North Carolina Home Builders Association Prevails in Cabarrus County APFO Suit

On August 24, the North Carolina Supreme Court issued its long awaited opinion in the Cabarrus County APFO case (Lanvale Properties, LLC  and Cabarrus County Building Industry Association v. County of Cabarrus and City of Locust). The Supreme Court, in a 5-2 decision, affirmed the decisions of the NC Court of Appeals and the trial court which had earlier struck down the APFO.  In support of the argument made by the building industry, the majority opinion concluded that Cabarrus County lacked the authority to impose the APFO.

The Supreme Court rejected each of the county’s arguments raised in an effort to overturn the Court of Appeals decision. The majority opinion, written as correctly anticipated by us, summarily rejected these arguments:

The County urges us to reverse the decisions below for three reasons: (1) The County was authorized to adopt the APFO pursuant to its “general zoning power”; (2) Session Law 2004-39 authorized the County to “adopt and enforce its APFO countywide, including within incorporated areas of the county and without the request or consent of any municipality in the County”; and (3) Plaintiff‟s claims were barred by the applicable statute of limitations. We reject each of these arguments.

The 68-page opinion is available HERE, which contains Justice Jackson’s majority opinion joined by four other justices (Parker, Martin, Newby and Edmonds), and the dissenting opinion authored by Justice Hudson and joined by Justice Timmons-Goodson.

This is a great victory for the real estate industry, and for the North Carolina Home Builders Association (NCHBA) in particular. The NCHBA Legal Action Fund approved funds to file helpful amicus briefs in the Court of Appeals and in the Supreme Court in this case. It did so to preserve the hard-fought victories which the building industry won in the Union County APFO case as well as the earlier victory in the Durham Land Owners case. These earlier victories were threatened because they were unanimous decisions of panels of the NC Court of Appeals which the Supreme Court had declined to hear. Thus, when the Supreme Court granted Cabarrus County’s petition to review this case, it was critical for NCHBA to participate in order to assure that the principles established in the earlier cases were sustained.

Now that the Supreme Court of North Carolina has spoken on this matter, the APFO threat, which was spreading across the state as an alternative to impact fees has been stopped. More importantly, the Supreme Court’s opinion addressed a line of cases urged by the county as precedent for reversing the Court of Appeals which would have greatly expanded a vision of local government authority which could have opened the door for the much broader exercise of local government power on many fronts.

Thanks are due to NCHBA for leading this fight, and to the legal team of Jim Scarbrough, Dan Higgins and Jay Mills for their outstanding work as lead counsel for the plaintiffs.  Jim is a member of the Cabarrus County HBA and has worked tirelessly on this case since it was first brought. Finally, thanks are due to the NAHB Legal Action Committee for their financial assistance to the Cabarrus litigation. It was indeed a team effort.

Cabarrus County has collected more than $6 million in fees over the years, and these will now have to be refunded to the builders who paid them. Stay tuned for more.

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Realtors® Welcome DNC Visitors to North Carolina

Ten digital billboards are on display through September 16 to welcome delegates, media and visitors to North Carolina for the Democratic National Convention. Through a a grant from the National Association of Realtors® (NAR), the Charlotte Regional Realtor® Association and the North Carolina Association of Realtors® (NCAR) worked with Adams Outdoor Advertising to create ten digital billboards throughout the Piedmont region as a way to welcome DNC delegates, media and visitors to North Carolina.

2012 Association/Carolina Multiple Listing Services, Inc. (CMLS) president Jennifer Frontera said, “We all know Charlotte, North Carolina is a great place to live and soon delegates, media and visitors from all over the U.S. will find that out.  Even if visitors to this area don’t come back and call Charlotte home, we want to make sure they remember the Realtors® welcomed them to our great city and state.”

The bright blue digital billboards displaying the “Welcome to North Carolina” message will run in Mecklenburg, Cabarrus, Catawba, Gaston and Union Counties from  August 20 – September 16, 2012.

Highways 150 & 16 (Catawba Co.)
I-85 & Dixon Road (Gaston Co.)
I-85 & Billy Graham Pkwy.
I-77 & WT Harris Blvd.
I-85 & Statesville Ave.
I-77 & Tyvola Road
I-485 & Nations Ford Rd.
I77 & Carowinds Blvd.
US 74 & Walkup Ave (Union Co.)
US 29 & Speedway Blvd. (Cabarrus Co.)

