'Leasehold planned community' means a planned community in which all or a portion of the real estate is subject to a lease, the expiration or termination of which will terminate the planned community or reduce its size.
(17)	'Lessee' means the party entitled to present possession of a leased lot whether lessee, sublessee, or assignee.
(18)	'Limited common element' means a portion of the common elements allocated by the declaration or by operation of G.S. 47E-2-104(b)(2) for the exclusive use of one or more but fewer than all of the lots.
(19)	'Lot' means a physical portion of the planned community designated for separate ownership or occupancy, the boundaries of which are described pursuant to G.S. 47E-2-105(a)(3).
(20)	'Lot owner' means a declarant or other person who owns a lot, or a lessee of a lot in a leasehold planned community whose lease expires simultaneously with any lease the expiration or termination of which will remove the lot from the planned community, but does not include a person having an interest in a lot solely as security for an obligation.
(21)	'Master association' means an organization described in G.S. 47E-2-120, whether or not it is also an association described in G.S. 47E-3-101.
(22)	'Person' means a natural person, corporation, business trust, estate, trust, partnership, association, joint venture, government, governmental subdivision or agency, or other legal or commercial entity.
(23)	'Planned community' means real estate with respect to which any person, by virtue of his ownership of a lot, is expressly obligated by a declaration to pay real property taxes, insurance premiums, or other expenses to maintain, improve, or benefit other lots or other real estate described in the declaration.  For purposes of this act, neither a cooperative nor a condominium is a planned community, but real estate comprising a condominium or cooperative may be part of a planned community.  'Ownership of a lot' does not include holding a leasehold interest of less that 20 years in a lot, including renewal options.
(24)	'Purchaser' means any person, other than a declarant or a person in the business of selling real estate for his own account, who by means of a voluntary transfer acquires a legal or equitable interest in a lot, other than (i) a leasehold interest (including renewal options) of less than 20 years, or (ii) as security for an obligation.
(25)	'Reasonable attorneys' fees' means attorneys' fees actually incurred without regard to any limitations on attorneys' fees which may be included in other statutes.
(26)	'Real estate' means any leasehold or other estate or interest in, over, or under land, including structures, fixtures, and other improvements and interests which by custom, usage, or law pass with a conveyance of land though not described in the contract of sale or instrument of conveyance.  'Real estate' includes parcels with or without upper or lower boundaries, and spaces that may be filled with air or water.
(27)	'Residential purposes' means use for dwelling or recreational purposes, or both.
(28)	'Special declarant rights' means rights reserved for the benefit of a declarant (i) to complete improvements indicated on plats and plans filed with the declaration (G.S. 47E-2-109); (ii) to exercise any development right (G.S. 47E-2-110); (iii) to maintain sales offices, management offices, signs advertising the planned community, and models (G.S. 47E-2-115); (iv) to use easements through the common elements for the purpose of making improvements within the planned community or within real estate which may be added to the planned community (G.S. 47E-2-116); (v) to make the planned community part of a larger planned community or group of planned communities (G.S. 47E-2-121); (vi) to make the planned community subject to a master association (G.S. 47E-2-120); or (vii) to appoint or remove any officer or executive board member of the association or any master association during any period of declarant control (G.S. 47E-3-103(d)).
(29)	'Time share' means a time share as defined in Chapter 93A of the General Statutes.
"§ 47E-1-104.  Variation.
(a)	Except as specifically provided in specific sections of this Chapter, the provisions of this Chapter may not be varied by the declaration or bylaws.
(b)	The provisions of this Chapter may not be varied by agreement; however, after breach of a provision of this Chapter, rights created hereunder may be knowingly waived in writing.
(c)	Notwithstanding any of the provisions of this Chapter, a declarant may not act under a power of attorney or proxy or use any other device to evade the limitations or prohibitions of this Chapter, the declaration, or the bylaws.
"§ 47E-1-105:  Reserved.
"§ 47E-1-106.  Applicability of local ordinances, regulations, and building codes.
A zoning, subdivision, or building code or other real estate use law, ordinance, or regulation may not prohibit a planned community or impose any requirement upon a planned community which it would not impose upon a substantially similar development under a different form of ownership or administration.  Otherwise, no provision of this Chapter invalidates or modifies any provision of any zoning, subdivision, or building code or any other real estate use law, ordinance, or regulation.  No local ordinance or regulation may require the recordation of a declaration prior to the date required by this Chapter.
"§ 47E-1-107.  Eminent domain.
(a)	If a lot is acquired by eminent domain, or if part of a lot is acquired by eminent domain leaving the lot owner with a remnant which may not practically or lawfully be used for any purpose permitted by the declaration, the award shall compensate the lot owner for his lot and its interest in the common element.  Upon acquisition, unless the decree otherwise provides, the lot's allocated interests are automatically reallocated to the remaining lots in proportion to the respective allocated interests of those lots before the taking, exclusive of the lot taken.
(b)	Except as provided in subsection (a) of this section, if part of a lot is acquired by eminent domain, the award shall compensate the lot owner for the reduction in value of the lot.  Upon acquisition, unless the decree otherwise provides, (i) that lot's allocated interests are reduced in proportion to the reduction in the size of the lot, or on any other basis specified in the declaration, and (ii) the portion of the allocated interests divested from the partially acquired lot are automatically reallocated to that lot and the remaining lots in proportion to the respective allocated interests of those lots before the taking, with the partially acquired lot participating in the reallocation on the basis of its reduced allocated interests.
(c)	If there is any reallocation under subsection (a) or (b) of this section, the association shall promptly prepare, execute, and record an amendment to the declaration reflecting the reallocations.  Any remnant of a lot remaining after part of a lot is taken under this subsection is thereafter a common element.
(d)	If part of the common elements is acquired by eminent domain, the portion of the award attributable to the common elements taken shall be paid to the association.  Unless the declaration provides otherwise, any portion of the award attributable to the acquisition of a limited common element shall be apportioned among the owners of the lots to which that limited common element was allocated at the time of acquisition based on their allocated interest in the common elements before the taking.
(e)	The court decree shall be recorded in every county in which any portion of the planned community is located.
"§ 47E-1-108.  Supplemental general principles of law applicable.
The principles of law and equity supplement the provisions of this act, except to the extent inconsistent with this act.
"§§ 47E-1-109 through 47E-1-115:  Reserved.
"ARTICLE 2.
"Creation, Alteration, and Termination of Planned Communities.
"§ 47E-2-101.  Creation of the planned community.
A declaration creating a planned community shall be executed in the same manner as a deed, shall be recorded in every county in which any portion of the planned community is located, and shall be indexed in the Grantee index in the name of the planned community and the association and in the Grantor index in the name of each person executing the declaration.
"§ 47E-2-102:  Reserved.
"§ 47E-2-103.  Construction and validity of declaration and bylaws.
(a)	All provisions of the declaration and bylaws are severable.
(b)	The rule against perpetuities may not be applied to defeat any provision of the declaration, bylaws, rules, or regulations adopted pursuant to G.S. 47E-3-102(a)(1).
(c)	In the event of a conflict between the provisions of the declaration and the bylaws, the declaration prevails except to the extent the declaration is inconsistent with this act.
(d)	Title to a lot and common elements is not rendered unmarketable or otherwise affected by reason of an insubstantial failure of the declaration to comply with this act.  Whether a substantial failure to comply with this act impairs marketability shall be determined by the law of this State relating to marketability.
"§ 47E-2-104.  Description of lots.
(a)	A description of a lot which sets forth the name of the planned community, the recording data for the declaration or a plat on which the lot is identified, and the identifying number of the lot, or which otherwise complies with the general requirements of the laws of this State concerning description of real property, is a sufficient legal description of that lot and all rights, obligations, and interests appurtenant to that lot which are created by the declaration, the bylaws, or this act.
