Real Estate Industry Issues

Nonresident Commercial Licensure

            NCAR worked closely with the Real Estate Commission, the Triangle Commercial Association of REALTORS®, and the Charlotte Region Commercial Board of REALTORS® to develop and pass legislation that will allow nonresident licensees to engage in transactions involving commercial real estate. HB 328, Amend Real Estate Licensing Laws, introduced by Rep. Julia Howard (R-Davie), a REALTOR® from Mocksville, and co-sponsored by Rep. John Rhodes (R–Mecklenburg), a REALTOR® from Cornelius, authorizes the Real Estate Commission to issue a limited broker or salesperson license to a nonresident to engage in commercial transactions. The nonresident licensee must be affiliated with and supervised by a resident broker or salesperson. Many of the details of this new type of license, including the amount of the licensing fee and the definition of commercial real estate, will be established in rules adopted by the Commission. HB 328 also allows the Commission to eliminate oral and written licensure examinations and offer only computerized examinations. NCAR will be involved in the development of rules for the limited nonresident commercial license program. 

Telemarketing

            For the second straight year legislation regulating telemarketing was introduced and, unlike last year, the legislation was enacted. NCAR successfully lobbied for amendments to the legislation that will protect REALTORS® from unnecessary and burdensome regulation. SB 872, Unwanted Telephone Solicitations, introduced by Sen. Scott Thomas (D–Craven), is intended to reduce the amount of telemarketing calls, including faxes, made within the state. In large part this legislation applies the Federal Trade Commission’s telemarketing rules, which only apply to calls made across state lines, to telemarketing calls made within the state. The bill, as amended by NCAR, provides that those who make calls to arrange a “face-to-face” meeting with the potential customer, small businesses that make only a few telephone solicitations, and those who make calls pursuant to an existing business relationship are not required to consult the federal Do Not Call registry. In addition, businesses that make these types of calls are not required to comply with certain training requirements, recordkeeping provisions, and federal regulations. After this legislation was enacted the Federal Communications Commission superceded all less restrictive state Do Not Call laws in adopting rules that regulate intrastate calls. However, the hard-earned exemptions under the state legislation are still important in the event that the federal rules are weakened or overturned, or if state law were to become more stringent than the federal rules in the future. 

Revise NC Banking Laws

NCAR was successful in removing several complicated provisions from SB 676, Revise The Banking Laws Of North Carolina, introduced by Sen. David Hoyle (D-Gaston), that arguably could have made it easier state chartered banks to get into real estate brokerage in North Carolina. NCAR had concerns with the original version of the bill because it would have given state chartered banks more powers to engage in "new activities", expand their authority to invest in subsidiaries and would have given the Commissioner of Banks temporary rule making authority. NCAR's lobbying team of Stephanie Simpson, Rick Zechini, John McMillan and Tim Kent shared our concerns at a meeting with the North Carolina Commissioner of Banks, Joseph Smith. The back and forth negotiations resulted in an agreement to remove the sections of the bill that NCAR found troubling. The bill was not enacted during the 2003 session, but remains eligible for consideration in 2004.

School Starts After Labor Day

Although legislation was not enacted this session, several bills were introduced that would require public schools in North Carolina to start their school year after Labor Day. HB 863, School Starts After Labor Day, which was introduced by Rep. Connie Wilson (R-Mecklenburg) and Rep. Dewey Hill (D-Columbus), SB 1002, School Starts After Labor Day, by Sen. Patrick Ballantine (R-New Hanover) and Sen. Scott Thomas (D-Craven), and SB 779, Schools Begin After Labor Day, by Sen. Dannelly (D-Mecklenburg) and Sen. Robert Holloman (D-Hertford). Conservative figures presented to legislators showed that starting classes later would generate more than $200 million in additional tax revenues by sparking August vacation employment. NCAR and the NC Vacation Rental Managers Association worked with a broad coalition made up of the tourism industry, the business community, and concerned parents and teachers to support the idea of requiring school to start after Labor Day. As North Carolina schools continue to start classes earlier and earlier, no doubt this issue will continue to be discussed.

