Although far from comprehensive, the South Carolina
legislature has successfully taken its first steps to regulate homeowners’
associations. The South Carolina Homeowners Association Act (“Act”) became
official on May 17, 2018 when the governor signed it into law. Up to this
point, South Carolina has never had a comprehensive law governing homeowners’
associations. Until now, there was only the South Carolina Horizontal
Property Act, which governs condominiums, and the South Carolina Nonprofit
Corporation Act, which deals with operational issues within nonprofit
corporations and generally applies to homeowners’ associations since they are
non-profits.
The Act places new requirements upon homeowners’
associations. It defines a homeowners’ association as any entity developed
to manage and maintain a planned community or condominium in which there is a
recorded declaration requiring a person to pay assessments. This
definition covers all mandatory homeowners’ and condominium associations.
The Act requires every homeowners’ association to have recorded its
declaration and bylaws by January 10, 2019 in order for those
documents to remain enforceable. This does not present a new
requirement for declarations; declarations already had to be recorded to
be enforceable. The requirement to record bylaws, however, is new. Most HOAs do not typically record their
bylaws, so those whose bylaws are not presently recorded will need to do so
prior to January 10, 2019 (some declarations have the bylaws attached as an
exhibit when they are recorded and in that case the bylaws will not need to be
re-recorded independently, unless they have been modified since they were first
recorded.) The unspoken requirement is that the bylaws must be formally
adopted by the HOA, which is sometimes an overlooked corporate formality during
the rush to incorporate an HOA. By way of comparison, North Carolina does not
require HOA bylaws to be recorded.
A note regarding what we mean by the term “recorded”. This
term means filed with the county office which oversees land records. Originally known as the “Register of Mesne
Conveyances”, the name of the land records office in some counties is known as
the Register of Deeds, or in some counties, the Clerk of Court’s office records
land records (“mesne” is an Old English term referring to the office which
records the documents making up the chain of title for a particular piece of
real estate). Upon recordation, a recorded document serves as public notice of
the contents of that document to all the world.
In an unprecedented move, the Act also requires HOA rules and regulations to be recorded by January 10, 2019 to be enforceable, and by January 10 of each successive year to remain enforceable. Somewhat confusingly, the Act states that rules and regulations are effective at the time they are properly adopted by the HOA, but to remain effective as of January 11 and thereafter, they must be recorded by January 10 of each year. So again, this provision does not affect the current enforceability of an HOA’s current rules and regulations, but HOAs must record them by January 10th of each year. And, given that they will now be a public record, HOAs may now wish to be more careful in the wording of their rules and regulations, and most likely, make sure they have been vetted by legal counsel to ensure, for example, that they do not contain provisions which could be deemed to be discriminatory.
In an unprecedented move, the Act also requires HOA rules and regulations to be recorded by January 10, 2019 to be enforceable, and by January 10 of each successive year to remain enforceable. Somewhat confusingly, the Act states that rules and regulations are effective at the time they are properly adopted by the HOA, but to remain effective as of January 11 and thereafter, they must be recorded by January 10 of each year. So again, this provision does not affect the current enforceability of an HOA’s current rules and regulations, but HOAs must record them by January 10th of each year. And, given that they will now be a public record, HOAs may now wish to be more careful in the wording of their rules and regulations, and most likely, make sure they have been vetted by legal counsel to ensure, for example, that they do not contain provisions which could be deemed to be discriminatory.
The rules and regulations must also be made accessible to
members. The Act allows such accessibility through a website
maintained by an HOA, or by posting the rules and regulations in a
conspicuous area within the common areas. This makes sense since arguably rules
and regulations are not enforceable if there is no way for members to know of
them.
Unincorporated homeowners’ associations, a rarity nowadays, must now provide members with notice at least 48 hours in advance of a meeting where the budget is to be increased in a given year. Incorporated HOAs are presently subject to lengthier notification requirements, and are therefore exempted from the 48-hour notification provision.
Unincorporated homeowners’ associations, a rarity nowadays, must now provide members with notice at least 48 hours in advance of a meeting where the budget is to be increased in a given year. Incorporated HOAs are presently subject to lengthier notification requirements, and are therefore exempted from the 48-hour notification provision.
The Act authorizes Magistrates Courts (generally referred to
as “small claims court”) to hear HOA disputes, provided the dispute does not
exceed the jurisdictional limitation of small claims court, currently
$7,500.00. This is new, as it was previously uncertain whether the very limited
subject matter jurisdiction of small claims court allowed HOA disputes to be
heard there.
The Act authorizes the South Carolina Department of Consumer Affairs to produce and disseminate educational information to the general public about homeowners’ associations and rights, responsibilities and the roles of homeowners’ associations, boards of directors and homeowners. The Department is directed to collect and publish data about homeowners’ complaints against homeowners’ associations, or homeowners’ associations’ complaints against homeowners, including the HOA name and any property management company. Notably, personal identifying information of the complaining party may not be published, allowing the complainant to remain anonymous while spotlighting the HOA and management company publicly, which we hope does not end up becoming a harassment tactic for disgruntled homeowners.
BOTTOM LINE: As with most new laws, time will tell how effective this new legislation is at enabling homeowners to educate themselves about their subdivision’s governing documents. In general, we are big believers in transparency and are in favor of HOAs’ governing documents, including rules and regulations, being publicly available and easily accessible. We are glad that the South Carolina General Assembly did not seek to regulate the content of declarations, bylaws or rules and regulations, but only seeks to ensure that they are publicly available. We hope this legislation may silence some of the dubious complaints that we sometimes hear that a member did not know about the homeowners’ association or what was required for compliance. It should also result in more accountability for board members. We query whether the reporting of conflicts between owners and their associations will have a positive effect. At least in our experience, a single or small group of vocal complainers may give the appearance of systemic disagreements; however, in reality, most interactions between homeowners’ associations and their members are positive.
Please stay tuned as this new law is implemented, and of course feel free to contact us to discuss any of these issues and steps needed for compliance, or any other issues affecting your South Carolina or North Carolina HOA.
The Act authorizes the South Carolina Department of Consumer Affairs to produce and disseminate educational information to the general public about homeowners’ associations and rights, responsibilities and the roles of homeowners’ associations, boards of directors and homeowners. The Department is directed to collect and publish data about homeowners’ complaints against homeowners’ associations, or homeowners’ associations’ complaints against homeowners, including the HOA name and any property management company. Notably, personal identifying information of the complaining party may not be published, allowing the complainant to remain anonymous while spotlighting the HOA and management company publicly, which we hope does not end up becoming a harassment tactic for disgruntled homeowners.
BOTTOM LINE: As with most new laws, time will tell how effective this new legislation is at enabling homeowners to educate themselves about their subdivision’s governing documents. In general, we are big believers in transparency and are in favor of HOAs’ governing documents, including rules and regulations, being publicly available and easily accessible. We are glad that the South Carolina General Assembly did not seek to regulate the content of declarations, bylaws or rules and regulations, but only seeks to ensure that they are publicly available. We hope this legislation may silence some of the dubious complaints that we sometimes hear that a member did not know about the homeowners’ association or what was required for compliance. It should also result in more accountability for board members. We query whether the reporting of conflicts between owners and their associations will have a positive effect. At least in our experience, a single or small group of vocal complainers may give the appearance of systemic disagreements; however, in reality, most interactions between homeowners’ associations and their members are positive.
Please stay tuned as this new law is implemented, and of course feel free to contact us to discuss any of these issues and steps needed for compliance, or any other issues affecting your South Carolina or North Carolina HOA.
