South Carolina lawmakers prepare to tackle divisive HOA issues

A committee appointed by the South Carolina legislature to study contentious issues surrounding homeowners associations (HOA) identified numerous problems that require the state assembly’s attention, but failed to agree on solutions for key issues.

There was no consensus on whether HOA managers should be licensed or certified, and the panel was split on the question of how long developers should be allowed to control an association.

“This has been a greatly debated subject, and the report mirrors the lines effectively drawn in the sand of not only within the study committee, but likely in the House and Senate,” said state Sen. Luke Rankin, R-Conway, who chaired the special panel.

“This is not a blue sky and mom and apple pie issue where everybody agrees, let’s do this,” Rankin said. “There are some pretty stark differences with historically entrenched positions to not change anything.”

The Study Committee on Homeowners Associations was formed by the legislature to review current laws and practices of homeowner associations in South Carolina, and to study how HOAs in other states operate.

The panel conducted three hearings in September and October to gather public input, and the findings are intended for use to craft new legislation or support existing bills that will be considered when the legislature reconvenes Tuesday.

The panel was specifically tasked with reviewing five categories: whether HOA governing documents should be disclosed to homebuyers, education for homeowners and board members, manager certification, the time period of a developer’s control of an HOA, and the need for a uniform planned community act.

The panel did agree that HOA governing documents should be disclosed to prospective buyers, particularly for new home sales.

And while there was agreement that education for homeowners and board members would be beneficial, there was not a consensus to make education a requirement.

“Mandatory education would place additional obligations on board members and could deter homeowners from offering to serve as board members, thus causing burdens that hinder the operation of HOAs,” the report said.

Numerous other issues affecting HOAs that were not part of the committee’s directives were debated during the public hearings without reaching an agreement.

“One of the biggest areas of concern we’ve heard is that property owners need an inexpensive way to have their complaints addressed,” state Sens. Rankin, Kevin L. Johnson, D-Clarendon, and Rep. Mike Ryhal, R-Carolina Forest, wrote in the report.

“If the magistrates court system is not used to process those complaints, then establishing an ombudsman’s office should be considered,” the lawmakers said.

Bills already introduced this session address the judicial jurisdiction, including S. 860 which clarifies that disputes involving neighbors, or fines and fees less than $7,500 would go to magistrate courts, while issues involving larger sums of money would be settled in circuit court.

The controversial practice of placing liens on homes for unpaid HOA fees was presented to the committee but no alternatives were included in the report.

Permitting the use of solar panels was also addressed but not resolved.

Rankin says it was part of his committee’s job to drill deeper into these difficult subjects to see where a consensus could be reached.

“The report speaks for itself in terms of the depth of oversight … and the divide between owners and developers,” Rankin said.

“Ultimately, this is progress -- It doesn’t look like it or feel like it, but it is progress,” Rankin said.

The panel was successful in bringing all of the interested parties to the table to discuss their differences and begin mediating solutions, a chore that will continue when this wide variety of affected players begin testifying before House and Senate committees when new bills are drafted.

In addition to lawmakers, the committee was made up of property owners who belong to HOAs, lawyers representing homeowners and HOAs, managers who favored and opposed licensing and certification, Realtors, a homebuilder, officials from the state’s consumer affairs department and labor department.

“There will be policy decisions that the House and Senate will have to make,” Rankin said. “The goal of this report is to educate the members and hope they review it and take into consideration the various points that were raised and debated, and perhaps enlighten them as to different views that they may not have otherwise had.”

More than one-third of South Carolina’s population is involved with HOAs, which controls more than $100 billion in assets that critics say are managed with little accountability.

The study findings noted that managers of large homeowner associations have responsibilities that are similar to administrators of a small city, however several panel members said that no clear evidence was presented that showed bad management is a significant problem.

“The report has been distributed to all members of the general assembly. If members want to introduce legislation or if they want to continue to act on bills still pending, they can do that,” said Paula Benson, senior staff attorney for the Senate Judiciary Committee.

“It’s still an issue that a lot of people are interested in,” Benson said.

Numerous bills are pending before the legislature that address HOA issues, however none were officially endorsed by the study committee.

Legislation with the strongest backing of lawmakers and homebuilders is S. 860, sponsored by state Sen. Greg Hembree, R-North Myrtle Beach, and the companion measure in the House, H. 4208, sponsored by Reps. Todd K. Atwater, R-Lexington, and Deborah A. Long, R-Indian Land.

The bill includes education programs for homebuyers on HOAs, requires that buyers be provided with governing documents, and defines court jurisdiction to resolve disputes.

Rankin’s legislation, S. 13, would require that HOA board members complete certain educational requirements, and gives enforcement action to magistrates court. It also requires that association meetings be open to the public and recordable by property owners.

A bill authored by Ryhal and several other lawmakers allows for board membership to be determined after 60 percent of lots have been sold, education for board members, public notice of meetings, a process for placing liens on a homeowner’s property, and court jurisdiction for disputes.

Hudson can be reached at 843-444-1765

Twitter: @AudreyHudson

This story was originally published January 9, 2016 at 9:00 AM with the headline "South Carolina lawmakers prepare to tackle divisive HOA issues."