"It's extremely dangerous, potential loss of life when you don't have adequate notification to get everybody out," Fayetteville Fire Department Battalion Commander Ron Lewis said.
Fire inspectors told ABC11 Eyewitness News it appeared someone tried to alter or disable the alarm system.
One resident living in the hotel said last month fire inspectors found the smoke detector and the fire sprinkler in her room didn't work.
"In my room the ceiling is falling down, and I remember hearing the fire marshal telling him he would have to fix it," evacuated resident Tia McNeill said.
Fire inspectors said they tried for more than a month to get the owner of the hotel, John Chen, to repair the fire alarm system.
The fire department said between 50 and 75 people were staying at the hotel. They said many of them were staying in rooms that were converted to small apartments.
Many residents who stay at the hotel said they are down on their luck.
Resident Jennifer Jackson said she came to Fayetteville two weeks ago looking for a new start, but has found herself homeless.
"Amazing that we got to go through this," she said. "And you know he didn't let anybody know anything about it."
The fire department called in the Red Cross to set up a temporary shelter for residents who had nowhere to go.
Officials have not said when or even if residents would get back into the Prince Charles anytime soon.
A spokesman for Chen said he was going to get the fire alarm system repaired, and get the Prince Charles re-opened as soon as possible. But he didn't know when that would be.
It is the latest chapter in what's been a troubled past for the Prince Charles Hotel.
The hotel's owner is still being fined hundreds of dollars a day for building code violations and historical restrictions.
Some wonder if it is the last straw in the latest attempt to breathe new life into the aging downtown icon.
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