(b)	Except as provided by the declaration:
(1)	If any chute, flue, duct, wire, conduit, bearing wall, bearing column, or any other fixture lies partially within and partially outside the designated boundaries of a lot, any portion thereof serving only that lot is a limited common element allocated solely to that lot, and any portion thereof serving more than one lot or any portion of the common elements is a part of the common elements.
(2)	All fixtures, improvements, attachments, and systems designed to serve a single lot, but located outside the lot's boundaries, are limited common elements allocated exclusively to that lot.
"§ 47E-2-105.  Contents of declaration.
(a)	The declaration for a planned community shall contain:
(1)	The name of the planned community and the name of the association;
(2)	The name of every county in which any part of the planned community is situated;
(3)	A description by reference to the plat(s) described in G.S. 47E-2-109 of the boundaries of each lot, including the lot's identifying number, and the common elements created by the declaration;
(4)	A description of any real estate which is or must become common elements or limited common elements, other than those specified in G.S. 47E-2-104(b), as provided in G.S. 47E-2-109(b)(9);
(5)	A description of any real estate (except real estate subject to development rights) which may be allocated subsequently as limited common elements, other than limited common elements specified in G.S. 47E-2-104(b), together with a statement that they may be so allocated;
(6)	A description of any development rights and other special declarant rights reserved by the declarant, together with a legally sufficient description of the real estate to which each of those rights applies, a statement of the maximum number of lots which the declarant reserves the right to create, and a time limit within which each of those rights must be exercised;
(7)	If any development right may be exercised with respect to different parcels of the real estate at different times, a statement to that effect together with (i) either a statement fixing the boundaries of those portions and regulating the order in which those portions may be subjected to the exercise of each development right, or a statement that no assurances are made in those regards; and (ii) a statement as to whether, if any development right is exercised in any portion of the real estate subject to that development right, that development right must be exercised in all or in any other portion of the remainder of that real estate;
(8)	Any other conditions or limitations under which the rights described in subdivision (6) of this subsection may be exercised or will lapse;
(9)	An allocation to each lot of the allocated interests in the manner described in G.S. 47E-2-107;
(10)	Any restrictions on use, occupancy, and alienation of the lots;
(11)	The recording data for recorded easements and licenses appurtenant to or included in the planned community or to which any portion of the planned community is or may become subject by virtue of a reservation in the declaration; and
(12)	All matters required by G.S. 47E-2-106, 47E-2-107, 47E-2-108, 47E-2-109, 47E-2-115, 47E-2-116, and 47E-3-103(d).
(b)	The declaration may contain any other matters the declarant deems appropriate.
"§ 47E-2-106.  Leasehold planned communities.
(a)	Any lease the expiration or termination of which may terminate the planned community or reduce its size, or a memorandum thereof, shall be recorded.  Every lessor of those leases shall sign the declaration, and the declaration shall state:
(1)	Where the complete lease may be inspected;
(2)	The date on which the lease is scheduled to expire;
(3)	A legally sufficient description of the real estate subject to the lease;
(4)	Any right of the lot owners to redeem the reversion and the manner whereby those rights may be exercised, or a statement that they do not have those rights;
(5)	Any right of the lot owners to remove any improvements after the expiration or termination of the lease, or a statement that they do not have those rights; and
(6)	Any rights of the lot owners to renew the lease and the conditions of any renewal, or a statement that they do not have those rights.
(b)	After the declaration for a leasehold planned community is recorded, neither the lessor nor his successor in interest may terminate the leasehold interest of a lot owner who, after demand, makes timely payment of his share of the rent determined in proportion to his common expense liability and otherwise complies with all covenants which, if violated, would entitle the lessor to terminate the lease.  A lot owner's leasehold interest is not affected by failure of any other person to pay rent or fulfill any other covenant.
(c)	Acquisition of the leasehold interest of any lot owner by the owner of the reversion or remainder does not merge the leasehold and fee simple interests unless the leasehold interests of all lot owners subject to that reversion or remainder are acquired.
(d)	If the expiration or termination of a lease decreases the number of lots in a planned community, the allocated interests shall be reallocated in accordance with G.S. 47E-1-107(a) as though those lots had been taken by eminent domain.  Reallocations shall be confirmed by an amendment to the declaration prepared, executed, and recorded by the association.
"§ 47E-2-107.  Allocation of votes and common expense liabilities.
(a)	The declaration shall allocate a fraction or percentage of the common expenses of the association and a portion of the votes in the association to each lot in the planned community and state the formulas used to establish those allocations.  Unless otherwise stated in the declaration, votes and common expenses shall be allocated equally among all lots.  No allocation may discriminate in favor of lots owned by the declarant or an affiliate of the declarant.
(b)	If lots may be added to or withdrawn from the planned community, the declaration shall state the formulas to be used to reallocate the allocated interests among all lots included in the planned community after the addition or withdrawal.
(c)	The declaration may provide:  (i) that different allocations of votes shall be made to the lots on particular matters specified in the declaration; (ii) for cumulative voting only for the purpose of electing members of the executive board; and (iii) for class voting on specified issues affecting the class if necessary to protect valid interests of the class.  No declarant or affiliate of the declarant may utilize cumulative or class voting for the purpose of evading any limitation imposed on declarants or affiliates of declarants by this act, nor may lots constitute a class because they are owned by a declarant or an affiliate of the declarant.
(d)	Except for minor variations due to rounding, the sum of the common expense liabilities allocated at any time to all the lots shall equal one if stated as a fraction or one hundred percent (100%) if stated as a percentage.  In the event of a discrepancy between an allocated interest and the result derived from application of the pertinent formula, the allocated interest prevails.
"§ 47E-2-108.  Limited common elements.
(a)	Except for the limited common elements described in G.S. 47E-2-104(b), the declaration shall specify to which lot or lots each limited common element is allocated.  That allocation may not be altered without the unanimous consent of the lot owners whose lots are affected.
(b)	Except as the declaration otherwise provides, a limited common element may be reallocated by an amendment to the declaration executed by all the lot owners between or among whose lots the reallocation is made.  The lot owners executing the amendment shall provide an original in recordable form with sufficient recording fees to the association, which shall record it.  The amendment shall be recorded in the names of the parties and the planned community.
(c)	A common element not previously allocated as a limited common element may not be so allocated except by unanimous consent or pursuant to provisions in the declaration made in accordance with G.S. 47E-2-105(a)(5).  All such allocations shall be made by amendments to the declaration and shall become effective in accordance with G.S. 47E-2-117(c).
"§ 47E-2-109.  Plats.
(a)	Plats are a part of the declaration and shall be recorded by the declarant.  Each plat shall be clear and legible and contain a certification by a land surveyor or engineer registered under the provisions of Chapter 89C of the General Statutes that the plat contains all information required by this section.
(b)	Each plat shall show:
(1)	The name and a survey or general schematic map of the entire planned community;
(2)	The location and dimensions of all real estate not subject to development rights, or subject only to the development right to withdraw, and the location and dimensions of all existing improvements within that real estate;
(3)	The location and dimensions of any real estate subject to development rights, labeled to identify the rights applicable to each parcel;
(4)	The extent of any encroachments by or upon any portion of the planned community;
(5)	The location and dimensions of all easements having specific location and dimensions and serving and burdening any portion of the planned community;
(6)	The location and dimensions of any lot boundaries and that lot's identifying number;
(7)	A legally sufficient description of any real estate in which the lot owners will own only an estate for years, labeled as 'leasehold real estate';
(8)	The distance between noncontiguous parcels of real estate comprising the planned community; and
(9)	The location and dimensions of limited common elements provided for in the declaration pursuant to G.S. 47E-2-105(a)(4) and (5) but not including parking spaces or the other limited common elements described in G.S. 47E-2-104(b).