Restrictive Covenants

            NCAR has been involved with two bills that would invalidate certain restrictive covenants and local government ordinances. SB 846 would invalidate restrictive covenants and ordinances that regulate the installation of solar panels. NCAR, which was able to halt this legislation in the House, opposed the bill based on the fact that homeowners have knowledge of restrictive covenants when they purchase a home and the opinion that the General Assembly should not be in the practice of interfering with the ability of neighborhoods to set appropriate and legitimate standards for residences. SB 722 would limit the ability of restrictive covenants and ordinances to regulate the display of the American flag. Because of the sensitive nature of this legislation, which has stalled in the House, NCAR has taken no position on the bill but continues to be actively involved.

Carrboro Inclusionary Zoning

In a big victory for NCAR, SB 493, Carrboro Inclusionary Zoning, was not voted on during the 2003 session. After a thorough debate of the bill in the Senate Local Government, State Government and Veterans Affairs Committee, it was clear that the bill sponsor did not have the support for the bill and made a motion to adjourn rather than have the bill defeated. The chairman of the committee, Sen. Ellie Kinnaird, is also the bill sponsor, which made lobbying the legislation very difficult because legislators don’t like to vote against a chairman’s bill. However all of our lobbying efforts and our Call-To-Action on this issue were extremely successful in getting members to oppose the bill.

 Private Road Disclosure

            Because of serious concerns raised by NCAR, the legislature failed to enact a bill that would place onerous requirements on the sellers of residential property. SB 974 would require the sellers of residential property to provide detailed information to potential purchasers about the street upon which the property is located. Sellers owning a house on a public street would have to certify that the road meets Department of Transportation standards. Sellers owning a house on a private street would be required to provide a detailed explanation of who is responsible for maintaining the street and the consequences for failing to adequately maintain the street. The legislation is designed to prevent developers from building subdivisions without adequately providing for the maintenance of streets within the subdivisions. In attempting to address this problem, NCAR believes that the legislation is overbroad, would be onerous for homeowners, and would increase the price of housing. NCAR has initiated discussions with the real estate bar and DOT officials in an attempt to craft a bill that more appropriately addresses the issue.

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Revenue Issues

Sales Tax On Professional Services

In 2002, Governor Easley created a special commission charged with studying how the state can make the tax structure work better. This commission issued a final report that recommended expanding the current sales tax to include professional services. The report was presented to both the House and Senate Finance committees; however, legislation to expand the sales tax to include services was not introduced during the 2003 session.  NCAR remains involved with a coalition of architects, engineers, lawyers and others that opposes expanding the sales tax to include services.

Statewide Transfer Tax and Impact Fee Bills

NCAR was instrumental in making sure no statewide real estate taxes or fees were enacted. Two bills were introduced in the General Assembly that would have given counties the authority to levy transfer taxes. HB 664, Local Option Tax Menu, introduced by Rep. Verla Insko (D-Orange) and Rep. Rick Glazier (D-Cumberland), would allow a county to levy a transfer tax of up to one percent if the voters of the county approved the tax at a special election. HB 749, Local Option Tax Menu, introduced by Rep. Bill Owens (D-Pasquotank), Rep. Carolyn Justice (R-Pender), Rep. Margaret Dickson (D-Cumberland), Rep. Verla Insko (D-Orange), and Rep. Lucy Allen (D-Franklin), would also allow counties to levy a transfer tax and impact fees upon voter approval. NCAR launched a highly successful Voter Education campaign targeting freshmen Reps. Glazier, Dickson, Justice and Allen who sponsored the bills. The campaign urged voters in the targeted districts to call and voice their opposition to these taxes and fees.

