Real Estate News

HOA Life | A spreading mantra: ‘There ought to be a law’

Residents of the Ocean Walk development in Surfside Beach weren’t happy with their new developer and management company.

According to residents, the developer didn’t seem to care that there were problems with the swimming pool and a waterfall at the entrance or that yards were eroding into ponds. They called the management company but couldn’t get any answers there.

Then they were told their homeowner association dues were going up by $105 a month, and that was the proverbial last straw.

Though eventually they came to a solution, the conflict in some ways mirrored that between HOAs and residents all over Horry County, and indeed, South Carolina.

South Carolina is home to 6,400 HOAs, according to the Foundation for Community Association Research, and officials throughout the state say that letters, calls and emails from dissatisfied homeowners are a near constant. They don’t come in a flood, say people in state and local governments, but you can count on them every week or month or so.

The writers want to eliminate what they see as unresolved problems in their developments and to rein in what they feel are out-of-control HOA boards and declarants, as developers are known legally.

There ought to be laws to help them out, they say.

Some developers and management companies agree that the state’s current laws that cover HOA and developer activities should be, at least, amended. Property owners say they like laws that govern homeowner associations in Florida, North Carolina and Virginia.

For instance, they require that prospective owners get copies of homeowner association rules and financial documents before they sign a mortgage so they know what they are buying into when they get that new home.

Too often, say homeowners in Horry County, those documents are part of the multitude of printed material that passes before them at closing. Who’s going to take the time to read them then?

But Mark Neill, a Surfside Beach lawyer who has dealt with the issues for 17 years, warns that an HOA law could result in higher dues for the members of the associations well as clarify current law and infuse homeowners with power they do not have now.

It costs money to produce the paperwork the law might require be sent to prospective buyers as well as current homeowners, Neill said. It can cost more money to get legal advice to answer challenges to subdivision authority, even if that is in a mediation meeting.

Those costs would have to be paid by homeowners, who could potentially have to fund both sides of a lawsuit against their development.

Four bills addressing some of the concerns of homeowners were introduced into the S.C. Senate this year, but none got beyond the initial assignment to a committee.

One of them, an overarching homeowners association law much like that in Florida, has been introduced annually in the Senate for at least six years. But it has never gotten out of the committee where it was sent after it was put into the hopper.

Since this is the last year of the current biennial, all four bills will have to be reintroduced if they are to move forward.

It’s not that South Carolina is without laws that govern some aspects of homeowners associations. The state’s Nonprofit Corporation Act covers the basics for most single-family home associations while the Horizontal Property Regime Act applies to condominiums.

But even if the laws introduced this year had been adopted, they wouldn’t have resolved what Ocean Walk residents faced.

“We were livid,” said resident Ted Hawley, who purchased his home four years ago when the community was called Bermuda Gardens.

Hawley said the original developer paid a portion of maintenance costs to keep residents’ monthly fees down. That developer, according to Hawley, thought it unfair to expect that a relatively small number of homeowners should bear the cost of keeping up with all the common areas. His reasoning was that he would lessen and eventually eliminate his contributions as more people moved in.

But he was forced to abandon the development during the recession, leaving it with insufficient dues and no reserve fund to do the work when a new owner came in.

The maintenance issues continued to be unresolved after the sale and repeated complaints from residents to a new management company went unanswered.

“The homeowners got together and we decided to make as big a stink as possible,” Hawley said.

They hired an attorney to help them resolve the matter.

In response, Hawley said, the management company told homeowners that it would not talk to them as long as legal action was a possibility. The residents reversed direction.

The additional fee was instituted after an emotional meeting in an empty store at Inlet Square Mall, at which some owners said the new developer should pay at least some of the cost, some threatened not to pay the increased dues and still others said they would be forced to sell because they did not have the money to pay more.

Since then, Hawley said, “Things have gotten better.”

The maintenance is being addressed and the management company replaced the unresponsive community manager with a new manager that Hawley praised for her communication skills.

Hawley is placated, somewhat. He said he still gets angry when he realizes that he must pay almost $500 a month in association dues.