(c)	A plat may also show the intended location and dimensions of any contemplated improvement to be constructed anywhere within the planned community.  Any contemplated improvement shown shall be labeled either 'MUST BE BUILT' or 'NEED NOT BE BUILT'.
(d)	Upon exercising any development right, the declarant shall record new plats necessary to conform to the requirements of subsections (a), (b), and (c) of this section.
"§ 47E-2-110.  Development rights.
(a)	To exercise any development right reserved under G.S. 47E-2-105(a)(6), the declarant shall record an amendment to the declaration (G.S. 47E-2-117) and comply with G.S. 47E-2-109.  The declarant is the owner of any lots thereby created.  The amendment to the declaration shall assign an identifying number to each new lot created, and except in the case of subdivision or conversion of lots described in subsection (c) of this section, reallocate the allocated interests among all lots.  The amendment shall describe any common elements and any limited common elements thereby created and, in the case of limited common elements, designate the lots to which each is allocated to the extent required by G.S. 47E-2-108 (Limited common elements).
(b)	Development rights may be reserved within any real estate added to the planned community if the amendment adding that real estate includes all matters required by, and is in compliance with, G.S. 47E-2-105 and also if the plats include all matters required by G.S. 47E-2-109.  This provision does not extend the time limit on the exercise of development rights imposed by the declaration pursuant to G.S. 47E-2-105(a)(6).
(c)	Whenever a declarant exercises a development right to subdivide or convert a lot previously created into additional lots, common elements, or both:
(1)	If the declarant converts the lot entirely to common elements, the amendment to the declaration shall reallocate all the allocated interests of that lot among the other lots as if that lot had been taken by eminent domain; or
(2)	If the declarant subdivides the lot into two or more lots, whether or not any part of the lot is converted into common elements, the amendments to the declaration shall reallocate all the allocated interests of the lot among the lots created by the subdivision in any reasonable manner prescribed by the declarant.
(d)	If the declaration provides, pursuant to G.S. 47E-2-105(a)(6), that all or a portion of the real estate is subject to the development right of withdrawal:
(1)	If all the real estate is subject to withdrawal, and the declaration does not describe separate portions of real estate subject to that right, none of the real estate may be withdrawn after a lot has been conveyed to a purchaser; and
(2)	If a portion or portions are subject to withdrawal, no portion may be withdrawn after a lot in that portion has been conveyed to a purchaser.
(e)	Any portion of the common elements for which the declarant has reserved any development rights shall be separately taxed and assessed against the declarant, and the declarant alone is liable for payment of those taxes.
"§ 47E-2-111.  Alterations of lots.
Subject to the provisions of the declaration and other provisions of law, a lot owner:
(1)	May make any improvements or alterations to his lot that do not impair the structural integrity or mechanical systems or lessen the support of any other portion of the planned community;
(2)	May not change the appearance of the common elements, without permission of the association; and
(3)	After acquiring an adjoining lot or an adjoining part of an adjoining lot, may remove or alter any intervening partition or create apertures therein if those acts do not impair the structural integrity or mechanical systems or lessen the support of any other portion of the planned community.  Removal of partitions or creation of apertures under this subdivision is not an alteration of boundaries.
"§ 47E-2-112:  Reserved.
"§ 47E-2-113.  Subdivision of lots.
(a)	If the declaration expressly so permits, a lot may be subdivided.  Subject to the provisions of the declaration and other provisions of law, upon application of a lot owner to subdivide a lot, the association shall prepare, execute, and record an amendment to the declaration, including the plats, subdividing that lot.  All expenses incurred in connection with the subdivision of a lot shall be paid in advance to the association by the lot owner requesting that the lot be subdivided.
(b)	The amendment to the declaration shall be executed by the owner of the lot to be subdivided, shall assign an identifying number to each lot created, and shall reallocate the allocated interests formerly allocated to the subdivided lot to the new lots in any reasonable manner prescribed by the owner of the subdivided lot.
"§ 47E-2-114:  Reserved.
"§ 47E-2-115.  Use for sale purposes.
A declarant may maintain sales offices, management offices, and models on lots or on common elements in the planned community only if the declaration so provides and specifies the rights of a declarant with regard to the number, size, location, and relation thereof.  Subject to any limitations in the declaration, a declarant may maintain signs on the common elements advertising the planned community.  The provisions of this section are subject to the provisions of other State law, and to local ordinances.
"§ 47E-2-116.  Easement rights.
(a)	Subject to the provisions of G.S. 47E-3-112, (Alienation of common elements) the unit owners have an easement (i) in the common elements for purposes of access to their lots and (ii) to use the common elements and all real estate which must become common elements (G.S. 47E-2-105(a)(4)) for all other purposes, except as otherwise provided in this act.
(b)	Subject to the provisions of the declaration, a declarant has an easement through the common elements as may be reasonably necessary for the purpose of discharging a declarant's obligations or exercising special declarant rights, whether arising under this act or reserved in the declaration.
"§ 47E-2-117.  Amendment of declaration.
(a)	Except in cases of amendments that may be executed by a declarant under G.S. 47E-2-109(d) or G.S. 47E-2-110; by the association under G.S. 47E-1-107, 47E-2-106(d), 47E-2-108(c), or 47E-2-113(a); or by certain lot owners under G.S. 47E-2-108(b), 47E-2-113(b), or 47E-2-118(b), and except as limited by subsection (d) of this section, the declaration may be amended only by affirmative vote or written agreement signed by lot owners of lots to which at least sixty-seven percent (67%) of the votes in the association are allocated, or any larger majority the declaration specifies.  The declaration may specify a smaller number only if all of the lots are restricted exclusively to nonresidential use.
(b)	No action to challenge the validity of an amendment adopted pursuant to this section may be brought more than one year after the amendment is recorded.
(c)	Every amendment to the declaration shall be recorded in every county in which any portion of the planned community is located and is effective only upon recordation.  An amendment shall be indexed in the Grantee index in the name of the planned community and the association and in the Grantor index in the name of each person executing the amendment.
(d)	Except to the extent expressly permitted or required by other provisions of this act, no amendment may create or increase the special declarant rights, increase the number of lots, change the boundaries of any lot, the allocated interests of a lot, or the uses to which any lot is restricted, in the absence of unanimous consent of the lot owners.
(e)	Amendments to the declaration required by this act to be recorded by the association shall be prepared, executed, recorded, and certified on behalf of the association by any officer of the association designated for that purpose or, in the absence of designation, by the president of the association.
"§ 47E-2-118.  Termination of planned community.
(a)	Except in the case of taking of all the lots by eminent domain (G.S. 47E-1-107), a planned community may be terminated only by agreement of lot owners of lots to which at least eighty percent (80%) of the votes in the association are allocated, or any larger percentage the declaration specifies.  The declaration may specify a smaller percentage only if all of the lots in the planned community are restricted exclusively to nonresidential uses.
(b)	An agreement to terminate shall be evidenced by the execution of a termination agreement, or ratifications thereof, in the same manner as a deed, by the requisite number of lot owners.   The termination agreement shall specify a date after which the agreement will be void unless it is recorded before that date.  A termination agreement and all ratifications thereof shall be recorded in every county in which a portion of the planned community is situated and is effective only upon recordation.
(c)	A termination agreement may provide for sale of the common elements, but may not require that the lots be sold following termination, unless the declaration as originally recorded provided otherwise or unless all the lot owners consent to the sale.  If, pursuant to the agreement, any real estate in the planned community is to be sold following termination, the termination agreement shall set forth the minimum terms of the sale.
(d)	The association, on behalf of the lot owners, may contract for the sale of real estate in the planned community, but the contract is not binding until approved pursuant to subsections (a) and (b) of this section.  Until the sale has been concluded and the proceeds thereof distributed, the association continues in existence with all powers it had before termination.  Proceeds of the sale shall be distributed to lot owners and lien holders as their interests may appear, as provided in the termination agreement.
