Regulation of HOAs now in effect

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A bill regulating homeowners associations took effect May 17 with Gov. Henry McMaster’s approval, making it the state’s first attempt to formally govern housing organizations.

While the bill does much to clarify the rights of HOA’s and homeowners, some attorneys say the law does not go far enough.

“South Carolina is one of the few states that doesn’t have a comprehensive homeowner’s law on the books,” said HOA attorney David Wilson, who is from Charlotte, but practices throughout South Carolina. “This was a step in the right direction … but I think it stops well short of what’s needed.”

Meanwhile, the legislators behind the bill say it adds transparency while giving consumers a place to turn when conflicts arise.

“Anytime there’s … a quasi-governmental organization that has the power to foreclose on your home, they need to operate in the sunlight,” Rep. Dan Hamilton, R-Greenville, who co-sponsored the bill, said. “Hopefully this law will provide more transparency and options for homeowners.”

A place to turn to

Hamilton, who works in real estate when he’s not in the legislature, said the bill is based on common complaints he hears from constituents and homeowners associations.

He said that while the bill that passed wasn’t the same as the one that was initially written, he feels the central point is intact in that it affords consumers a place to call when they have a complaint.

“If they have a problem, they really have nowhere to go except lawyers and the courts, and we just thought it’d be a good idea to find an alternative solution to keep those disputes out of court and find a way to help homeowners navigate solutions to issues,” Hamilton said.

As a result, the bill creates a new Department of Consumer Affairs Services for Homeowners and Homeowners Associations which will field complaints and make information about them publicly available online.

While the bill prohibits the department from arbitrating disputes between homeowners and HOAs, the idea is that the organization will record data from both sides of conflicts and make it publicly available so that all sides are treated fairly in the court of public opinion. Making the information available also gives homebuyers better tools for researching before they buy.

Wilson said that he has some trepidation about the new department.

“I’m not sure the creation of this Department of Consumer Affairs is going to accomplish much,” Wilson said. “The fear, among some in the legislature, is that this office might exponentially grow until [they] can’t fund it.”

While the department has no authority to settle disputes, the bill does make HOA conflicts worth up to $7,500 the jurisdiction of magistrate courts.

“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,” Wilson said in a blog post about the law.

Wilson said that all other disputes are heard in either the court of common pleas, or in cases involving foreclosure, the master-in-equities court.

New requirements

Hamilton said the bill creates transparency by creating new requirements for both HOAs and homeowners.

To get in line with the new regulations, HOAs must now begin recording their “rules, regulations and amendments” with authorities in the county in which they are located, and make them available upon request by a homeowners association member.

The law says that HOAs have until Jan. 10, 2019, to file the documents.

However, Wilson said that there are still questions about which documents must be recorded.

“Instead of defining what the rules and regulations are, they leave that out there, don’t give a definition, so there’s a question, at least in my mind, about what the legislature meant,” Wilson said.

Because of this, Wilson said that HOA boards should seek the help of an attorney at least once a year to ensure the group’s rules remain enforceable.

Additionally, the law also now requires HOAs to give 48 hours’ notice before holding meetings to increase their yearly operating budget by more than 10 percent.

The law stipulates that the HOA may notify owners by email, by posting in a “conspicuous place in a common area in the community,” on an HOA’s website or by other methods stipulated in the association’s bylaws.

Conversely, homeowners must now disclose, when selling a home, if the property is part of a homeowners association.

This information must be given in writing to the person buying the home, to ensure that they are aware of the rules and guidelines of the community in which they are moving, including any fee requirements.

The information may also be provided electronically.

What the bill leaves out

While Wilson said the bill is a good first step toward regulation, he feels there are additional elements that should be added.

Among these is a loophole that he said was left out of the bill that doesn’t allow for amendments to HOA documents.

“In North Carolina, the law is that even if your documents don’t have a provision that allows you to amend the covenant, the statute basically inserts that in, so that if we need to change something we can change something,” Wilson said. “In South Carolina, if your documents don’t have a provision for amendments, you’re kind of stuck with what you got and there’s not really a way out of it.”

Another addition that Wilson expressed interest in is a clarification of an HOA’s ability to fine homeowners who don’t adhere to the group’s regulations.

“Let’s say somebody paints their house pink and they don’t get the right approvals to do it,” Wilson said. “In North Carolina, and all other states that have a comprehensive law on this, there’s fining authority.”

According to Wilson, this was an oversight in the bill.

“It’s just such a fundamental power that your community really needs to have, so it would make sense to have something like that to be more of a comprehensive approach for the whole state,” he said.

Follow Matthew Chaney on Twitter @SCLWChaney