The law needs to limit dues increases to a maximum of 20 percent in any one year, he said.

Different, but the same

The situation at Ocean Walk differed from many other HOA issues in that nearly all residents were united in opposition to the increased fee and angry with the property manager for not answering repeated questions.

And yet, the basic dynamic, dissatisfaction with community owners and managers, was the same that takes place wherever there are homeowner associations, say those who deal with such situations daily.

Most frequently, say developers, managers and homeowners themselves, it is one or two or at most a small group of residents who raise issues, over and over. Often, the developers and managers add, the same people come back repeatedly with one grievance or concern after another and refuse to accept the answers they get to their questions.

Battles between such residents and community managers – developers, volunteer board members or hired management companies – can go on for years.

Such is the case with Clete Linke at Waterford Plantation.

His first issue with those running the subdivision came shortly after he moved in several years ago when the homeowners association told him he had to remove lattice work he’d put up to hide his heat pump.

Lattice wasn’t allowed in Waterford, he was told, and he took it down even though he said that other homes in the development had lattice work in one place or another.

He had a run-in with the development’s prime builder, who had the developer’s permission to act as declarant in his stead, and the relationship between the two became antagonistic, with at times angry emails shooting back and forth.

While declarants are required by Horry County to form a homeowners association in order to get the permits they need to create a community, they also have full control over what happens inside the property’s boundaries. Developments have documents that set out the rules by which the development must operate and the rules that homeowners must follow.

But in South Carolina, at least, declarants can overrule almost any action taken by a board of directors and even rewrite the rules without a vote of the homeowners. They also can appoint at least the majority of members to association boards as long as they legally control the development.

And the declarants decide how long they will be in control, setting that time in documents as either a specific year in the future or the build out of a large percentage of the development.

Residents such as Linke and others in other developments think the declarants’ control is unchecked for too long and that legal limits should be set on it.

Linke also wants to see some legal way that doesn’t involve a lawsuit to make declarants and homeowners associations enforce rules equally.

Steve Houser, a resident of Glenmoor on S.C. 90 outside Conway, said the Florida law sets a good example for power sharing between declarants and homeowners.

It says that declarants must surrender power incrementally, giving up a portion when the development is 20 percent complete, more when 40 percent of it is complete and so on, Houser said.

He said Glenmoor, where there are currently disagreements between homeowners and the declarant, provides ample evidence of why that should be. He said he calculated the combined financial stake of the homeowners versus that of the developer and found that homeowners as a group had much more liability than the developer should something go wrong.

Common themes

Homeowners’ complaints about those who govern their developments tend to be grouped in a number of common concerns, said Juliana Harris of the S.C. Department of Consumer Affairs and Lisa Bourcier, Horry County spokeswoman.

• They don’t like seeing the association’s costs and therefore their dues go up for no logical reason.

• They don’t like the nearly dictatorial powers developers have over their property, and by extension, them.

• They feel that favoritism is shown to some residents while others may face retribution for speaking out.

• They think that their association boards or declarants are not acting legally and they have no recourse but to hire an attorney to file a civil lawsuit.

• They can’t get information about a the association’s finances.

• Their boards meet and make decisions in private.

• They can’t get minutes of meetings.

Jan Benton said she and other owners of the condominiums at Azalea Lakes near the U.S. 17 entrance to The Market Common have run into a seemingly impenetrable wall trying to get financial and other information from their board of directors.

A former county planner in Anson County, N.C., Benton knows that the S.C. law that governs condominium and single-family development management says that community managers must produce financial information when residents ask to see it.

The laws further require that associations must give some kind of public notice of meetings, which are to be open to property owners. A notice posted on a bulletin board in an area commonly used by residents will suffice, according to the law.

Because of questions, the Azalea Lakes board said Benton and other residents were harassing them. The board didn’t like hearing the same questions repeatedly and adopted a rule that forbids harassment of board members. Harassing is defined as “to annoy persistently.”

The board decides who steps over the line and may issue a $50 fine for each occurrence.