Local Transfer Tax And Impact Fee

NCAR opposed five bills this session that would have allowed transfer taxes and impact fees in Durham County. Rep. Luebke and Rep. Miller introduced HB 632 (Durham Impact Fee For Schools) and HB 633 (Durham County School Capital Tax). Senator Lucas introduced SB 436 (Durham Impact Fee For Schools) and Senator Gulley introduced SB 479 (Durham County School Capital Tax) and SB 484 (Durham Impact Fee For Schools).

Delegations of Authority

NCAR opposed SB 160, Delegations of Authority, which would have allowed cities and counties, without legislative approval, to levy or adopt transfer taxes, impact fees, impact taxes, tree ordinances, inclusionary zoning and many other ordinances that would be detrimental to the real estate industry. NCAR testified in opposition to the original bill in committee and initially no vote was taken. The bill was recalendered and Sen. Dan Clodfelter (D–Mecklenburg), the committee chairman and bill sponsor, offered an amendment to SB 160 that removed the transfer tax and impact fee provision. The amended bill passed the Senate Judiciary I Committee and was referred to the Senate Finance Committee. NCAR remained opposed to the legislation and the bill was never scheduled for a hearing in the Finance Committee. The General Assembly has been very reluctant to support legislation this extreme and defeated a similar bill last session.

Local Option Project Development Financing

The General Assembly passed SB 725, Local Option Project Development Financing, introduced by Sen. Dan Clodfelter (D–Mecklenburg) that clears the way for a proposed constitutional amendment to be placed on the ballot in November 2004. If the constitutional amendment is approved, it would give local governments a powerful tool called "tax increment financing" to build parking decks, convention centers, or other similar structures that are part of larger economic development projects. Local governments could avoid local bond referendums to borrow the money and instead would pledge future tax property revenues generated by the projects to pay the debt.

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Regulatory Issues

Rulemaking by Agencies

Because numerous state agencies have the authority to adopt rules that affect the development, use, and sale of property, it is more important than ever that the citizens and businesses of the state have the ability to participate in the rulemaking process. NCAR helped draft and lobby for legislation that requires state agencies that are adopting rules to comply with procedural safeguards that will protect the State's citizens and businesses. HB 1151, Improve Rulemaking Process, introduced by Rep. Martin Nesbitt (D-Buncombe), Rep. Connie Wilson (R-Mecklenburg), and Rep. Bill Culpepper (D-Chowan), mandates that an agency must provide public notice, accept written comment, and hold at least one public hearing prior to adopting certain types of rules. The rules would then be reviewed by the Rules Review Commission, the entity responsible for verifying that agency rules are authorized and appropriately adopted, to make sure that the agency has both an adequate justification for adopting the rule and the statutory authority to adopt the rule. If the Rules Review Commission finds that the agency has failed to meet these standards then the rule will not go into effect. 

County Boards of Health Expanded Authority

            NCAR helped defeat legislation introduced by Representative Carolyn H. Justice of Pender County that would have made it easier for county boards of health to adopt health and environmental rules that are stricter than applicable state rules. The defeat of this legislation will help prevent unnecessary and burdensome local regulations. NCAR worked with a broad coalition of concerned business groups on the legislative victory.

Underground Storage Tanks

            The General Assembly enacted legislation designed to address the inadequacy of funding available to help property owners clean up underground storage tank (UST) contamination. Although there are two state funds available to assist property owners in cleaning up UST spills, the amount of money in the funds is not enough to clean up many properties. HB 897 prioritizes these limited funds by making them available for the cleanup of properties that are the most contaminated and that provide the greatest threat to human health and the environment. This legislation also attempts to make the cleanup of UST sites more efficient and less costly. In addition, the bill authorizes a legislative study to evaluate ways to provide greater financial assistance to property owners that have property contaminated by USTs.

