Special panel tackling HOA issues before legislature reconvenes in January

Lillian Montaigne wants the state legislature to investigate HOAs, and like many Horry County residents beholden to the neighborhood boards, she has no shortage of criticism when it comes to how money is managed, boards are elected, and a litany of questions about the inner workings of the quasi-government panels.

The Hunters Ridge property owner says her HOA is only too glad to take her required fees, but not willing to use the funding for basic maintenance, like clearing the garbage out of a holding pond in her backyard, or enforcing neighborhood rules.

“HOAs should report truthfully where the money is going, and the management company should be responsible to the homeowners,” Montaigne said. “They are causing property values to go down, there has to be some control over the management company.”

Tony Blevins, a property owner at the Sands Ocean Club, said the legislature needs to tackle a multitude of legal issues including questions of liability.

“There needs to be an assurance the board is independent and it should have no financial ties to anyone or company performing services for an HOA — that is a definite conflict of interest,” Blevins said.

When HOAs are sued in South Carolina, claims are paid through liability insurance purchased by the HOA with homeowner fees, not through private insurance, he said.

“I think the laws need to be strengthened for bad acts the board may perform, not incompetence, but to the degree they are not carrying out their fiduciary duties,” Blevins said. “If I sue them and I win, then I pay for it as an HOA member — it comes out of my own pocket.”

The state legislature formed a special committee to review current laws, policies and practices of homeowner associations in South Carolina, and to study how HOAs in other states operate.

The Study Committee on Homeowners Associations was tasked with gathering public comment and conducting three hearings that concluded on Oct. 27. Their report to the general assembly is due Dec. 31, but could be made public as early as Dec. 18.

Sen. Luke Rankin, R-Conway, chairs the panel and said during the final October hearing they had received nearly 200 emails offering public comment.

The committee’s goal is “to determine what recommendations we can make to the general assembly about legislation that’s in the best interest of the homeowners, the managers and developers of South Carolina and the subject of HOA management reform (and) transparency,” Rankin said during the final hearing.

Specifically, the panel was directed to report back to the general assembly on the disclosure of governing documents to prospective buyers; education options for homeowners and board members; manager certification and licensing; the time period for developers to control associations; and the need for a uniform planned community act.

Rep. Mike Ryhal, R-Carolina Forest, and panel member, said the committee sorted through issues that deal with turnover – when developers cede legal control of the community back to the homeowners, and when commitments are made by developers but not kept.

The panel also discussed whether homeowners must go to court to resolve differences with an HOA, or if a simpler process could be created by the legislature.

Several bills are already pending in this legislative session that address HOA issues, which lawmakers will examine when they reconvene in January.

Ryhal said if the study committee’s final report addresses basic and simple issues, legislation could probably move quickly with assurance of passage.

“But I think it’s important enough they we try to get something through that protects property and homeowners,” Ryhal said.

“There were several issues brought up … if you’re a homeowner and the board comes after you, what rights do you have, what recourse do you have? We also heard about that last year when we had that meeting in the county,” Ryhal said. “That’s one issue, I don’t think it’s clear what happens to property owners when they are fined or being assessed, and liens put on property – what are their rights? Was the fine levied justly or unjustly? I brought that up several times, it needs to be addressed.”

The legislature has been tackling HOA issues since the 2003-2004 session, and in the 2007-2008 session Sen. Darrell Jackson, D-Richland, introduced a comprehensive bill dealing with meetings, record keeping, disclosures and unpaid assessments and suspension of privileges. The bill ultimately died in committee.

The HOA issue was revived in 2014 after the Horry County delegation had a public hearing to address the topic, and 300 residents turned out to voice concerns.

One bill moving through the House and Senate, bills 4208 and 860, respectively, would authorize actions for specific performance of covenants and restrictions under the magistrates court jurisdiction, offer free online education programs for homeowners and board members, and require that homeowners provide prospective buyers with their HOA’s governing documents.

Another bill sponsored by Ryhal, bill 3248, would create a process to give notice of public meetings and of placing a lien on a homeowner’s property.

This story was originally published December 4, 2015 at 11:01 PM with the headline "Special panel tackling HOA issues before legislature reconvenes in January."