2018 Legislative Update

On May 17, 2018, South Carolina’s Governor signed House Bill 3886 into law. Officially titled the “South Carolina Homeowners Association Act,” this is the first South Carolina bill specifically directed at homeowners associations and condominiums in South Carolina and will impact how each of these types of communities operates.

Below is a brief summary of some of the key parts of the new law provided by David Wilson of Black, Slaughter & Black Attorneys at 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. 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 to Governing Documents. 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 by More Than Ten Percent (10%)

For many communities this will not be a change because the community documents already require member approval before the budget can be increased by more than ten percent (10%). Depending on what your community’s current requirements are, this provision may or may not impact your association.

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 teh SC Nonprofit Act’s provisions on access to certain community documents are already required. However, there are some communities that have been never incorporated and they have 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 up to $7,500

The idea behind this change 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, producing educational materials, and collecting complaints for reporting and informational purposes–it is not promulgating regulations or to 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.

Click here for the full text of the law.