(e)	If the real estate constituting the planned community is not to be sold following termination, title to the common elements vests in the lot owners upon termination as tenants in common in proportion to their respective interests as provided in the termination agreement.
(f)	Following termination of the planned community, the proceeds of any sale of real estate, together with the assets of the association, are held by the association as trustee for lot owners and holders of liens on the lots as their interests may appear.  All other creditors of the association are to be treated as if they had perfected liens on the common elements immediately before termination.
(g)	If the termination agreement does not provide for the distribution of sales proceeds pursuant to subsection (d) of this section or the vesting of title pursuant to subsection (e) of this section, sales proceeds shall be distributed and title shall vest in accordance with each lot owner's allocated share of common expense liability.
(h)	Except as provided in subsection (i) of this section, foreclosure or enforcement of a lien or encumbrance against the common elements does not of itself terminate the planned community, and foreclosure or enforcement of a lien or encumbrance against a portion of the common elements other than withdrawable real estate does not withdraw that portion from the planned community.  Foreclosure or enforcement of a lien or encumbrance against withdrawable real estate does not of itself withdraw that real estate from the planned community, but the person taking title thereto has the right to require from the association, upon request, an amendment excluding the real estate from the planned community.
(i)	If a lien or encumbrance against a portion of the real estate comprising the planned community has priority over the declaration and the lien or encumbrance has not been partially released, the parties foreclosing the lien or encumbrance may, upon foreclosure, record an instrument excluding the real estate subject to that lien or encumbrance from the planned community.
"§ 47E-2-119:  Reserved.
"§ 47E-2-120.  Master associations.
(a)	If the declaration for a planned community provides that any of the powers described in G.S. 47E-3-102 are to be exercised by or may be delegated to a profit or nonprofit corporation which exercises those or other powers on behalf of one or more other planned communities or for the benefit of the lot owners of one or more other planned communities, all provisions of this act applicable to lot owners' associations apply to any such corporation, except as modified by this section.
(b)	Unless a master association is acting in the capacity of an association described in G.S. 47E-3-101, it may exercise the powers set forth in G.S. 47E-3-102(a)(2) only to the extent expressly permitted in the declarations of the planned communities which are part of the master association or expressly described in the delegations of power from those planned communities to the master association.
(c)	If the declaration of any planned community provides that the executive board may delegate certain powers to a master association, the members of the executive board have no liability for the acts or omissions of the master association with respect to those powers following delegation.
(d)	The rights and responsibilities of lot owners with respect to the lot owners' association set forth in G.S. 47E-3-103, 47E-3-108, 47E-3-109, 47E-3-110, and 47E-3-112, apply in the conduct of the affairs of a master association only to those persons who elect the board of a master association, whether or not those persons are otherwise lot owners within the meaning of this act.
(e)	Notwithstanding the provisions of G.S. 47E-3-103(f) with respect to the election of the executive board of an association by all lot owners after the period of declarant control ends, and even if a master association is also an association described in G.S. 47E-3-101, the articles of incorporation of the master association and the declaration of each planned community, the powers of which are assigned by the declaration or delegated to the master association, may provide that the executive board of the master association shall be elected after the period of declarant control in any of the following ways:
(1)	All lot owners of all planned communities subject to the master association may elect all members of that executive board.
(2)	All members of the executive boards of all planned communities subject to the master association may elect all members of that executive board.
(3)	All lot owners of each planned community subject to the master association may elect specified members of that executive board.
(4)	All members of the executive board of each planned community subject to the master association may elect specified members of that executive board.
"§ 47E-2-121.  Merger of consolidation of planned communities.
(a)	Any two or more planned communities, by agreement of the lot owners as provided in subsection (b) of this section, may be merged or consolidated into a single planned community.  In the event of a merger or consolidation, unless the agreement otherwise provides, the resultant planned community is, for all purposes, the legal successor of all of the preexisting planned communities, and the operations and activities of all associations of the preexisting planned communities shall be merged or consolidated into a single association which shall hold all powers, rights, obligations, assets, and liabilities of all preexisting associations.
(b)	An agreement of two or more planned communities to merge or consolidate pursuant to subsection (a) of this section shall be evidenced by the president of the association of each of the preexisting planned communities following approval by owners of lots to which are allocated the percentage of votes in each planned community required to terminate that planned community.  Any such agreement shall be recorded in every county in which a portion of the planned community is located and is not effective until recorded.
(c)	Every merger or consolidation agreement shall provide for the reallocation of the allocated interests in the new association among the lots of the resultant planned community either (i) by stating the reallocations or the formulas upon which they are based or (ii) by stating the percentage of overall common expense liabilities and votes in the new association which are allocated to all of the lots comprising each of the preexisting planned communities, and providing that the portion of the percentages allocated to each lot formerly comprising a part of the preexisting planned community shall be equal to the percentages of common expense liabilities and votes in the association allocated to that lot by the declaration of the preexisting planned community.
"§ 47E-2-122.  Addition of unspecified real estate.
If the right is originally reserved in the declaration, the declarant may, in addition to any other development right, amend the declaration at any time during as many years as are specified in the declaration to add additional real estate to the planned community without describing the location of that real estate in the original declaration; provided, that the amount of real estate added to the planned community pursuant to this section may not exceed ten percent (10%) of the real estate described in G.S. 47E-2-105(a)(3), and provided further, that the declarant may not in any event increase the number of lots in the planned community beyond the number stated in the original declaration pursuant to G.S. 47E-2-105(a)(5).
"ARTICLE 3.
"Management of Planned Community.
"§ 47E-3-101.  Organization of owners' association.
A lot owners' association shall be incorporated no later than the date the first lot in the planned community is conveyed.  The membership of the association at all times shall consist exclusively of all the lot owners or, following termination of the planned community, of all persons entitled to distributions of proceeds under G.S. 47E-2-118.  The association shall be organized as a profit or nonprofit corporation.
"§ 47E-3-102.  Powers of owners' association.
(a)	Subject to the provisions of the declaration, the association may:
(1)	Adopt and amend bylaws and rules and regulations;
(2)	Adopt and amend budgets for revenues, expenditures, and reserves and collect assessments for common expenses from lot owners;
(3)	Hire and discharge managing agents and other employees, agents, and independent contractors;
(4)	Institute, defend, or intervene in litigation or administrative proceedings on matters affecting the planned community;
(5)	Make contracts and incur liabilities;
(6)	Regulate the use, maintenance, repair, replacement, and modification of common elements;
(7)	Cause additional improvements to be made as a part of the common elements;
(8)	Acquire, hold, encumber, and convey in its own name any right, title, or interest to real or personal property, provided that common elements may be conveyed or subjected to a security interest only pursuant to G.S. 47E-3-112;
(9)	Grant easements, leases, licenses, and concessions through or over the common elements;
(10)	Impose and receive any payments, fees, or charges for the use, rental, or operation of the common elements other than the limited common elements described in G.S. 47E-2-104(b) and for services provided to lot owners;
(11)	Impose reasonable charges for late payment of assessments and, after notice and an opportunity to be heard, suspend privileges or services provided by the association (except rights of access to lots including those provided for in G.S. 47E-2-116(a)(i)) during any period that assessments or other amounts due and owing to the association remain unpaid for a period of 30 days or longer;
(12)	After notice and an opportunity to be heard, impose reasonable fines or suspend privileges or services provided by the association (except rights of access to lots including those provided for in G.S. 47E-2-116(a)(i)) for reasonable periods for violations of the declaration, bylaws, and rules and regulations of the association;
(13)	Impose reasonable charges in connection with the preparation and recordation of amendments to the declaration, initial sale certificates required by G.S. 47E-4-102, resale statements required by G.S. 47E-4-109, or statements of unpaid assessments;
(14)	Provide for the indemnification of and maintain liability insurance for its officers, executive board, directors, employees, and agents;
(15)	Assign its right to future income, including the right to receive common expense assessments;
(16)	Exercise all other powers that may be exercised in this State by legal entities of the same type as the association; and
(17)	Exercise any other powers necessary and proper for the governance and operation of the association.
