HOA Changes Called For

January 12, 2014 3:05 PMViews: 972

By Paul Gable

Homeowner’s associations (HOA) and the ability of residents affected by them to get treated fairly has become an increasing matter of debate in both Horry County and around the state in recent years.

As more retirees moved to the county over the last 10 years, they often chose private sub-divisions or condominiums to live in that are governed by some type of HOA.

Homeowner Associations are governed by a chain of documents and laws such as:

The Articles of Incorporation filed with the Secretary of State provide the legal basis of the association in the form of an Incorporated Non-Profit Corporation.

The recorded map or ‘plat’ defines each owner’s title to property including the association’s title to common areas.

The CCR’s (Covenants, Conditions, and Restrictions) are publicly recorded deed restrictions.

The Bylaws are the rules for management and administration.

Resolutions are additional rules and regulations that the association may adopt.

Federal Laws also apply.  Some but not all include the The Fair Housing Act, Internal Revenue Codes, the American Disabilities Act, and the Fair Debt Collection Practices Act.

State Laws affecting homeowner associations such as property and conveyance, non-profit corporations and the horizontal property act for condominiums.

Two types of problems generally draw criticism from local HOA members. The first deals with HOA boards meeting and making decisions in private sessions and refusing to make available association budgets and expenses. Residents ask how they can get access to the HOA books and/or have an audit of them performed.

The second problem deals with a method for settling disputes between an association member and the HOA board.

Rep. Tracey Edge of North Myrtle Beach said the state law currently governing HOA’s is inadequate and needs revision. Edge said he would support a requirement to make HOA board meetings and budgets public. He also said the possibility of applying state Freedom of Information Act requirements to HOA boards was something that should be looked into.

“In the areas where these boards act as a governing body, there should be openness about the way they make decisions, especially budgets,” Edge said. “Residents who are affected by these decisions should have the right to see how they are made and have the ability to provide input into the decision making process.”

Sen. Darrell Jackson introduced legislation to provide stricter scrutiny over HOA’s. He said the reasoning behind the bill was the increasing number of disputes between HOA’s and their members.

The bill proposes to increase transparency of the HOA operations. It also designates the Department of Consumer Affairs as the state agency to monitor HOA’s and mediate disputes between the organization and its members.

Some of the provisions of Jackson’s bill include:

A meeting of the board of directors, including a subcommittee or other committee of, must be open to all members of record. The open meeting requirement does not apply to a meeting between the board and its attorney with respect to proposed or pending litigation where the content of the discussion would otherwise be governed by attorney-client privilege.

A member has the right to attend all meetings of the board and to speak for a reasonable amount of time on a matter placed on the agenda. The board may adopt reasonable rules to govern the rights of members to speak and the frequency and duration of member statements.

The association’s records must be maintained in this State and be open to inspection and available for photocopying by members or their authorized agent at reasonable times and places within five business days after receipt of a written request stating the specific books and records the member requests of the association. A member who is denied access to official records is entitled to ten dollars per day for the association’s failure to comply. The calculation begins on the eleventh business day after receipt of the written request.

The homeowners’ association shall prepare an annual budget. The budget must reflect the estimated revenues and expenses for that year and the estimated surplus or deficit as of the end of the current year. The budget must delineate all fees or charges for recreational amenities. The association shall provide each member with a copy of the budget or written notice to the member’s lot or unit mailing address or alternate address provided in writing by the member that the budget is available pursuant to Section 27-52-160(C).

The homeowners’ association shall prepare an annual financial report within ninety days after the close of its fiscal year. The association shall provide each member with a copy of the budget or written notice to the member’s lot or unit mailing address or alternate address provided in writing by the member that the financial report is available pursuant to Section 27-52-160(C).

The association’s governing documents must prescribe the manner in which expenses are shared and specify the member’s proportional share thereof for annual assessments and special assessments. An association may not charge a member an annual assessment that is more than twenty percent greater than the previous year’s assessments without the approval of two-thirds of the members of the association.

Before a homeowners’ association may file suit or take other action against a member homeowner for a violation of governing documents other than failure to pay an assessment, the association must, in addition to compliance with other law and the governing documents, provide notice and opportunity for a hearing. The notice must be sent certified mail, return receipt requested, to the member’s lot or unit’s mailing address or address otherwise specified in writing by the member.

The adjudicatory panel must hold the hearing within thirty days after the association sends the required notice to the member. The association shall provide the member notice of the date, time, and place of the hearing at least fourteen days prior to the hearing date. The member may request postponement which must be granted for good cause shown.

A member may seek nonbinding mediation through the department for disputes involving the association’s governing documents or disputes involving a monetary amount of at least two hundred fifty dollars. The request for mediation must be submitted on a form prescribed by the department and be accompanied by a nonrefundable fee of fifty dollars. Once a request for mediation is received, the department shall send a notice of date, time, and place for the mediation to the member and the board of directors of the homeowners’ association.

Some legislators, HOA’s, their lawyers and real estate agents have criticized previous HOA bills authored by Jackson as ”onerous”. However, as complaints about HOA’s escalate yearly throughout the state, especially along the Grand Strand, the legislators should step up to the plate and create legislation to reign in these independent, often secretive organizations.

 

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