Swift Creek Rule Disapproval

            The General Assembly invalidated part of a state rule that was adopted to protect the water quality of Swift Creek in Vance, Warren, Franklin, Nash, and Edgecombe counties by restricting development within a 274-mile watershed protection zone along the creek. The North Carolina Home Builders Association lobbied for the change asserting that the rule would drive up the price of housing in the area and was overbroad because only part of the creek was listed as an outstanding resource water. HB 566 provides that the rule will remain in effect for the 14-mile segment of the creek that is designated as an outstanding resource water and the 182 square miles of the watershed protection zone that is upstream of the segment in Nash, Franklin, Warren, and Vance counties.

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Property Management Issues

Tenant Late Fees

SB 874, Tenant Late Fees, introduced by Sen. Wib Gulley (D-Durham), passed the 2003 session, but not after several provisions were deleted at the request of NCAR and the NC Apartment Association. One of the deleted provisions would have allowed troops on temporary duty to break leases. Under current law service members who are being permanently transferred can break their lease, but the law doesn't apply to service members who break a lease while on temporary duty. The other troubling provision dealt with administrative fees and other landlord tenant law changes. NCAR was successful in removing the provisions leaving a bill that clarifies late fees for weekly tenants.

Privilege License Tax in Nags Head

During the waning days of the 2003 session, the NCAR lobbying team had a great victory as it stopped a last minute bill to allow the town of Nags Head to impose a privilege license tax on residential rental properties. Current law allows cities to impose a privilege license tax on rental homes, but the amount of the tax is limited and private residences occupied by the owner and that are rented for only part of the season are exempt from the tax unless the owner owns more than one residence. The language in the proposed bill would have eliminated the exemption and removed the cap. NCAR worked closely with the Outer Banks Association of REALTORS® and appreciate all of their calls and emails on the issue.

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Homeowner’s Insurance Issues

Full Homeowners Insurance To Be Offered Through the Beach Plan

Through lobbying efforts of the NCAR lobbying team, coastal residents will have a new source of homeowner's insurance under a bill approved by the legislature.  SB 769, Beach Plan Homeowners Policy Rate Setting, introduced by Sen. Scott Thomas (D-Craven), was approved and sent to Gov. Mike Easley for his signature. The bill completes authorization for the N.C. Insurance Underwriting Association to offer complete homeowner's insurance policies after July 1. The bill will provide another option for homeowners to obtain a complete homeowner's insurance product in North Carolina. You may recall NCAR supported HB 1120 last session that directed the Beach Plan to expand its offerings to include a full homeowners Insurance policy. SB 769 makes legal changes to make the program work better and clarifies that the state insurance commissioner has final approval over the program's rules and underwriting standards.

Credit Scoring Ban Approved

Insurance companies will be prohibited from using credit scores as the sole basis for increasing rates or terminating policies under SB 771, Credit Scoring Limitation, sponsored by Sen. Scott Thomas (D-Craven).  Credit ratings, however, can still be used to give consumers discounts on rates. Insurance companies would also be required to file with the Department of Insurance the methods they use to determine individual credit scores.  NCAR along with the North Carolina Department of Insurance supported SB 771 which is a great step in making sure qualified and credit worthy applicants are able to obtain homeowners insurance.

August 2003

House Passes Adjournment Resolution - End of Session Near (NCAR):

The House overwhelmingly passed a resolution setting next Friday, July 18th as the close of the session. It would be the first time since 1999 that legislators finished their so-called long session before August. Legislators are expected to come back this year, however, to tackle redistricting. They are awaiting direction from the state Supreme Court, which is considering an appeal of a lower court redistricting order from last year. The adjournment resolution calls for the General Assembly to convene for its short session May 10, 2004.

FCC Unexpectedly Extends Federal Telemarketing Rule to Intrastate Calls (NCAR):

The Federal Communications Commission released its revisions to the Do Not Call rules that extend these rules to calls made within states. Previously the Federal Trade Commission had adopted the Do Not Call rules in an attempt to allow the public to stop unwanted telemarketing calls. The FTC version of the rules only applied to calls made from state to state. Congress directed the FCC to amend the rules to cover industries that the FTC could not regulate and to make the rules consistent across industries. However, in adopting the amended rules the FCC made them applicable to intrastate calls. The rule will hamper the business of real estate practitioners who depend on cold calling, largely within their local neighborhoods, to prospect for clients and customers.

