GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1991

H	2 

HOUSE BILL 37
Committee Substitute Favorable 5/2/91

Short Title:  Homeowners Recovery Fund.	(Public)
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Sponsors:
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Referred to:  

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February 11, 1991

A BILL TO BE ENTITLED
AN ACT TO ESTABLISH A HOMEOWNERS RECOVERY FUND UNDER THE SUPERVISION OF THE GENERAL CONTRACTORS LICENSING BOARD.
The General Assembly of North Carolina enacts:
Section 1.  Chapter 87 of the General Statutes is amended by adding the following new Article to read:
"ARTICLE 1A.
"Homeowners Recovery Fund.
"§ 87-15.5. Definitions.
As used in this Article, unless the context clearly requires otherwise:
(1)	'Applicant' means the owner of a single-family residential dwelling unit who has suffered a reimbursable loss because of the dishonest or incompetent conduct of a general contractor in constructing or altering the residential dwelling unit and has filed an application for reimbursement from the Homeowners Recovery Fund.
(2)	'Board' means the General Contractors Licensing Board.
(3)	'Fund' means the Homeowners Recovery Fund.
(4)	'Dishonest conduct' means fraud or deceit in obtaining a license under Article 1 of Chapter 87 of the General Statutes, or fraud or deceit by a general contractor in the practice of general contracting.
(5)	'General contractor' means a person or entity who:
a.	Is licensed under Article 1 of Chapter 87 of the General Statutes; or
b.	Fraudulently procures any building permit by presenting the license certificate of another; or
c.	Fraudulently procures any building permit by falsely impersonating a licensed contractor.
(6)	'Incompetent conduct' means incompetency or gross negligence by a general contractor in the practice of his profession.
(7)	'Reimbursable losses' are only those losses of money which:
a.	Result from the dishonest or incompetent conduct of a general contractor which conduct occurred on or after October 1, 1991;
b.	Are not paid by or on behalf of, in whole or in part, the contractor whose conduct caused the loss; and
c.	Are not covered by any bond, surety agreement, or insurance contract.
"§ 87-15.6. Homeowners Recovery Fund.
(a)	There is established the Homeowners Recovery Fund.  The Fund shall be administered by the General Contractors Licensing Board under rules and regulations adopted by it.  The purpose of the Fund is to reimburse homeowners who have suffered financial loss as a result of the dishonest or incompetent conduct in North Carolina of a general contractor.
(b)	The Board shall have authority to impose a surcharge of not more than fifty dollars ($50.00) annually on each license application or renewal, which surcharge shall be deposited by the Board into the Fund.  For the first year of operation of the Fund the Board shall assess a surcharge in an amount sufficient to yield one hundred fifty thousand dollars ($150,000).  Thereafter the Board shall maintain a minimum level of one hundred fifty thousand dollars ($150,000) in the Fund for recovery and guaranty purposes.  The Board may suspend the surcharge for any year for which the Fund balance is at least one hundred fifty thousand dollars ($150,000) and the Board determines that sufficient funds are available to meet likely disbursements for that year and that an adequate reserve will remain after such disbursements.  The Board shall receive, manage, and disburse funds as may from time to time be appropriated or voluntarily contributed to it, or otherwise received by it, as provided in this Article.  G.S. 87-7 shall not apply to the Homeowners Recovery Fund.
"§ 87-15.7.  Fund administration.
(a)	All sums received by the Board pursuant to this Article shall be held in a separate account known as the Homeowners Recovery Fund.  Deposits to and disbursements from the Fund account shall be subject to the written direction of the Board under rules established by it.
(b)	The Board shall adopt regulations and rules of procedure governing management of the Fund account, presentation and processing of applications for reimbursement, processing of reimbursable claims, and subrogation or assignment of the rights of any reimbursed applicant.
(c)	The Board may use or otherwise expend monies in the Fund for the following purposes:
(1)	To make reimbursements on approved applications;
(2)	To purchase insurance to cover such losses, in whole or in part, deemed appropriate by the Board and not inconsistent with the purposes of the Fund;
(3)	To invest such portions of the Fund as are not currently needed to reimburse losses and maintain adequate reserves, and as are permitted to be made by fiduciaries under State law; and
(4)	To pay the expenses of the Board to administrate the Fund, including employment of counsel to prosecute subrogation claims.
(d)	The Board shall submit annually a report to the State Treasurer accounting for all monies collected and expended in the administration of the Homeowners Recovery Fund.
"§ 87-15.8. Application for reimbursement.
(a)	An application for reimbursement from the Homeowners Recovery Fund may be filed by any person who has suffered a monetary loss as the result of dishonest or incompetent conduct by a general contractor in the construction, alteration, or repair of a single-family residential dwelling unit owned by such person.
(b)	The Board shall prepare a form of application for reimbursement from the Homeowners Recovery Fund.  Effective October 1, 1991, the Board may consider applications for reimbursement of losses that arise after that date and which are caused by the dishonest or incompetent conduct of any general contractor committed on or after that date; provided, however, that such reimbursement shall be made only to the extent to which such losses are not bonded or otherwise covered, protected, or reimbursed, and provided further that the applicant for reimbursement has exhausted all civil remedies against the contractor or his or her estate, has obtained a judgment in his favor in such action which judgment has been unsatisfied, and has complied with other applicable rules of the Board.  If the applicant is prevented from filing suit or obtaining a judgment against the contractor due to the automatic stay provision of Section 362 of the U.S. Bankruptcy Code, the requirement of exhaustion of civil remedies and the obtaining of a judgment against the contractor shall be waived.  The Board shall have authority to find that all other requirements of this Article have been met by the applicant.
(c)	The Board shall investigate all applications made and may reject or allow such claims in whole or in part based on and to the extent that monies are available in the Homeowners Recovery Fund.  The Board shall have complete discretion to determine the order, amount and manner of payment of approved applications.  All such payments shall be a matter of privilege and not of right and no person shall have any right in the Homeowners Recovery Fund as a third party beneficiary or otherwise.  No attorney shall be compensated by the Board for prosecuting an application before it.
"§ 87-15.9. Subrogation for reimbursement made.
In the event reimbursement is made to an applicant under this Article, the Board shall be subrogated in the reimbursed amount and may bring such action as deemed advisable against the contractor, his assets or his estate.  The Board may enforce any claims it may have for restitution or otherwise, and may employ and compensate consultants, agents, legal counsel, and other such employees as it deems necessary and appropriate to carry out its authority under this section."
Sec. 2.  This act is effective upon ratification.