Quick Answer
G.S. 47F-3-104 governs how a developer's special declarant rights, such as the right to control the board during declarant control, can be transferred. A transfer needs a recorded instrument, the transferee must sign it, and the section sets out who remains liable after a transfer and what a successor takes on, including a successor after foreclosure.
The one thing a board most needs to know: a transferor stays responsible for obligations that arose before the transfer and for warranty obligations imposed by the Chapter, and lot owners can sue even without privity. The section applies to older communities too, per G.S. 47F-1-102(c).
At a Glance
| Item | Detail |
|---|---|
| Law/citation | G.S. 47F-3-104, "Transfer of special declarant rights" |
| History | S.L. 1998-199, s. 1; S.L. 2014-57, s. 3 |
| Applies to | Planned communities created on or after January 1, 1999, and, per G.S. 47F-1-102(c), pre-1999 planned communities unless the articles or declaration expressly provide to the contrary (events on or after January 1, 1999) |
| Key sections | Subsections (a) through (g) |
| Remedy or penalty | None stated as a penalty. Transferor and successor liability rules are set out in (b), (e) and (f); an attempted exercise of rights in (e)(4) is "void" |
What the Law Says
(a) Recorded instrument
"No special declarant right ... defined under this Chapter may be transferred except by an instrument evidencing the transfer recorded in every county in which any portion of the planned community is located." Apart from the foreclosure rule in (c), the instrument "is not effective unless executed by the transferee."
(b) Transferor liability
- A transferor "is not relieved of any obligation or liability arising before the transfer and remains liable for warranty obligations imposed upon the transferor by this Chapter." "Lack of privity does not deprive any lot owner of standing to maintain an action to enforce any obligation of the transferor."
- If the successor is an affiliate of the declarant, the transferor is jointly and severally liable with the successor for the successor's obligations relating to the community.
- If the transferor keeps some rights and transfers others to a non-affiliate, the transferor remains liable for obligations tied to the retained rights arising after the transfer.
- A transferor has no liability for a non-affiliate successor's acts or omissions in exercising the transferred rights.
(c) and (d) Foreclosure and similar sales
On foreclosure, trustee's sale, tax sale, judicial sale or sale in bankruptcy or receivership of declarant-owned lots or land subject to development rights, a buyer of all the property "but only upon the person's request in an instrument recorded in every county" succeeds to the requested special declarant rights, unless a mortgage or other agreement provides otherwise. The conveying judgment or instrument must transfer only the rights requested.
If all of a declarant's interests in the community are sold in such a sale, the declarant "ceases to have any special declarant rights and the period of declarant control (G.S. 47F-3-103(d)) terminates" unless (1) the conveying instrument transfers all special declarant rights to a successor declarant, or (2) the declarant earlier transferred the board-appointment rights to someone else under this section.
(e) Successor obligations
- An affiliate successor is subject to all obligations and liabilities imposed on the transferor by the Chapter or the declaration.
- A non-affiliate successor in a foreclosure-type transfer is subject to obligations expressly imposed by the Chapter or declaration on a declarant relating to its exercise or nonexercise of rights, or on its transferor, other than five listed items: misrepresentations, warranty obligations on improvements, third-party contract obligations, fiduciary breaches by earlier appointees, and the transferor's acts after the transfer.
- A non-affiliate successor to only the right to keep sales offices, management offices, signs and models may not exercise other special declarant rights and has no declarant liability.
- A successor taking by foreclosure-type conveyance who records an intention to hold the rights solely for transfer may not exercise them except the right to control the board for the remainder of declarant control, and attempted exercise is "void."
(f) and (g)
Subsection (f) says nothing in the section subjects a successor to a transferor's claims or obligations other than those "expressly arising under this Chapter or the declaration." Subsection (g) says "assignment of declarant rights" includes any assignment of special declarant rights to a person, including assignments under this section.
What This Means in Practice
For boards
When a developer sells out to a builder, or a lender forecloses, check the county records for the recording required by (a) and (c). Without a recorded instrument, the statute says special declarant rights may not be transferred. Our reading: a board that is told someone else now controls the declarant rights should ask for the recorded instrument before dealing with that person on turnover, assessments or approvals.
