Things Community Management Companies Should Not Do in South Carolina

We often are asked by managers and Board members what duties are appropriate to delegate to a property manager.

First, a property manager is almost always going to be considered an agent of the homeowners association. As an agent, what authority does the property manager have?  In general, an association manager has whatever power is granted by the Board of Directors for the HOA.  It is common for management companies to manage the day-to-day running of the association, leaving the decision-making for the Board.  Some common duties include collection of assessments, helping to enforce restrictions, helping with the annual budget, and sending out notices and other letters.

Are there any types of things that a property manager should not be doing?  Certainly anything outside the agreed-upon scope of the property manager’s duties is to be avoided by the property manager.  In addition, certain areas should be handled by professionals other than the property manager.

For all legal matters, homeowners associations should employ a licensed South Carolina attorney, preferably one experienced in dealing with homeowners association and condominium issues. It is important to remember that except for when individuals represent themselves, practicing law without a license is prohibited by the State of South Carolina and is subject to both civil and criminal penalties.  In South Carolina, the unauthorized practice of law is considered a felony with a penalty of up to five years in prison and/or up to $5,000 for each separate act.

In the recent South Carolina Supreme Court case of Rogers Townsend & Thomas, P.C. v. Peck, et al., Appellate Case No.: 2011-199626, one management company’s specific practices were held to be the unauthorized practice of law.  The Court held that each of the following activities engaged in by a community management company and its principals and agents constituted the unauthorized practice of law:  (1) representing homeowners associations in magistrate’s court, (2) filing judgments in circuit court, (3) preparing and recording lien documents, and (4) advertising that the management company could provide legal services.

As a management company, if your business model includes any of the above items it is now clear that you must shift these types of duties to a duly-licensed South Carolina attorney. If a property manager is being asked by a board of directors to perform functions that constitute the unauthorized practice of law, the manager, Board and/or individual board members may be subject to both civil and criminal penalties.

In addition to answering specific Board and manager questions, I regularly provide training for property managers and Boards to help understand their legal duties and what is—and is not—permitted under South Carolina law.

If there is any question on whether a Board can or should delegate responsibilities to the property manager the best practice is to consult the association’s attorney. And, given this new case, the Board and managers should always err on the side of caution when it comes to legal action and legal issues.

HOA & Condo Associations