In the latest version of what appears to be an annual exercise, the North Carolina General Assembly passed a regulatory reform bill over the Governor's veto that includes relaxation of environmental provisions.
This year's efforts lessen stormwater restrictions on impervious surfaces in overbuilt subdivisions in North Carolina coastal counties, providing relief to homeowners' associations ("HOAs") that, through no fault of their own, are out of compliance with state stormwater regulations.
Impervious Surface Limits in Stormwater Permits
Post-construction stormwater management in coastal counties has been around for many years. The North Carolina Department of Environmental Quality ("DEQ") issued "Stormwater Certifications" as far back as 1991, which morphed over time under legislative and regulatory changes to the state stormwater permits issued today by DEQ's Division of Energy, Mineral and Land Resources ("DEMLR").
On a statewide basis, DEMLR issues and enforces stormwater permits under various programs, and it operates under the coastal counties post-construction stormwater management program for coastal development. Those stormwater permits generally are low density or high density, and either can be issued to developers for residential subdivisions.
Low-density stormwater permits limit impervious surfaces to a certain percentage of an entire subdivision, often with per-lot restrictions, whereas high-density permits require engineered stormwater control measures with specific operation and maintenance requirements.
Stormwater permits for residential subdivisions include terms that must be incorporated in restrictive covenants recorded in the Register of Deeds Office in the county in which the subdivision is located in order to bind subsequent owners of any portion of the subdivision. Such terms include impervious surface limitations restricting development on each lot to a certain square footage of the built-upon area and an overall percentage limitation on impervious surfaces for the entire subdivision.
Permit Transfers Can Uncover Violations
When stormwater permits are transferred from developers to HOAs, the HOAs are increasingly finding themselves vexed by stormwater issues inherited from the developer's lack of oversight by and DEMLR's lack of compliance enforcement. Violations of impervious surface limitations often remain dormant until there is a request to transfer a subdivision's stormwater permit from the developer or current permit holder to the HOA.
Part of the transfer process includes an inspection of the subdivision and stormwater control measures by DEMLR, which often uncovers the fact that the subdivision, as built, contains more impervious surface area than allowed under the plans that were submitted and became part of the subdivision's stormwater permit.
Sometimes the issue results from homeowners constructing more built upon area than allowed under the subdivision's restrictive covenants, but often it's the result of the developer not following the approved design plans containing the original impervious surface limitations set out in the subdivision's stormwater permit.
It's not unusual for a developer to change designs during construction, fail to modify the stormwater permit, certify compliance with the design plans, then transfer control of the subdivision to an HOA without transferring the stormwater permit. In earlier articles, we have highlighted this transfer problem. Unfortunately, by the time anyone, including DEMLR, realizes a stormwater permit was never transferred, the subdivision is built out, homes have been sold, the subdivision is out of compliance, the developer is long gone, and the HOA must deal with the fallout.
A Solution for the Unsolvable
Homeowners in New Hanover County complained to their state representatives about the practical and legal problems created in older subdivisions so much that the General Assembly created a limited solution. Session Law 2018-114 entitled "An Act to Provide Further Regulatory Relief to the Citizens of North Carolina" (the "Act") became effective on June 27, 2018, and contains the Coastal Stormwater Program Variances. Under this legislation, any subdivision meeting these provisions will be deemed in compliance with the impervious surface limitations of the statutes and rules regulating stormwater in the coastal counties:
- The subdivision's original Declaration of Covenants was recorded at least 20 years prior June 27, 2018; and,
- The original developer of the subdivision transferred the stormwater permit to the HOA for the subdivision and, at the time of the transfer, the HOA had no notice from the original developer or any regulatory agency, i.e., DEMLR, that the subdivision was not in compliance with the impervious surface limitations.
The Coastal Stormwater Program Variance option applies only to impervious surfaces built before January 1, 2017.
The relief allowed by the Act is valuable if a stormwater compliance issue arises for an HOA where the HOA has received a stormwater permit through the transfer process and, as a part of the process, DEMLR deemed the subdivision in substantial compliance with its stormwater permit.
However, for HOAs in a battle with a developer over which party has responsibility for bringing the subdivision into compliance for DEMLR to effectuate a transfer of the subdivision's stormwater permit, no relief is available. Those HOAs should consult with a team that includes an attorney and a stormwater engineer experienced in coastal stormwater permits to develop a strategy to work out a resolution.
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This article is not intended to give, and should not be relied upon for, legal advice in any particular circumstance or fact situation. No action should be taken in reliance upon the information contained in this article without obtaining the advice of an attorney.