How the DNC will Affect Builders and Developers

With the Democratic National Convention rolling into Charlotte on September 4th, builders and developers should prepare themselves for delays in both inspections and plan reviews throughout Mecklenburg County. Here’s some of what you can expect:

  • Mecklenburg County: A temporary increase in inspection wait times should be expected over the next two weeks. Due to road closings and security measures, projects located within the I-277 loop will experience extensive delays of perhaps several days during the first week of September. Your project’s assigned management team will be able to discuss your particular project’s situation and the options available to address your specific project needs. The Hal Marshall Service Center will remain open, but staff will be limited and traffic congestion may make public access to the building difficult. Parking will be limited only to those visitors with county business.
  • City of Charlotte: The Charlotte-Mecklenburg Government Center (CMGC) will be open to the public during the DNC, but traffic congestion and parking restrictions may make public access to the building difficult. The CMGC parking garage on East 4th and Davidson will be closed beginning Saturday, September 1st through Thursday, September 6th. During the DNC, public visitors to the CMGC will only be allowed access to the lobby level. If you need to visit with any city employee not on the lobby level, you must pre-arrange to meet that employee in the lobby and they will escort you to your meeting location. If you have any questions, please contact Land Development Customer Service at 704-336-6692.

For more information on street closings and Uptown access during the DNC, visit the City’s website.


NAR: Proposed Federal Banking Rules Could Affect Real Estate Lending

The following is a copy of the letter from NAR’s Associate Commercial Policy Representative Vijay Yadlapati:

A joint industry coalition comment letter just submitted to the regulators regarding the proposed Basel III capital rules. The letter requests that the regulators extend the comment period from 90 to 150 days; it also request that they engage in a study of the impacts the proposed regulations will have on non-financial businesses (e.g., real estate).  Comments on the proposed rules are currently due by September 7, 2012.

Also a letter was sent to regulators from Rep. Peter King (R-NY) raising a number of concerns about the impact the proposed rules will have on credit capacity — particularly with smaller banks.


As you may recall, on June 12, 2012, the Federal Reserve, OCC and FDIC proposed regulations implementing the Basel III capital accords. Basel III is an international agreement that updates capital and liquidity requirements for banks and other financial institutions. This 750-page regulation will impact the ability of non-financial businesses to raise capital and increase their costs of borrowing.

In a series of three separate but related proposals, the regulators proposed substantial revisions to the U.S. regulatory capital regimen for banking organizations that, if adopted, will have a significant impact on the entire U.S. banking industry. The U.S. rules are based on the core requirements of the 2011 international Basel III Accord and in significant part on the “standardized approach” for the weighting and calculation of risk-based capital requirements under the 2004-2006 Basel II Accord.  Importantly, the proposals will extend large parts of a regulatory capital regime that was originally intended only for large, internationally active banks to all U.S. banks and their holding companies, other than the smallest bank holding companies (generally, those with under $500 million in consolidated assets).

Commercial Real Estate

Most commercial loans will continue to be risk-weighted at 100 percent. The one significant change is for “high volatility” commercial real estate loans (“HVCRE loans”), a subset of ADC loans. HVCRE loans will be risk-weighted at 150 percent. A lender may be able to return an ADC loan to the 100 percent risk weight through underwriting and the imposition of certain terms, as follows:

•      The LTV ratio is less than or equal to the “applicable maximum supervisory LTV ratio.”

•      The borrower has contributed at least 15 percent of the appraised “as completed” value of the property. The contribution may take the form of cash or unencumbered readily marketable assets, or the borrower may have paid development expenses out of pocket.

•      The borrower has paid to the bank the capital charge that the bank will have to incur on the loan and has done so before the bank advances any funds.

•      The contributed capital, which may eventually include capital generated internally by the project, must remain in place until the project is completed, the facility converts to permanent financing, or is sold or paid in full.

•      Permanent financing by the bank must conform to the bank’s underwriting criteria for long-term commercial mortgage loans. An ADC loan to finance one- to four-family residential properties, however, may continue to be risk-weighted at 100 percent.

Residential Construction and Multifamily Loans

The current risk-based capital rules assign a risk weight of 50 percent to certain one-to-four family residential presold construction loans and to multifamily loans. A 100 percent risk weight applies to a presold construction loan if the purchase contract is cancelled. These risk weights are fixed by statute and cannot be changed. The proposed Standardized Approach, however, adds several new conditions to both kinds of loans in order to qualify for these risk weights.

Presold construction loans must meet several prerequisites designed to ensure that the property will, in fact, be sold on completion. Two notable new requirements are, first, that the builder incur at least the first 10 percent of the direct costs of construction (land, labor, and construction) before the builder may begin to draw down on the loan; and, second, that the loan amount may not exceed 80 percent of the sales price of the presold residence.