(b)	Notwithstanding subsection (a) of this section, the declaration may not impose limitations on the power of the association to deal with a declarant which are more restrictive than the limitations imposed on the power of the association to deal with other persons.
"§ 47E-3-103.  Executive board members and officers.
(a)	Except as provided in the declaration, in the bylaws, in subsection (b) of this section, or in other provisions of this act, the executive board may act in all instances on behalf of the association.  In the performance of their duties, officers and members of the executive board shall be deemed to stand in a fiduciary relationship to the association and the lot owners and shall discharge their duties in good faith, and with that diligence and care which ordinarily prudent men would exercise under similar circumstances in like positions.
(b)	The executive board may not act on behalf of the association to amend the declaration (G.S. 47E-2-117), to terminate the planned community  (G.S. 47E-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. 47E-3-103(f)), but the executive board may fill vacancies in its membership for the unexpired portion of any term.  Notwithstanding any provision of the declaration or bylaws to the contrary, the lot owners, by a sixty-seven percent (67%) vote of all persons present and entitled to vote at any meeting of the lot owners at which a quorum is present, may remove any member of the executive board with or without cause, other than a member appointed by the declarant.
(c)	Within 30 days after adoption of any proposed budget for the planned community, the executive board shall provide a summary of the budget to all the lot owners and shall set a date for a meeting of the lot owners to consider ratification of the budget not less than 14 nor more than 30 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 lot owners in the association or any larger vote specified in the declaration rejects the budget.  In the event the proposed budget is rejected, the periodic budget last ratified by the lot owners shall be continued until such time as the lot owners ratify a subsequent budget proposed by the executive board.
(d)	Subject to subsection (e) of this section, the declaration may provide for a period of declarant control of the association, during which period a declarant, or persons designated by him, may appoint and remove the officers and members of the executive board.  Regardless of the period provided in the declaration, a period of declarant control terminates no later than the earlier of:  (i) 120 days after conveyance of seventy-five percent (75%) of the lots (including lots which may be created pursuant to special declarant rights) to lot owners other than a declarant; (ii) two years after all declarants have ceased to offer lots for sale in the ordinary course of business; or (iii) two years after any development right to add new lots was last exercised.  A declarant may voluntarily surrender the right to appoint and remove officers and members of the executive board before termination of that period, but in that event he may require, for the duration of the period of declarant control, that specified actions of the association or executive board, as described in a recorded instrument executed by the declarant, be approved by the declarant before they become effective.
(e)	Not later than 60 days after conveyance of twenty-five percent (25%) of the lots (including lots which may be created pursuant to special declarant rights) to lot owners other than a declarant, at least one member and not less than twenty-five percent (25%) of the members of the executive board shall be elected by lot owners other than the declarant.  Not later than 60 days after conveyance of fifty percent (50%) of the lots (including lots which may be created pursuant to special declarant rights) to lot owners other than a declarant, not less than thirty-three percent (33%) of the members of the executive board shall be elected by lot owners other than the declarant.
(f)	Not later than the termination of any period of declarant control, the lot owners shall elect an executive board of at least three members, at least a majority of whom shall be lot owners.  The executive board shall elect the officers.  The executive board members and officers shall take office upon election.
"§ 47E-3-104.  Transfer of special declarant rights.
(a)	No special declarant right (G.S. 47E-1-103(28)) created or reserved under this act may be transferred except by an instrument evidencing the transfer recorded in every county in which any portion of the planned community is located.  The instrument is not effective unless executed by the transferee.
(b)	Upon transfer of any special declarant right, the liability of a transferor declarant is as follows:
(1)	A transferor is not relieved of any obligation or liability arising before the transfer, including, but not limited to, liability as to obligations related to warranties.  Lack of privity does not deprive any lot owner of standing to maintain an action to enforce any obligation of the transferor.
(2)	If a successor to any special declarant right is an affiliate of a declarant (G.S. 47E-1-103(1)), the transferor is jointly and severally liable with the successor for any obligation or liability of the successor which relates to the planned community.
(3)	If a transferor retains any special declarant right, but transfers other special declarant rights to a successor who is not an affiliate of the declarant, the transferor is liable for any obligations or liabilities imposed on a declarant by this act or by the declaration relating to the retained special declarant rights and arising after the transfer.
(4)	A transferor has no liability for any act or omission or any breach of a contractual or warranty obligation arising from the exercise of a special declarant right by a successor declarant who is not an affiliate of the transferor.
(c)	Unless otherwise provided in a mortgage instrument or deed of trust, in case of foreclosure of a mortgage, tax sale, judicial sale, sale by a trustee under a deed of trust, or sale under Bankruptcy Code or receivership proceedings, of any lots owned by a declarant or real estate in a planned community subject to development rights, a person acquiring title to all the real estate being foreclosed or sold, but only upon his request, succeeds to all special declarant, or only to any rights reserved in the declaration and held by that declarant to maintain models, sales offices, and signs.  The judgment or instrument conveying title shall provide for transfer of only the special declarant rights requested.
(d)	Upon foreclosure, tax sale, judicial sale, sale by a trustee under a deed of trust, or sale under Bankruptcy Code or receivership proceedings, of all lots and other real estate in a planned community owned by a declarant, the declarant ceases to have any special declarant rights.
(e)	The liabilities and obligations of a person who succeeds to special declarant rights are as follows:
(1)	A successor to any special declarant right who is an affiliate of a declarant is subject to all obligations and liabilities imposed on the transferor related to the planned community.
(2)	A successor to any special declarant right, other than a successor described in subdivision (3) or (4) of this subsection, who is not an affiliate of a declarant, is subject to all obligations and liabilities imposed:
a.	On a declarant which relate to his exercise or nonexercise of special declarant rights; or
b.	On his transferor, other than:
1.	Misrepresentations by any prior declarant;
2.	Warranty obligations on improvements made by any previous declarant, or made before the planned community was created;
3.	Breach of any fiduciary obligation by any previous declarant or his appointees to the executive board; or
4.	Any liability or obligation imposed on the transferor as a result of the transferor's acts or omissions after the transfer.
(3)	A successor to only a right reserved in the declaration to maintain models, sales offices, and signs (G.S. 47E-2-115), if he is not an affiliate of a declarant, may not exercise any other special declarant right, and is not subject to any liability or obligation as a declarant, except the obligation to provide an initial sale certificate, and any liability arising as a result thereof.
(4)	A successor to all special declarant rights held by his transferor who is not an affiliate of that declarant and who succeeded to those rights pursuant to a deed in lieu of foreclosure or a judgment or instrument conveying title to lots under subsection (c) of this section, may declare his intention in a recorded instrument to hold those rights solely for transfer to another person.  Thereafter, until transferring all special declarant rights to any person acquiring title to any lot owned by the successor, or until recording an instrument permitting exercise of all of those rights, other than any right held by his transferor to control the executive board in accordance with the provisions of G.S. 47E-3-103(d) for the duration of any period of declarant control, any attempted exercise of those rights is void.  So long as a successor declarant may not exercise special declarant rights under this subsection, he is not subject to any liability or obligation as a declarant other than liability for his acts and omissions under G.S. 47E-3-103(d).
"§ 47E-3-105.  Termination of contracts and leases of declarant.