NCAR has been involved in a bill that is pending in the State House regarding intrastate telemarketing calls. NCAR lobbied successfully for an amendment to this legislation that removed burdensome requirements, such as checking the federal do not call registry and recordkeeping provisions, for telephone calls made by real estate professionals and other small businesses. Because the federal Do Not Call rules will apply to intrastate calls and because there are no similar exemptions in the federal rules regarding real estate professionals, the efforts of NCAR appear to be frustrated. The FCC changes to the Do Not Call rules appear to be facing regulatory and legal challenges in the near future, and because state telemarketing laws are allowed to be more strict than the Federal Do Not Call rules, NCAR is working to keep the hard fought for exemptions in the state legislation.

NAR maintains that the FCC, in heeding a directive from the U.S. Congress to align its rules with those of the FTC, went farther than Congress intended by preempting, rather than coordinating with, existing state no-call laws. "The preemption in the FCC rule really came out of left field," said NAR Chief Economist David Lereah. "While we understood the FCC was directed by Congress to finalize rules that would maximize consistency with the FTC rules, there was no indication it would preempt state laws."

NAR had requested a federal exemption to the no-call restriction for real estate practitioners in comment letters to both the FTC and FCC, lobbying both commissions diligently on the issue of restrictive telemarketing rules, but the only exemptions that ended up in the final rules were for political organizations, charities, telephone surveyors, and those with an existing business relationship.

The new FTC and FCC rules don't prohibit cold calling. However, under the registry rules, businesses are required to purchase the list of names in the registry and are prohibited from contacting households included in it unless the call fits under one of the exempted categories. Businesses must cross-check their call lists against the registry quarterly. The one exempted category where real estate practitioners might find relief is in the area of existing business relationship, though the rules narrowly define such a relationship: You can make calls to a contact who's on the list for up to 18 months after a business transaction and up to three months after a consumer inquiry or application.

NAR is looking into pursuing a legal remedy against the FCC, possibly as part of a broader coalition of impacted business interests, and is also reviewing legislative and regulatory options. In addition, the association is developing guidance on compliance with the registry. The guidance will be posted at REALTOR.org before the Oct. 1, 2003, effective date.

Davie County “Cost of Growth” study is complete; flawed study indicates that retail commercial property is the only type that is not a negative drain on the tax base:

            Tischler & Associates (the consulting firm hired by Davie County to review the cost of growth) has turned in their final draft.  It states that housing, among other uses, does not “pay its way” in terms of services vs. tax revenue generated.  This is different from what has been stated in the study by Dr. Connaughton.  We have reviewed the study and found several problems with it, which I will share with the Davie County Commissioners.  I have been working closely with the Davie County Home Builders in stating our position on this issue to the commissioners as well as Terry Brally, the County Manager.

Town of Kernersville, Unified Development Ordinance Sign regulations:

Real Estate Lead In Signage Staff Summary: Real estate directional signage has become an issue since corporate building companies have started to place signs throughout the community. A letter was sent to developers and real estate firms asking for “comments on what type of real estate lead-in signs should be allowed in Kernersville”. No comments were received. Based on information from members of the original Sign Committee, the intent of lead-in real estate signage was to allow real estate signs to be placed out on the main road and within the development. To clarify the Sign Committee’s original intent, the staff is recommending that real-estate lead-in signs shall only be placed at the access road(s) intersection to a major thoroughfare(s) and lead-ins from that intersection to the home(s).

3-2 SIGN REGULATIONS

3-2.1 SIGN REGULATIONS – CURRENT

(B) Permitted Signs

(1) Signs Permitted

(d) Real Estate Signs. In all RS and RM Districts, a real estate sign is limited to six (6) square feet. In all other districts, real estate signs shall not exceed eighteen (18) square feet. Lead-in (directional) signs are allowed from Friday noon to Monday noon and shall be limited to the access road(s) intersection to a major thoroughfare(s) and lead-ins from that intersection to the home(s).

