Chapter 4 SUMMARY OF LEGAL DOCUMENTS FOR COMMON INTEREST COMMUNITIES

• Jurisdiction: North Carolina

4 SUMMARY OF LEGAL DOCUMENTS FOR COMMON INTEREST COMMUNITIES

§ 4.01. In General

Although both planned communities and condominiums are two distinct entities requiring very different documents for their formation and ongoing operations. While there are some common legal documents for these two types of communities — declaration, bylaws, articles and resolutions — the contents within those legal documents are vary significantly. For both planned communities and condominiums it is important that all the documents be synchronized to work together in a consistent uniform plan or scheme.¹ While the declaration may be markedly different for condominiums and planned communities, common law limitations on the manner in which the declaration can be amended are often similar with both types of developments.²

It is difficult for developers to foresee what the future legal landscape will be like for common interest communities decades from the community's inception. A declaration for a condominium built in 1965 will look little like a condominium declaration built in the twenty-first century. Likewise, declarations for planned communities formed prior to the enactment of the PCA will differ significantly from declarations recorded after the PCA that rely heavily on the PCA for guidance. In this regard, it is important for the developer to make sure that the amendment provisions in the legal documents for the community are realistically attainable to deal with the changing legal landscape.³

§ 4.02. Maps and Plats

Broadly speaking, a plat is a map showing the subdivision of land into smaller parcels of land. Almost all subdivisions today start with a map of the subdivision that is approved by the local authority for recordation with the register of deeds. Today, a significant amount of the rules for maps and plats of subdivisions are set out at both the State and the local level. North Carolina requires a developer to obtain approval and certification from a "Review Officer" before any sort of map of a subdivision can be recorded with the register of deeds.⁴ The Review Officer has to be designated by the board of commissioners of each county, which is charged with the responsibility of reviewing each map and plat required to be submitted for review before the map or plat is recorded.⁵ In most cases, the map cannot be recorded with the register of deeds until the Review Officer signs off on the map and certifies it.⁶ In addition, the developer has to cause one or more corners of the development to be designated as a "control corner," before recordation of a map.⁷ Once these "control corners" are established, then the developer is obligated to record the map or plat showing the location of the control corner or corners and permanent marker or markers with an adequate and sufficient description to enable a surveyor to locate such control corner or marker.⁸

In addition to the obvious physical boundaries of lots and common areas, the map for a planned community in North Carolina typically provides the location of public utility easements; easements in favor of the homeowners association; the nature of the streets and rights-of-way, i.e., whether public or private; and the book and page for the restrictive covenants for the subdivision and the location of wetlands, if any. In the case of subdivisions that will have public rights-of-way, the public dedication by the developer is contained in the recorded map for the subdivision.⁹ Once the map is recorded, any map showing such a publicly dedicated right of way becomes immediately usable by public utilities to install, maintain, and operate lines, cables, or facilities for the provision of service to the public.¹⁰

§ 4.02.01. Planned Communities

The PCA has no specific requirements for what the maps and plats for a planned community must contain. However, there are a number of statutory requirements for maps found elsewhere, many of which are extremely technical in nature.¹¹ Many legal requirements for maps of subdivisions in North Carolina are set forth Chapter 47 of the General Statutes. In addition to the size requirements, the statute requires that each plat contain the following information: property designation; name of owner (the name of owner is for indexing purposes only and is not for title certification); location to include township, county and state, and the date or dates the survey was made; scale or scale ratio in words or figures and bar graph; and the name and address of surveyor or firm preparing the plat.¹² Furthermore, the statute requires a certificate by the person under whose supervision the survey or plat was made, stating the origin of the information shown on the plat, including recorded deed and plat references shown on the map.¹³

§ 4.02.02. Condominiums

The Condominium Act has detailed provisions for what the plats and plans for a condominium project must contain. Under the Condominium Act, for example, the declarant has to file with the register of deeds in each county where the condominium is located the condominium's plat or plan certified by an architect licensed under the provisions of Chapter 83A of the General Statutes or an engineer registered under the provisions of Chapter 89C of the General Statutes.¹⁴ Each condominium plat or plan must contain very specific information about the condominium.¹⁵ Many local ordinances require plans to be prepared "in accordance," "pursuant to" or "in compliance with" the Condominium Act.¹⁶ These local governments would use the checklist in N.C.G.S. § 47C-2-109(b) before approving any condominium plat or plans. While there are some provisions in the Condominium Act that are discretionary with respect to plats,¹⁷ other provisions, such as requiring the developer to re-record new plats and plans if a "development right" is exercised and the type of formatting of the plats and plans before recording, are mandatory.¹⁸

§ 4.03. The Declaration

The Declaration is the "constitution" for a development. It contains almost all essential obligations of owners for assessments and usually the use restrictions applicable to the development as well. In a planned community, the declaration typically contains the membership structure; the manner in which assessments are to be levied, increased and collected from owners; use restrictions on lots; easement rights and burdens; provisions subordinating the association's assessment lien to a mortgage secured by lots; and the procedure for amending the declaration. Developers will often take the use restrictions out of the declaration and record a separate set of restrictive covenants. More often than not, however, the use restrictions are contained in the declaration. There is no "right" place to put the use restrictions. Where the use restrictions are placed is simply a matter of personal preference of the developer. The declaration occasionally will have procedures for the ways in which the homeowners association operates as a separate corporate entity; however, usually these procedures are found in the bylaws for the association.¹⁹ The declaration can contain an endless amount of information on the powers, limitations and duties of the homeowners association and the lot owners. There is virtually no limit to the amount of information the declaration can contain. The PCA requires the declaration creating a planned community to be "executed in the same manner as a deed," and to be recorded in every county in which any portion of the planned community is located.²⁰ The declaration should 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.²¹

With respect to condominiums, the declaration usually contains all the same information as that for planned communities. In addition, the condominium declaration contains the percentage interest members have in the common elements. Like the PCA, a declaration creating a condominium has to be "executed in the same manner as a deed," and recorded in every county in which any portion of the condominium is located.²² Like the PCA, the declaration should be indexed in the Grantee index in the name of the condominium and in the Grantor index in the name of each person executing the declaration.²³ Unlike a declaration in a planned community, a declaration or an amendment to a declaration adding units to a condominium, may not be recorded unless all structural components and mechanical systems of all buildings containing any units are substantially completed in accordance with the plans, as evidenced by a recorded certificate of completion executed by an architect or engineer.²⁴ In fact, the declaration for a planned community is usually done at the opposite time of a condominium declaration — before homes are constructed on the lots.

§ 4.04. Defining the Area to Be Maintained

One of the most important functions of a declaration is to define the property the declaration applies to and describe the property that will be maintained by an association with assessments. One of the main functions of an association is to collect assessments in order to fund the ongoing maintenance of the common area owned by the association or its members. The law in North Carolina is clear that in order for assessment obligations to be enforceable the following must exist: (1) there must be a sufficient standard by which to measure the defendants' liability for assessments, and (2) the relevant covenants must identify with particularity the property to be maintained. The failure for a developer to meet these two requirements in the foundational legal documents for the community has caused North Carolina courts to strike down covenants requiring the mandatory payment of assessments in a variety of circumstances. In the past this has been problematic in planned communities and not in condominiums, where typically the common elements to be maintained by the association...