If entered into before the executive board elected by the lot owners pursuant to G.S. 47E-3-103(f)	takes office, (i) any management contract, employment contract, or lease of recreational or parking areas or facilities affecting or related to the planned community, (ii) any other contract or lease between the association and a declarant or an affiliate of a declarant, or (iii) any contract or lease affecting or related to the planned community that is not bona fide or was unconscionable to the lot owners at the time entered into under the circumstances then prevailing, may be terminated without penalty by the association at any time after the executive board elected by the lot owners pursuant to G.S. 47E-3-103(f) takes office upon not less than 90 days notice to the other party.  Notice of the substance of the provisions of this section shall be set out in each contract entered into by or on behalf of the association before the executive board elected by the lot owners pursuant to G.S. 47E-3-103(f) takes office.  Failure of the contract to contain such a provision shall not affect the rights of the association under this section.  This section does not apply to any lease, the termination of which would terminate the planned community or reduce its size, unless the real estate subject to that lease was included in the planned community for the purpose of avoiding the right of the association to terminate a lease under this section.
"§ 47E-3-106.  Bylaws.
(a)	The bylaws of the association shall provide for:
(1)	The number of members of the executive board and the titles of the officers of the association;
(2)	Election by the executive board of officers of the association;
(3)	The qualifications, powers and duties, terms of office, and manner of electing and removing executive board members and officers and filling vacancies;
(4)	Which, if any, of its powers the executive board or officers may delegate to other persons or to a managing agent;
(5)	Which of its officers may prepare, execute, certify, and record amendments to the declaration on behalf of the association; and
(6)	The method of amending the bylaws.
(b)	The bylaws may provide for any other matters the association deems necessary and appropriate.
"§ 47E-3-107.  Upkeep of planned community; responsibility and assessments for damages.
(a)	Except as otherwise provided in the declaration, G.S. 47E-3-113(h) or subsection (b) of this section, the association is responsible for causing the common elements to be maintained, repaired, and replaced when necessary and to assess the lot owners as necessary to recover the costs of such maintenance, repair, or replacement except that the costs of maintenance, repair or replacement of a limited common element shall be assessed as provided in G.S. 47E-3-115(c)(1).  Except as otherwise provided in the declaration, each lot owner is responsible for the maintenance and repair of his lot and any improvements thereon.  Each lot owner shall afford to the association and when necessary to another lot owner access through his lot reasonably necessary for any such maintenance, repair or replacement activity.
(b)	If a lot owner is legally responsible for damage inflicted on any common element, the association may direct such lot owner to repair such damage or the association may itself cause the repairs to be made and recover damages from the responsible lot owner.
(c)	If damage is inflicted on any lot by an agent of the association in the scope of his activities as such agent, the association is liable to repair such damage or to reimburse the lot owner for the cost of repairing such damages.  The association shall also be liable for any losses to the lot owner.
(d)	When the claim under subsection (b) or (c) of this section is less than or equal to the jurisdictional amount established for small claims by G.S. 7A-210, any aggrieved party may request that a hearing be held before an adjudicatory panel appointed by the executive board to determine if a lot owner is responsible for damages to any common element or the association is responsible for damages to any lot.  If the executive board fails to appoint an adjudicatory panel to hear such matters, hearings under this section shall be held before the executive board.  Such panel shall accord to the party charged with causing damages notice of the charge, opportunity to be heard and to present evidence, and notice of the decision.  This panel may assess liability for each damage incident against each lot owner charged or against the association not in excess of the jurisdictional amount established for small claims by G.S. 7A-210.  When the claim under subsection (b) or (c) of this section exceeds the jurisdictional amount established for small claims by G.S. 7A-210, liability of any lot owner charged or the association shall be determined as otherwise provided by law.  Liabilities of lot owners determined by adjudicatory hearing or as otherwise provided by law shall be assessments secured by lien under G.S. 47E-3-166.  Liabilities of the association determined by adjudicatory hearing or as otherwise provided by law may be offset by the lot owner against sums owing to the association and if so offset, shall reduce the amount of any lien of the association against the lot at issue.
(e)	The declarant alone is liable for maintenance, repair, and all other expenses in connection with real estate subject to development rights.
"§ 47E-3-107A.  Procedures for fines and suspension of planned community privileges or services.
Unless a specific procedure for the imposition of fines or suspension of planned community privileges or services is provided for in the declaration, a hearing shall be held before an adjudicatory panel appointed by the executive board to determine if any lot owner should be fined or if planned community privileges or services should be suspended pursuant to the powers granted to the association in G.S. 47E-3-102(11)	and (12).  If the executive board fails to appoint an adjudicatory panel to hear such matters, hearings under this section shall be held before the executive board.  The lot owner charged shall be given notice of the charge, opportunity to be heard and to present evidence, and notice of the decision.  If it is decided that a fine should be imposed, a fine not to exceed one hundred fifty dollars ($150.00) may be imposed for the violation and without further hearing, for each day after the decision that the violation occurs.  Such fines shall be assessments secured by liens under G.S. 47E-3-116.  If it is decided that a suspension of planned community privileges or services should be imposed, the suspension may be continued without further hearing until the violation or delinquency is cured.
"§ 47E-3-108.  Meetings.
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 lot owners having twenty percent (20%), or any lower percentage specified in the bylaws, of the votes in the association.  Not less than 10 nor more than 50 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 lot or to any other mailing address designated in writing by the lot owner.  The notice of any meeting shall state the time and place of the meeting and the items on the agenda,  including the general nature of any proposed amendment to the declaration or bylaws, any budget changes, and any proposal to remove a director or officer.
"§ 47E-3-109.  Quorums.
(a)	Unless the bylaws provide otherwise , a quorum is 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)	Unless the bylaws specify a larger percentage, a quorum is deemed present throughout any meeting of the executive board if persons entitled to cast fifty percent (50%) of the votes on that board are present at the beginning of the meeting.
"§ 47E-3-110.  Voting; proxies.
(a)	If only one of the multiple owners of a lot is present at a meeting of the association, he is entitled to cast all the votes allocated to that lot.  If more than one of the multiple owners are present, the votes allocated to that lot may be cast only in accordance with the agreement of a majority in interest of the multiple owners, unless the declaration or bylaws expressly provides otherwise.  Majority agreement is conclusively presumed if any one of the multiple owners casts the votes allocated to that lot without protest being made promptly to the person presiding over the meeting by any of the other owners of the lot.
(b)	Votes allocated to a lot may be cast pursuant to a proxy duly executed by a lot owner.  If a lot is owned by more than one person, each owner of the lot may vote or register protest to the casting of votes by the other owners of the lot through a duly executed proxy.  A lot owner may not revoke a proxy given pursuant to this section except by actual notice of revocation to the person presiding over a meeting of the association.  A proxy is void if it is not dated.  A proxy terminates one year after its date, unless it specifies a shorter term.
(c)	If the declaration requires that votes on specified matters affecting the planned community be cast by lessees rather than lot owners of leased lots, (i) the provisions of subsections (a) and (b) of this section apply to lessees as if they were lot owners; (ii) lot owners who have leased their lots to other persons may not cast votes on those specified matters; and (iii) lessees are entitled to notice of meetings, access to records, and other rights respecting those matters as if they were lot owners.  Lot owners shall also be given notice, in the manner provided in G.S. 47E-3-108, of all meetings at which lessees may be entitled to vote.
(d)	No votes allocated to a lot owned by the association may be cast.
(e)	The declaration may provide that on specified issues only a defined subgroup of lot owners may vote provided:
(1)	The issue being voted is of special interest solely to the members of the subgroup; and
(2)	All except de minimis cost that will be incurred based on the vote taken will be assessed solely against those lot owners entitled to vote.
