With the recent decision in Winrose Homeowners’ Association, Inc. v. Hale the South Carolina Supreme Court proved that it is past time for a comprehensive HOA statute in South Carolina. For more in-depth analysis of the Court’s decision, see our earlier article.
Suffice it to say, throughout its decision the Court expressed discomfort with some practices that have grown up surrounding HOA foreclosures in this state. But it is important to note what it did not say as well. The Court did not say that HOAs could not foreclose. In fact, it specifically stated that the HOA in this case “had the legal right to pursue collection of the debt owed, including foreclosure of the Property to satisfy the debt.”
Most of the Court’s vitriol was directed at foreclosure purchasers whose business model of “leveraging a nominal debt to secure an exorbitant return from homeowners who fear the prospect of eviction” seemed to turn the Court’s stomach.
The Court also spared some of its ire for attorneys’ firms that pursued foreclosure under “certain circumstances.” However, from my review of the case it is unclear exactly what the Court’s problem was in regard to the legal requirements of conducting the foreclosure and sale. The Court already said that the HOA had the right to foreclose. It was only troubled by the amount of the foreclosure sale, and most of its concern was centered around the business practices of a third party purchaser (and honestly I can’t argue with their concern there).
This case again highlights the fact that courts in South Carolina continue to wrestle with some of the most basic concepts relating to homeowners associations precisely because there is no comprehensive HOA statute. This constant struggle to give a framework for how HOAs should operate in South Carolina results in wasted energy, time, and money for everyone involved—especially homeowners.
If this state is truly concerned about protecting homeowners, then the ultimate protection that it could give homeowners would be creation of a comprehensive statute. Then those protections would be built into each foreclosure case and the Supreme Court wouldn’t have to soil themselves when a very basic HOA question is presented on appeal next time.
Among other things, a comprehensive statute could solve the Court’s concern about:
- bidding practices at an HOA foreclosure
- what happens to mortgages in an HOA foreclosure
- notices designed to protect homeowners, including notice of the hearing and notice of the foreclosure sale
Some states have even enacted statutes that allow an HOA to have super-priority liens up to a certain amount. This adds protection to an HOA but also creates limits on when they could or would foreclose. The HOA problems that our courts are currently struggling with can be drastically reduced or eliminated. Instead of re-creating the judicial wheel that almost every other state in this nation has already been using for decades, it is time for a comprehensive HOA statute here in South Carolina. To find out how this case could affect your homeowners association contact one of our South Carolina community association attorneys.