Loans secured by mortgages on multifamily properties will remain eligible for the 50 percent risk weight if several conditions are met. For example, a newly originated multifamily loan cannot be risk-weighted at 50 percent and must be weighted at 100 percent. If, after at least one year, the borrower has made all principal and interest payments on time, the loan will be eligible for the 50 percent risk weight, if other conditions are satisfied.

These conditions include the following: (i) the LTV ratio does not exceed 80 percent on a fixed rate loan or 75 percent on a loan where the rate may adjust; (ii) amortization of principal and interest must occur over a period of not more than 30 years, and the original maturity for repayment of principal is not less than seven years; and (iii) annual net operating income of the property must exceed annual debt service by 20 percent for a fixed-rate loan or 15 percent for a loan where the rate may vary.

Basel III Working Group

We have formed a staff level working group with various real estate groups in Washington. This group is meeting regularly to share information and develop a collective strategy on these proposed rules.  As always, please let me know if you have any questions.  Thank you and I hope you have a great weekend.


Vijay Yadlapati

Commercial Policy Representative
National Association of Realtors®
Ph: 202.383.1090
Fx: 202.383.7580


More Information from the National Association of REALTORS®:

Update from NAR
Letter from NAR
Federal Reserve Press Release

REBIC Life Member Doug Boone Passes at Age 66

Doug Boone, a Charlotte developer and one of only four Life Members on REBIC’s Board of Governors, passed away last Thursday at the age of 66. Considered one of the leading voices of the New Urbanist movement, Doug was best known for his development of the New Neighborhood in Old Davidson, a groundbreaking mixed-use project constructed around Davidson’s landmark St. Alban’s Episcopal Church.

A longtime executive with the John Crosland Co., Doug became active in REBIC in the mid 1980s, and was instrumental in molding it into the leading real estate public policy voice of the Charlotte region. For his contributions, he was named a Life Member of REBIC’s Board, along with John Crosland, Jr., Allen Tate, Jr., and former executive director Mark Cramer.

Born Sept. 19, 1945 in Detroit, Mich., Doug attended Western Michigan University in Kalamazoo, earning a bachelor’s degree in business administration, accounting, and law. He spent 22 years (1974-1995) at Crosland, eventually rising to the position of president of Crosland Land Co. During his time with the company, he was involved in acquisition and development of about 60 of Charlotte’s best-known neighborhoods.

He served as president of the Charlotte Home Builders Association in 1985 and also worked on various government committees related to all aspects of the home building industry, the environment and utility issues.

In 1996, he formed Boone Communities, and in the next 12 years, developed three neighborhoods in the Charlotte area. Boone Communities also advised large land owners on land use and provided expert witness and consulting to land owner attorneys in road right-of-way condemnation cases. Doug was always willing to serve his community, and offered to serve on the Board of Equalization and Review after the last countywide reevaluation, though he still recovering from heart surgery at that time.

Doug is survived by his children; Aaron Boone (Jacqueline), Alan Boone (Stacey), Richard Boone, Bill Boone and Elizabeth Boone (Devin Gray); grandchildren, Ana and Jessa Boone, Colin Fowler and Oliver Gray; sister, Marsha Taylor (Rick); niece, Kelley Leach (Jim) and their children, Hayden, McKenzie and Eli and very dear friend, Nancy Slagle.

A memorial service will be held on Friday August 10, at 11 a.m., at St. Alban’s Episcopal Church in Davidson. The family will greet friends following the service.

In lieu of flowers, memorial contributions may be made to Our Towns Habitat, 20310 N Main Street, Cornelius, NC 28031 or Arbor Day Foundation, 100 Arbor Avenue, Nebraska City, Neb. 68410

NAR Podcast on 5-year Reauthorization of National Flood Insurance Program

In the latest Commercial Podcast from NAR Treasurer Bill Armstrong, news comes of the passage on Capitol Hill of the National Flood Insurance Program.  You can hear the cast, called “Flood Insurance Win,” in its entirety here.

On June 29th, the Senate passed the Biggert-Waters Flood Insurance Bill, and President Obama signed it into law on July 9th. This is a  culmination of years of steady effort by NAR members and its legislative team, including  a final push at NAR’s Midyear Legislative Meetings and REALTOR® Rally.

The years of temporary extensions to the National Flood Insurance Program (NFIP) were by definition unable to offer protections to commercial property markets, and in fact led twice to shutdowns, including one that stalled more than 40,000 real estate transactions requiring flood insurance for financing in June 2010 alone.

Reauthorization of NFIP means stakeholders will no longer need to take their chances in the virtually nonexistent market for private flood insurance. There are 21,000 communities across the US that require flood insurance as a financing prerequisite, and the passage of the bill ensure that 5.6 million business and home owners will have access to the coverage they need.

Source: National Association of REALTORS®