(f)	For purposes of subdivision(e)(1) above, an issue to be voted on is not a special interest solely to a subgroup if it substantially affects the overall appearance of the planned community or substantially affects living conditions of lot owners not included in the voting subgroup.
"§ 47E-3-111.  Tort and contract liability.
(a)	Neither the association nor any lot owner except the declarant is liable for that declarant's torts in connection with any part of the planned community which that declarant has the responsibility to maintain.
(b)	An action alleging a wrong done by the association shall be brought against the association and not against a lot owner.
(c)	If an action is brought against the association for a wrong which occurred during any period of declarant control, and if the association gives the declarant who then controlled the association reasonable notice of and an opportunity to defend against the action, such declarant is liable to the association:
(1)	For all tort losses suffered by the association or that lot owner, and
(2)	For all losses which the association would not have incurred but for breach of contract.
Nothing in this subsection shall be construed to impose strict or absolute liability upon the declarant for wrongs or actions which occurred during the period of declarant control.
(d)	In any case where the declarant is liable to the association under this section, the declarant is also liable for all litigation expenses, including reasonable attorneys' fees, incurred by the association.  Any statute of limitation affecting the association's right of action under this section is tolled until the period of declarant control terminates.  A lot owner is not precluded from bringing an action contemplated by this section because he is a lot owner or a member or officer of the association.
"§ 47E-3-112.  Conveyance or encumbrance of common elements.
(a)	Portions of the common elements may be conveyed or subjected to a security interest by the association if persons entitled to cast at least eighty percent (80%) of the votes in the association, including eighty percent (80%) of the votes allocated to lots not owned by a declarant, or any larger percentage the declaration specifies, agree in writing to that action; provided that all the owners of lots to which any limited common element is allocated shall agree in order to convey that limited common element or subject it to a security interest.  The declaration may specify a smaller percentage only if all the lots are restricted exclusively to nonresidential uses.  Distribution of proceeds of the sale of a limited common element shall be as provided by agreement between the lot owners to which it is allocated and the association.  Proceeds of the sale or financing of a common element (other than a limited common element) shall be an asset of the association.
(b)	The association, on behalf of the lot owners, may contract to convey common elements or subject them to a security interest, but the contract is not enforceable against the association until approved pursuant to subsection (a) of this section.  Thereafter, the association has all powers necessary and appropriate to effect the conveyance or encumbrance, free and clear of any interest of any lot owner or the association in or to the common element conveyed or encumbered, including the power to execute deeds or other instruments.
(c)	Any purported conveyance, encumbrance, or other voluntary transfer of common elements, unless made pursuant to this section is void.
(d)	No conveyance or encumbrance of common elements pursuant to this section may deprive any lot of its rights of access and support.
"§ 47E-3-113.  Insurance.
(a)	Commencing not later than the time of the first conveyance of a lot to a person other than a declarant, the association shall maintain, to the extent reasonably available:
(1)	Property insurance on the common elements insuring against all risks of direct physical loss commonly insured against including fire and extended coverage perils.  The total amount of insurance after application of any deductibles shall be not less than eighty percent (80%) of the replacement cost of the insured property at the time the insurance is purchased and at each renewal date, exclusive of land, excavations, foundations, and other items normally excluded from property policies; and
(2)	Liability insurance in reasonable amounts, covering all occurrences commonly insured against for death, bodily injury, and property damage arising out of or in connection with the use, ownership, or maintenance of the common elements.
(b)	If the insurance described in subsection (a) of this section is not reasonably available, the association promptly shall cause notice of that fact to be hand-delivered or sent prepaid by United States mail to all lot owners.  The declaration may require the association to carry any other insurance, and the association in any event may carry any other insurance it deems appropriate to protect the association or the lot owners.
(c)	Insurance policies carried pursuant to subsection (a) of this section shall provide that:
(1)	Each lot owner is an insured person under the policy to the extent of his insurable interest;
(2)	The insurer waives its right to subrogation under the policy against any lot owner or member of his household;
(3)	No act or omission by any lot owner, unless acting within the scope of his authority on behalf of the association, will preclude recovery under the policy; and
(4)	If, at the time of a loss under the policy, there is other insurance in the name of a lot owner covering the same risk covered by the policy, the association's policy provides primary insurance.
(d)	Any loss covered by the property policy under subdivision (a)(1) of this section shall be adjusted with the association, but the insurance proceeds for that loss are payable to any insurance trustee designated for that purpose, or otherwise to the association, and not to any mortgagee or beneficiary under a deed of trust.  The insurance trustee or the association shall hold any insurance proceeds in trust for lot owners and lien holders as their interests may appear.  Subject to the provisions of subsection (h) of this section, the proceeds shall be disbursed first for the repair or restoration of the damaged property, and lot owners and lien holders are not entitled to receive payment of any portion of the proceeds unless there is a surplus of proceeds after the property has been completely repaired or restored, or the planned community is terminated.
(e)	An insurance policy issued to the association does not prevent a lot owner from obtaining insurance for his own benefit.
(f)	An insurer that has issued an insurance policy under this section shall issue certificates or memoranda of insurance to the association and, upon written request, to any lot owner, mortgagee, or beneficiary under a deed of trust.  The insurer issuing the policy may not cancel or refuse to renew it until 30 days after notice of the proposed cancellation or nonrenewal has been mailed to the association, each lot owner and each mortgagee or beneficiary under a deed of trust to whom certificates or memoranda of insurance have been issued at their respective last known addresses.
(g)	Any portion of the planned community for which insurance is required under subdivision (a)(1) of this section which is damaged or destroyed shall be repaired or replaced promptly by the association unless (i) the planned community is terminated, (ii) repair or replacement would be illegal under any State or local health or safety statute or ordinance, or (iii) the lot owners decide not to rebuild by an eighty percent (80%) vote, including one hundred percent (100%) approval of owners assigned to the limited common elements not to be rebuilt.  The cost of repair or replacement in excess of insurance proceeds and reserves is a common expense.  If the entire planned community is not repaired or replaced, (i) the insurance proceeds attributable to the damaged common elements shall be used to restore the damaged area to a condition compatible with the remainder of the planned community, (ii) the insurance proceeds attributable to limited common elements which are not rebuilt shall be distributed to the owners of the lots to which those limited common elements were allocated, or to lienholders, as their interests may appear, and (iii) the remainder of the proceeds shall be distributed to all the lot owners or lienholders, as their interests may appear, in proportion to the common expense liabilities of all the lots.  Notwithstanding the provisions of this subsection, G.S. 47E-2-118 (termination of the planned community) governs the distribution of insurance proceeds if the planned community is terminated.
(h)	The provisions of this section may be varied or waived in the case of a planned community all of whose lots are restricted to nonresidential use.
"§ 47E-3-114.  Surplus funds.
Unless otherwise provided in the declaration, any surplus funds of the association remaining after payment of or provision for common expenses and any prepayment of reserves shall be paid to the lot owners in proportion to their common expense liabilities or credited to them to reduce their future common expense assessments.
"§ 47E-3-115.  Assessments for common expenses.
(a)	Until the association makes a common expense assessment, the declarant shall pay all common expenses.  After any assessment has been made by the association, assessments thereafter shall be made at least annually.
(b)	Except for assessments under subsections (c), (d), and (e) of this section, all common expenses shall be assessed against all the lots in accordance with the allocations set forth in the declaration pursuant to G.S. 47E-2-107(a).  Any past due common expense assessment or installment thereof bears interest at the rate established by the association not exceeding eighteen percent (18%) per year.
(c)	To the extent required by the declaration:
(1)	Any common expense associated with the maintenance, repair, or replacement of a limited common element shall be assessed against the lots to which that limited common element is assigned, equally, or in any other proportion that the declaration provides;
(2)	Any common expense or portion thereof benefiting fewer than all of the lots shall be assessed exclusively against the lots benefitted; and
(3)	The costs of insurance shall be assessed in proportion to risk and the costs of utilities shall be assessed in proportion to usage.