Off Site Real Estate Signs in Winston-Salem:

Based on complaints, the Winston-Salem City-County Inspections Division recently began vigilant enforcement of the sign ordinance. Real estate lead-in directional signs are allowed from Friday noon to Monday noon BUT ANY SIGNS PLACED IN A RIGHT-OF-WAY MUST HAVE THE PERMISSION OF THE PROPERTY OWNER. All signs violating this ordinance will be removed and discarded.

July 2003

Positive Economic Impact of Residential Development in Davie County is Significant:

            In a study conducted by economic professors from UNC-Charlotte, the impacts of residential development were measured in terms of changes in the counties’ annual output, employment, tax revenue, and public costs.  The report concludes that the construction and occupancy of single family homes increases revenue for the counties above the increase in costs.  In fact, this economic activity is a significant contributor to the overall local economy by also increasing overall county output and jobs.

            The study, based on year 2000 data, indicates that the construction of the 328 permitted single family homes: increased county output by $79 million, generated 705 jobs, increased local tax revenue by $974,000, and only increased public sector costs by $251,000.  The ongoing occupancy of those homes will annually; increase county output by $5.57 million, generate 82 jobs, increase county revenue $554,000, and increase public costs by $446,000.  Additionally, the New Residential Construction Industry, out of 136 separate industries in Davie County, ranks as the 5th largest output industry and 13th largest employment industry.

City of Winston-Salem Draft Traffic Calming Policy:

The Public Works Committee of the City Council unanimously voted to table the section of a policy that would require new developments of a certain size to “calm” traffic in connected existing neighborhoods.  We were concerned with this section of the policy primarily because a developer could be required to “fix” existing traffic problems in neighborhoods where a new development would connect, provided no engineering standards for the traffic calming devices and measures, and gave no objective guidance as to the number and location of the devices.  The Public Works Committee of the City Council will hear it again in August.

Fire Inspections Fee to Fund New Inspector Position:

The City of W-S recently completed a study that identified certain City regulations and processes that could be re-designed to more business friendly.  During this process, customers receiving services from the Inspections and Fire department expressed the need for better Inter-Departmental coordination and willingness to accept higher fees if necessary to implement enhancements.  The Fire and Inspections Departments have reviewed fee changes proposed by staff and a group of affected parties (commercial contractors, and alarm and sprinkler installers), have agreed on a fee schedule.  There will now be an additional fee for fire department review of plans for commercial and multifamily projects.  This fee will go towards paying for additional staff for review and field inspections in order to reduce “late in the game” issues with sprinkler, extinguisher, and alarm systems that can be costly and time consuming.  The fees will begin July 1 and a new inspector will be hired at that time.  If the demand for another inspector exists, and if the fees are generating enough revenue, an additional inspector will be hired.

NCHBA’s top legislative priority in 2003 is the passage of sweeping reform of the Administrative Procedures Act to curb the abuse of the use of “temporary” rules by state agencies. (from NCHBA):

 House Bill 1151 would require “temporary” rules to meet the same standards of review as permanent rules, and rules that did not meet those standards would not go into effect.  HB 1151 passed the House with only five dissenting votes, and on Thursday, June 5th, passed third reading in the Senate unanimously.  The bill will now go back to the House for concurrence in the Senate committee substitute.

ASSOCIATION HEALTH PLAN BILL PASSES HOUSE (from NAR):

Last week, the House passed the Small Business Health Fairness Act, H.R. 660, which would allow bona fide business and professional associations to create and administer association health plans and offer health benefits to association members through either fully insured group pools or self-insurance plans. The Senate has yet to take up the companion bill, S. 545, where it is anticipated to encounter strong opposition. For more info, CONTACT: Marcia Salkin, 202/383-1092, msalkin@realtors.org.