What to know about the NC Planned Community Act

The North Carolina Planned Community Act establishes the legal framework for planned communities in the state, particularly those formed after January 1, 1999. Staying informed about these laws is essential for board members, as it helps protect the integrity of the community and supports compliance with state regulations.

At FirstService Residential, we partner with boards and owners across North Carolina to simplify the complexities of community management. With a deep understanding of evolving regulations, we can provide expert guidance to help boards operate within the law while focusing on what matters most — enhancing property values and improving the resident experience. Whether your community is in Charlotte, Raleigh, Durham, Asheville, or beyond, our local experts are here to help you navigate North Carolina’s legal landscape with confidence.

In this article, we’ll break down key aspects of the North Carolina Planned Community Act, including how it affects your community, what board members need to know about easements and common elements, and how to navigate budget approvals and declaration amendments.

Important: The information in this article is for general informational purposes only and is not intended as legal advice. Laws change frequently and vary by jurisdiction. Always consult an attorney and your property management partner for guidance on making decisions for your North Carolina association. No action should be taken in reliance upon the information contained in this post without obtaining the advice of an attorney.
 

How the NC Planned Community Act affects your community

The North Carolina Planned Community Act, outlined in Chapter 47F of the North Carolina General Statutes, governs the creation, management, and operation of homeowners associations. If your planned community was formed on or after January 1, 1999, it will follow this Act.

In 1999, the North Carolina General Assembly enacted this act as Chapter 47F of the North Carolina General Statutes. The Act was intended to establish certain rights for property owners in planned communities, establish a framework of rules and regulations to govern planned communities, and grant owners' associations the powers necessary to manage them.

Before this law was enacted, HOAs relied solely on their governing documents — including the declaration, articles of incorporation, bylaws, and community rules — to define their responsibilities and authority. However, some governing documents were incomplete or ambiguous, leading to inconsistencies in how associations handled key issues. The Act was introduced to address these gaps, offering clear guidance on areas such as budget approvals, common element transfers, and easements.

Keep in mind, there is an exception to this rule. Communities in the state that consist of 20 or fewer lots operate outside of this Act. In fact, these communities or associations can elect to fall under the sections of this Act by including it in their declaration. If an exempted association does not expressly opt out of this statute, specific provisions may still apply to their community. Concerning association powers, fines and the display of flags and/or political signs can all be examples of this.

The North Carolina Planned Community Act is broken down into three articles: 

• Article 1 – General Provisions.
   
• Article 2 – Creation, Alteration, and Termination of Planned Communities.
   
• Article 3 – Management of Planned Community.

While the Act as a whole applies to planned communities created after January 1, 1999, some, but not all, of the provisions also apply to planned communities created prior to January 1, 1999. While this partial application occasionally provides some guidance to pre-1999 communities, it can also cause confusion for them because the answers to other important questions can only be found in the community's governing documents, and such answers are often hard to find or, even worse, not addressed at all.

Some of the most common problems that arise in pre-1999 planned communities that are not governed by the Act or addressed by the governing documents are: 

• Transfer of common elements
   
• Grant of easements over common elements
   
• Member approval of the owners' association's annual budget; and,
   
• Amendment of the declaration. 

Allowing easements over common elements

The Act addresses this issue in N.C. Gen. Stat. § 47F-3-102(9), which states that one of the powers of an association is the power to "grant easements, leases, licenses, and concessions through or over the common elements." Unfortunately, this provision of the Act does not apply to pre-1999 planned communities. If the governing documents for a pre-1999 community do not explicitly give the association the power to grant easements or licenses over the common elements, the association should not attempt to do so without member approval. When faced with this scenario, a pre-1999 community must review its governing documents and consider the same member approval options described above regarding conveyances of the common elements.

Boards may determine that granting an easement benefits the community, whether for utility access, shared infrastructure, or agreements with neighboring properties. While many governing documents authorize easements for municipal or utility purposes, they may not explicitly allow easements for other entities. Boards should carefully review governing documents with help from qualified legal counsel and seek homeowner approval before proceeding. Establishing a transparent process can help align easement decisions with community interests to minimize potential disputes.
 

What the NC Planned Community Act says about transferring common elements

Associations are often faced with a need to convey a portion of the community's common elements to address a boundary line issue, as security for a loan to the association, or for any number of other reasons. Many declarations do not grant the association board of directors power to convey any interest in the common elements. That being said, a conveyance will require a certain level of approval from members.

But what is the extent of the approval needed from board members? A majority, a super-majority, or unanimous consent? For post-1999 planned communities, the Act clearly specifies the level of member approval. N.C. Gen. Stat. § 47F-3-112 provides that 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, or any larger percentage the declaration specifies, agree in writing to that action."

However, N.C. Gen. Stat. § 47F-3-112 does not apply retroactively to pre-1999 planned communities. Those communities must therefore rely solely on the language, if any, in their declaration or other governing documents; and, unfortunately, the governing documents of many pre-1999 planned communities do not contain specific provisions regarding the conveyance of common elements. When they do, they often do so in ambiguous terms and pre-1999 communities must interpret their governing documents to determine what level of member approval is appropriate.