(d)	Assessments to pay a judgment against the association may be made only against the lots in the planned community at the time the judgment was entered, in proportion to their common expense liabilities.
(e)	If any common expense is caused by the negligence or misconduct of any lot owner or occupant, the association may assess that expense exclusively against his lot.
(f)	If common expense liabilities are reallocated, common expense assessments and any installment thereof not yet due shall be recalculated in accordance with the reallocated common expense liabilities.
"§ 47E-3-116.  Lien for assessments.
(a)	Any assessment levied against a lot remaining unpaid for a period of 30 days or longer shall constitute a lien on that lot when a claim of lien is filed of record in the office of the clerk of superior court of the county in which the lot is located in the manner provided herein.  The association may foreclose the claim of lien in like manner as a mortgage on real estate under power of sale under Article 2A of Chapter 45 of the General Statutes.  Unless the declaration otherwise provides, fees, charges, late charges, fines, interest, and other charges imposed pursuant to G.S. 47E-3-102, 47E-3-107, 47E-3-107A, and 47E-3-115 are enforceable as assessments under this section.
(b)	The lien under this section is prior to all liens and encumbrances on a lot except (i) liens and encumbrances (specifically including but not limited to, a mortgage or deed of trust on the lot) recorded before the docketing of the claim of lien in the office of the clerk of superior court, and (ii) liens for real estate taxes and other governmental assessments and charges against the lot.  This subsection does not affect the priority of mechanics' or materialmen's liens.
(c)	A lien for unpaid assessments is extinguished unless proceedings to enforce the lien are instituted within three years after the docketing of the claim of lien in the office of the clerk of superior court.
(d)	This section does not prohibit other actions to recover the sums for which subsection (a) of this section creates a lien or prohibit an association taking a deed in lieu of foreclosure.
(e)	A judgment, decree, or order in any action brought under this section shall include costs and reasonable attorneys' fees for the prevailing party.
(f)	Where the holder of a first mortgage or first deed of trust of record, or other purchaser of a lot obtains title to the lot as a result of foreclosure of a first mortgage or first deed of trust, such purchaser and its heirs, successors and assigns, shall not be liable for the assessments against such lot which became due prior to the acquisition of title to such lot by such purchaser.  Such unpaid assessments shall be deemed to be common expenses collectible from all the lot owners including such purchaser, its heirs, successors and assigns.
(g)	A claim of lien shall set forth the name and address of the association, the name of the record owner of the lot at the time the claim of lien is filed, a description of the lot and the amount of the lien claimed.
"§ 47E-3-117:  Reserved.
"§ 47E-3-118.  Association records.
(a)	The association shall keep financial records sufficiently detailed to enable the association to comply with this act.  All financial and other records shall be made reasonably available for examination by any lot owner and his authorized agents.
(b)	The association, upon written request, shall furnish to a lot owner or his authorized agents a statement setting forth the amount of unpaid assessments and other charges against a lot.  The statement shall be furnished within 10 business days after receipt of the request and is binding on the association, the executive board, and every lot owner.
"§ 47E-3-119.  Association as trustee.
With respect to a third person dealing with the association in the association's capacity as a trustee under G.S. 47E-2-118 following termination or G.S. 47E-3-113 for insurance proceeds, the existence of trust powers and their proper exercise by the association may be assumed without inquiry.  A third person is not bound to inquire whether the association has power to act as trustee or is properly exercising trust powers, and a third person, without actual knowledge that the association is exceeding or improperly exercising its powers, is fully protected in dealing with the association as if it possessed and properly exercised the powers it purports to exercise.  A third person is not bound to assure the proper application of trust assets paid or delivered to the association in its capacity as trustee.
"ARTICLE 4.
"Protection of Purchasers.
"§ 47E-4-101.  Applicability and waiver.
(a)	This Article applies to all lots subject to this act, except as provided in subsection (b) of this section or as modified or waived by agreement of purchasers of lots in a planned community in which all lots are restricted to nonresidential use.
(b)	Neither an initial sale certificate nor a resale statement need be prepared or delivered in the case of a disposition which is:
(1)	Gratuitous;
(2)	Pursuant to court order;
(3)	By government or governmental agency;
(4)	By foreclosure or deed in lieu of foreclosure;
(5)	To a person in the business of selling real estate who intends to offer the lot or lots to purchasers; or
(6)	Subject to cancellation at any time for any reason by the purchasers without penalty.
"§ 47E-4-102.  Initial seller disclosure requirements.
Any initial seller shall furnish to a purchaser before execution of any contract for sale of a lot, or otherwise before conveyance, a copy of the declaration (other than the plats), the bylaws, the rules or regulations of the association, and an initial sale certificate containing and fully and accurately disclosing:
(1)	A statement setting forth the amount and frequency of common expense assessments, other fees or charges payable by lot owners;
(2)	A statement setting forth any unpaid common expense assessments, other fees or charges currently due and payable from the initial seller;
(3)	A statement of any capital expenditures anticipated by the association for the current and two next succeeding fiscal years;
(4)	A statement of the amount of any reserves for capital expenditures and of any portions of those reserves designated by the association for any specified projects;
(5)	The most recent regularly prepared balance sheet and income and expense statement, if any, of the association;
(6)	The current operating budget of the association; and
(7)	Any services not reflected in the budget that the declarant provides, or expenses that he pays and that he expects may become at any subsequent time a common expense of the association and the projected common expense assessment attributable to each of those services or expenses for the association and for each type of lot.
The failure of an initial seller to comply with the requirements of this section shall not affect title to any lot transferred.
"§§ 47E-4-103 to 47E-4-108:  Reserved.
"§ 47E-4-109.  Resales of lots.
Except in the case of a sale subject to G.S. 47E-4-102 or unless exempt under G.S. 47E-4-101(b), a lot owner shall furnish to a prospective purchaser before conveyance a statement setting forth the common expense assessment and any other fees payable by lot owners.
"§ 47E-4-110:  Reserved.
"§ 47E-4-111.  Conveyances to the association.
Before conveying real estate to the association, the declarant shall have that real estate released from all liens.  Further, improvements on the real estate shall be substantially complete before the real estate is conveyed to the association or the declarant shall provide reasonable assurances and security for the completion of the improvements, independent of the declarant.
"§§ 47E-4-112 to 47E-4-116:  Reserved.
"§ 47E-4-117.  Effect of violations on rights of action; attorneys' fees.
If a declarant or any other person subject to this act fails to comply with any provision hereof or any provision of the declaration or bylaws, any person or class of persons adversely affected by the failure to comply has a claim for appropriate relief.  The court may award reasonable attorneys' fees to the prevailing party.
"§ 47E-4-118.  Labeling of promotional material.
If any improvement contemplated in a planned community is labeled 'NEED NOT BE BUILT' on a plat, or is to be located within a portion of the planned community with respect to which the declarant has reserved a development right, no promotional material may be displayed or delivered to prospective purchasers which describes or portrays that improvement unless the description or portrayal of the improvement in the promotional material is conspicuously labeled or identified as 'NEED NOT BE BUILT'.
"§ 47E-4-119.  Declarant's obligation to complete and restore.
(a)	The declarant shall complete all improvements labeled 'MUST BE BUILT' on plats prepared pursuant to G.S. 47E-2-109.
(b)	The declarant is subject to liability for the prompt repair and restoration, to a condition compatible with the remainder of the planned community, of any portion of the planned community affected by the exercise of rights reserved pursuant to or created by G.S. 47E-2-110, 47E-2-111, 47E-2-113, 47E-2-115, or 47E-2-116.
"§ 47E-4-120:  Reserved."
Section 2.  This act becomes effective October 1, 1997.