The section also determines who answers for pre-transfer problems. Subsection (b) says a transferor keeps liability for obligations arising before the transfer and for statutory warranty obligations, so a claim about the original developer's work is not necessarily lost when the rights change hands. Whether a specific defect claim fits is a question for counsel.
For owners
The privity sentence in (b)(1) means an owner can sue to enforce a transferor's obligation without having contracted with that transferor.
What the law does not say
- It does not define the time to bring a claim or cap damages.
- It does not say what happens when a recorded instrument is defective, beyond the effectiveness rule in (a). Open question.
- We did not re-read the definition of special declarant right in G.S. 47F-1-103(28). Check it before applying this section.
- We did not read the condominium counterpart or any case applying the section.
Timeline
| Date | Event |
|---|---|
| January 1, 1999 | Planned Community Act effective (S.L. 1998-199) |
| Date not verified | S.L. 2014-57, s. 3 amended the section (listed in the statute history) |
Related North Carolina Law
- G.S. 47F-3-103: board, declarant control and owner-elected board
- G.S. 47F-3-105: terminating declarant contracts and leases
- G.S. 47F-3-111: tort liability and declarant torts
- G.S. 47F-1-102: applicability and pre-1999 communities
- North Carolina HOA laws complete guide
Board Checklist
- Pull the county record for any claimed transfer of declarant rights, in every county where the community lies.
- Confirm the instrument is signed by the transferee, except in a foreclosure-type transfer under (c).
- Identify whether a successor is an affiliate of the original declarant.
- After a foreclosure or sale, check what rights the conveying instrument actually transferred.
- Keep a file of the transfer history and warranty documents for turnover.
- Ask counsel before relying on any declarant right claimed by a new party.
Frequently Asked Questions
How can a developer transfer special declarant rights in North Carolina?
Under G.S. 47F-3-104(a), only by an instrument recorded in every county where any part of the community is located, and, apart from foreclosure-type transfers, signed by the transferee.
Does the original developer stay liable after selling its rights?
The transferor remains liable for obligations that arose before the transfer and for warranty obligations imposed by the Chapter, with different rules for affiliates and for retained rights.
Can an owner sue a former declarant without a contract with it?
Subsection (b)(1) says lack of privity does not deprive a lot owner of standing to enforce the transferor's obligation.
What happens to declarant control after a foreclosure?
If all the declarant's interests are sold in a foreclosure-type sale, special declarant rights end and the period of declarant control terminates, unless one of two listed exceptions applies.
Does this apply to pre-1999 communities?
Yes, per G.S. 47F-1-102(c), unless the articles or declaration expressly provide to the contrary, and only for events on or after January 1, 1999.
Is an unrecorded transfer valid?
The statute says no special declarant right "may be transferred except by" a recorded instrument. Ask counsel about a specific case.
Where We Stand
Our position: we are neutral on this law. It mainly governs developers, lenders and successors, and has limited day-to-day effect on running an established community. Tip: if your community is still under declarant control or just turned over, ask counsel to review the recorded transfers and warranty history before you sign any turnover paperwork. This is Association Property Managers' operating view as a management company, separate from the legal summary above, and it is not legal advice.
Where This Comes From
This page is based on the full text of G.S. 47F-3-104, S.L. 2014-57 as listed in its history, and the pre-1999 list in G.S. 47F-1-102(c), read on the North Carolina General Assembly site (Chapter 47F on ncleg.gov). Because the section is long, this page summarizes later subsections instead of quoting every clause. We did not read cases applying it.
How APM Helps
Association Property Managers provides remote HOA and condo management for associations in North Carolina, starting at a flat $99/month per community with no per-door fees or long-term contracts. See remote management in North Carolina, browse every North Carolina state-law guide, or request a free proposal, delivered within three business days. Laws and licensing rules differ by state, and we confirm the requirements for North Carolina when we build your proposal.
Legal disclaimer: This article is general information, not legal advice. Laws change and associations differ. Confirm the current statute text and how it applies to your governing documents with a licensed North Carolina attorney before acting.
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