Some common provisions include: 

• The level of member approval generally needed to approve association actions (typically majority approval at a meeting at which a quorum is present)
   
• The level of member approval needed to amend the declaration (varies among planned communities)
   
• The level of member approval required by the Act, even though the Act does not technically apply, or,
   
• Unanimous consent.

Interpreting governing documents can be complex, especially when board members and residents hold differing views on approval requirements for common element transfers. Achieving unanimous consent is rare, and pre-1999 communities that attempt to follow the Act may still face legal challenges from members, as compliance does not guarantee protection from disputes over governance decisions. To navigate these challenges, boards should conduct a thorough review of their governing documents and consult their association attorney along with their property management partner.
 

Navigating budget approvals for your association

One of the duties of an association's board of directors is to establish an annual budget for the association which will be funded, primarily, if not exclusively, by assessments against owners. Since assessments are determined based on the budget, the annual budget is very important to owners. Some, but not all, pre-1999 planned community governing documents include provisions requiring some level of owner approval to increase annual assessments in excess of a certain amount; for example: in excess of 5% over the prior year's budget. Owners in the pre-1999 communities whose governing documents are silent have no control over the budget other than to vote off (or in some cases, to remove) the board directors who have adopted an unpopular budget.

The Act gives owners in post-1999 planned communities the power to reject the board of directors' budget. N.C. Gen. Stat. § 47F-3-103(c) provides that the owners in a post-1999 planned community must be given an opportunity to ratify the community's budget. After preparing the budget, the board of directors must provide a summary of it to all owners and hold a meeting to consider the budget. It is not necessary that a quorum of owners be present at the meeting. If the owners of at least a majority of all the lots in the planned community reject the budget, it will not be ratified and the budget for the previous year will continue in effect until the budget is ratified.

N.C. Gen. Stat. § 47F-3-103(c) does not apply to pre-1999 planned communities. If the governing documents of a pre-1999 planned community do not give owners the right to approve or reject the budget prepared by the board, the owners have no control over their association's budget other than to vote against the re-election of the board or vote for the removal of the offending directors. The owners will not find approval authority in the Act or any other statute. Owners in pre-1999 planned communities who want to have at least some level of budget control should consider amending their governing documents--which raises the next issue.
 

Amending association declarations in North Carolina

This is the most significant governing document. One of the most common, and certainly most important, actions taken by an association is the amendment of its governing documents, specifically the declaration. Until legislation enacted by the General Assembly in 2013, pre-1999 planned communities could only amend their declaration if, and upon the terms, provided for in the community's declaration and other governing documents. In 2013, the Act was amended to make N.C. Gen. Stat. § 47F-2-217, the declaration amendment section of the Act, applicable to pre-1999 planned communities except as provided below.

N.C. Gen. Stat. § 47F-2-217(a), which, with the exception addressed below, is now applicable to all planned communities, provides that "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 association's declaration may require a higher level of member approval, but the minimum level of member approval in a residential community is 67%.

There is a catch. While N.C. Gen. Stat. § 47F-2-217 now applies to pre-1999 communities, it does not if "the articles of incorporation or the declaration expressly provides to the contrary." Unfortunately, the meaning of this phrase has created potential problems for pre-1999 communities. For example, if a pre-1999 community's declaration contains a clear and unambiguous provision providing that a mere majority of all members can amend the declaration, the provision in the declaration should control over N.C. Gen. Stat. § 47F-2-217(a). If, however, the declaration contains ambiguous language regarding amendments, such as "all actions taken by Members shall be by majority vote," it is unclear whether this is a sufficiently "express provision" to override the 67% approval floor set out in N.C. Gen. Stat. § 47F-2-217(a).

The amendment applying N.C. Gen. Stat. § 47F-2-217 to pre-1999 communities is new and has not yet been interpreted by a North Carolina appellate court. Until that time, planned communities without clear amendment provisions in their declarations should consider taking the conservative approach and complying with the Act.
 

Have questions about the NC Planned Community Act?

There are several other provisions of the Act that do not apply retroactively to pre-1999 planned communities, but the provisions discussed above seem to create the most problems. Directors and members of a pre-1999 planned community who desire to convey title to or grant an easement over common elements, grant members some level of budgetary approval, or amend the community's declaration based on the current provisions of its governing documents will need to carefully interpret their community's governing documents to decide how to proceed. In some cases, the best way forward may be to amend the governing documents or simply adopt the application of the Act in its entirety to the planned community, an alternative that the Act makes available pursuant to N.C. Gen. Stat. § 47F-1-102(d).

Understanding and complying with the North Carolina Planned Community Act is essential for association boards looking to uphold best practices and minimize legal risk. Given the complexities involved, associations should take a proactive approach to interpreting governing documents and aligning with current regulations.

As North America’s leading property management company, FirstService Residential can provide expert guidance to help North Carolina boards manage compliance, governance, and financial oversight with confidence. Our team offers tailored solutions for the unique needs of each community, so your association can operate efficiently and in compliance with North Carolina law.

Looking for support? Contact FirstService Residential today to learn how we can help your community thrive.