New Homeowners Association Act Passed in South Carolina

South Carolina finally enacted a Homeowners Association Act (the “Act”) when Governor McMaster signed legislation on May 17, 2018. Instead of a sweeping regulatory framework, however, the South Carolina Act will result in very few changes for most Associations in South Carolina.

The provisions of the Act that relate to Homeowners Associations are as
follows:

1. Recording of Governing Documents. The Act defines “Governing Documents” to include the Declaration (or Restrictive Covenants) and Bylaws. For such documents to be enforceable, they must be recorded in the county clerk’s office or county register of deeds by January 10, 2019. Of course, almost every Association has a recorded Declaration so this requirement will have very little impact. However, because the definition of “Governing Documents” also includes bylaws, many Associations will be required to take action. In my experience, a majority of Associations have not recorded their bylaws. Therefore, many South Carolina Homeowners Associations will need to record their bylaws by January 10, 2019.

2. Recording of Rules and Regulations. Although not defined as “Governing Documents,” Associations that have promulgated Rules and Regulations also will need to record them by January 10, 2019 in order for them to be enforceable under the Act. In addition, Rules and Regulations must be made accessible to a homeowner upon request, or be posted on a website or a conspicuous place in a common area in the community.

3. Notice Required before Meeting to Increase Annual Budget. The Act requires at least 48 hours’ notice to homeowners before a meeting in which a decision to raise the annual budget is made. However, this provision does not apply to an Association that is incorporated under the South Carolina Nonprofit Corporation Act (most HOAs are nonprofit corporations). The reason for the exception is not clear, but presumably it is because the legislature concluded that the Nonprofit Corporation Act includes sufficient notice provisions to protect homeowners. The notice required by this provision, if applicable, can be satisfied by posting conspicuously in the community, by posting on a website maintained by the Association, by email, or through other methods provided by the bylaws to ensure actual notice.

4. Access to Association Records. Provisions of the South Carolina Nonprofit Corporation Act allow homeowners to inspect and copy certain records of their Association. A provision of the new Act makes these “inspect and copy” laws applicable to Associations that are not incorporated under the Nonprofit Corporation Act.

5. Magistrate Court Jurisdiction. The Act expressly states that magistrates courts shall have concurrent jurisdiction over monetary disputes if the disputes meet the jurisdictional limit of magistrates courts, which is up to $7500.

6. Creation of Department of Consumer Affairs Office. The Act creates a “Department of Consumer Affairs Office for Homeowners and Homeowners Associations.” However, the department is limited to maintaining a website to post informative materials, and to receive and
maintain data regarding complaints from homeowners and Associations. The Act expressly prohibits the Department from “promulgating regulations or issuing guidelines” and from “serving as an arbiter in disputes between the homeowner and the homeowners association.”

In addition, the Act creates another disclosure requirement for sellers of residential properties under the Residential Property Condition Disclosure Act. It adds the following disclosure requirement: “whether the property is subject to governance or a homeowners association . . . which carries certain rights and obligations that may limit the use of his property and involve financial obligations.” Although the new Act does not make sweeping changes or set up a regulatory scheme, Homeowners Associations and management companies need to be aware of the new law and make sure their governing documents are in compliance so they can be enforced.