A South Carolina bill we have been watching for more than a year was signed into law by the governor yesterday, May 17, 2018. House Bill 3886 is the first bill specifically directed at homeowners associations and condominiums in South Carolina and will impact how each of these types of communities operates. Officially titled the “South Carolina Homeowners Association Act,” click here for the text of the law.
Here is a brief summary of some of the key parts of the new law:
Disclosure Duty
The law creates a new duty to disclose whether real property being sold is part of a homeowners association. Along with the duty to disclose things like the condition of floors, foundations, plumbing, electrical, and other components of the property, the law will now require property owners to disclose whether the property being sold is part of a homeowners association. The question that remains unanswered is whether this is something that an average homeowner would be able to answer without guidance from an attorney.
Record Governing Documents
“Governing Documents” are defined in the new law to include the Master Deed or Declaration of Covenants, Conditions, and Restrictions (sometimes called just the “Declaration,” the “Covenants,” or the “CC&Rs”). To continue to be enforceable these documents must be recorded if they have not been. For most communities this is not a problem since the standard practice has been to record them in order to put all parties on notice of the restrictions and covenants that affect Owners in the community. Governing Documents also includes the community Bylaws. Because it is far less common for these to be recorded most communities will need to take action to have them recorded.
In addition to ensuring that these documents are recorded, there are also additional steps that must be taken to keep them enforceable year after year. HOA Boards will need to stay on top of this requirement as it could affect whether they can enforce their covenants.
Record Rules and Regulations
Unlike governing documents the new law does not define what constitutes “rules and regulations” but does contain a similar recording requirement. These could include things like documents actually entitled “rules and regulations” or other documents such as a community handbook, architectural guidelines, and other similar rules.
Boards should consult with a community association attorney to determine what documents the new law will require to be recorded.
48-hour Notice for Meetings to Increase Budgets
For those communities that are not incorporated as nonprofits pursuant to the South Carolina Nonprofit Act this will require a minimum notice of 48-hours before any decision can be made to increase the budget. Depending on what your community’s current requirements are, this may or may not impact you.
Inspection and Copying of Association Records
This addition in the law is really to correct a loophole that had existed. Most homeowners associations are incorporated as nonprofit entities and therefore the SC Nonprofit Act’s provisions on access to certain community documents are already required. However, there are some communities that have never been incorporated and they had been able to argue that there was no statutory requirement to provide access to community documents. This change makes it clear that all homeowners associations and condominiums must comply with the SC Nonprofit Act’s document access requirements.
Magistrate’s Court to Have Concurrent Jurisdiction for Monetary Disputes
The idea behind it is to allow parties to have easier access to court and to reduce costs of involvement with the legal system for HOA matters, but it remains to be seen what impact this change will have.
Creation of Department of Consumer Affairs office, i.e., an Ombudsman Office
Currently this is limited to maintaining a website, production of educational materials, and collection of complaints for reporting and informational purposes—it is not promulgating regulations or issuing guidance or serving as arbiter in disputes.
Many critics of this part of the new law are concerned with the potential extra layer of bureaucracy that this office could create. Depending on how it develops it could add time to all enforcement matters and remove control of the community from the homeowners themselves. There are also grave concerns about the potential expense of an office like this, especially if it grows, as bureaucracies often do over time.
If you have questions about how this new law impacts your community, the attorneys at Law Firm Carolinas in North Carolina and South Carolina are glad to answer questions and assist with anything needed to bring your community into compliance.