Carla Murphy, current Azalea Lakes homeowners association president, said neither she nor any other director has ever invoked the harassment rule. But she said that every time she threatens to invoke, the residents who complain move from one subject to another.

Benton thinks at least part of the problem is that Azalea Lakes does not have the oversight of a professional management company. She said the situations that must be resolved are too complex, too time-consuming to expect that volunteer managers can handle them efficiently.

What she wants is only that the board follow the law already on the books. Bad management, she said, threatens the owners’ property value.

“It’s just a said situation out here,” she said.

There ought to be a law

Property owners aren’t the only ones who say there ought to be at least one more law that governs how homeowners associations must operate.

The top officers at Gold Crown Management, which is in charge at Ocean Walk, and Waccamaw Management, which oversees Waterford Plantation, believe that South Carolina’s association laws would benefit with some amendments.

Builder Harry Dill, who built most of the homes at Waterford, believes that it would be OK if state law required homeowners associations or Realtors to see that buyers got copies of homeowner documents before they close.

Gold Crown and Waccamaw are among the few property management companies in Horry County that are certified by the S.C. Chapter of the Community Associations Institute, a national group that advocates for professional management at developments.

John Reyelt, president of Gold Crown, is a member of the chapter’s legislative action committee, and Press Courtney, president of Waccamaw, is the committee vice chairman.

According to information from John Thompson, the committee chairman, the S.C. Chapter supports licensing of property management professionals that is overseen by the state Department of Labor License and Regulation, which would also have the power to discipline those managers who didn’t follow the state’s regulations.

The Chapter also supports “the concept of a comprehensive planned community act,” according to Thompson’s information, and believes that current law should be overhauled when the legislature is ready to do so.

“It is my hope,” Sen. Ray Cleary, R-Murrells Inlet, wrote to Hawley, the Ocean Walk resident who contacted him about the situation there, “that we can address the HOA issue in January; hopefully we can get support in the House and get it passed in the Senate next year.”

Cleary said he was a co-sponsor for the earliest introduction of the Homeowners Association Act, which has been sponsored annually by Sen. Darrell Jackson, D-Hopkins, a Richland County community east of Columbia.

Cleary said the bill, although it contained many good things, won’t progress in the legislature because it mandates a $10 fee from each member of a homeowners association to fund enforcement of the law by the Department of Consumer Affairs.

He said a hearing was held on the bill the year he was a co-sponsor and legislators were deluged by 1,000 letters against the bill from builders and their supporters.

“Nobody wants to take on a bill that has that much opposition,” he said.

Cleary served on the homeowners associations board at Deerfield Plantation, where previous board members tried to make a homeowner demolish the house he recently purchased – but which a previous owner built – because it did not meet setback requirements.

When he lived in Wachesaw, Cleary said the HOA banned colored Christmas lights.

“Sometimes they have nothing better to do,” he said. “You’d be surprised at what they can do.”

Cleary said that 80 percent of associations are well run, but the 20 percent that aren’t give all a bad reputation. He likened management at poorly run developments to dictatorships.

He said state law needs to give homeowners a clear path for their complaints to be heard, but believes appeals to state authorities should cost those seeking the hearing $500.

As with Jackson’s homeowners association bills, Cleary said the oversight should be at the Department of Consumer Affairs. Complaints should have a peer review that would determine if they were justified.

Those taking the matter further would appear before an administrative law judge, who would rule on the grievance, Cleary said.

As with Houser at Glenmoor, Cleary said his biggest issue is with developer-controlled associations.

He now believes that a homeowner bill needs to originate in the House rather than the Senate and that it should be called the Homeowner Protection Bill.

Elsewhere, Courtney and Reyelt advocated education for board members, which they said both Waccamaw and Gold Crown provide.

“Our job is to sit down with the newly-elected board and tell them what should be,” Reyelt said.

And while it is inevitable that there will always be residents who complain about homeowners associations and managers, having the state laws that give them a path to have their complaints addressed by state authorities can help ease some of the current angst.

“People develop more passion about their homes and the immediate community than they do anything else,” Courtney said.

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