A new transparency law for South Carolina HOAs requires public recording and disclosure of rules and regulations beginning January 10, 2019. But what does that mean, and how does that impact the South Carolina real estate world?
Last year, South Carolina Governor Henry McMaster signed into law the South Carolina Homeowners Association Act (the "SCHAA") which has been codified as Title 27 - Chapter 30 of the South Carolina Code. One of the most crucial and fundamental aspects of this new law is implementing public records requirements for all HOAs in the State. All HOAs are required to formally record their governing documents in the Register of Deeds (or local equivalents) so that they are accessible to the public.
While most HOAs already had some of their rules and regulations available online on their own websites, these often were only available to current residents or were buried down in the site and difficult to find. And good luck if you were curious about a small HOA that does not have a website!
Every South Carolina HOA is required to record their governing documents by January 10, 2019. And any new governing documents will needed to be recorded by January 10th of the year following their adoption by the HOA. If they fail to record them in time, they'll become unenforceable under the new law. So what are "governing documents" of an HOA? SC Code Section 27-30-120 defines them as the "declaration, master deeds, or bylaws, or any amendments" thereof. So if the HOA changes their pool schedule or their architectural guidelines, unless they are stated in the community's declaration, master deed, or bylaws, they do not need to be recorded.
However, the HOA is required to maintain available to the HOA members all "rules, regulations, and amendments." These documents must be provided upon request by any community member or otherwise available on the HOA's website or another conspicuous place, such as a community center. Interestingly, the legislature did not define what "rules and regulations" entail. These would likely include architectural guidelines and common property rules, but without guidance from the legislature or the courts, HOAs should err on the side of caution and make available anything potentially a rule or regulation of the association.
Another important piece of this legislation relates to annual budget reviews. If an HOA wishes to increase its annual budget, they will be required to notify all residents with at least 48 hours in advance of the meeting. This provision of the law, however, does not apply to any HOA which is incorporated as a non-profit corporation.
Lastly, the law also expands the South Carolina Department of Consumer Affairs' authority over HOA and Homeowner complaints. The Department is able to publicly publish a report of all complaints it receives against an HOA or Homeowner. However, the Act does not give the Department any power to actually reprimand or punish improper conduct.
This new law will be a great benefit to potential home buyers in South Carolina. Now, before even entering into a contract, the potential buyers will be able to inspect the community's governing documents and see what restrictions they might be subject to, such as assessments or short-term rental prohibitions. The law still only requires rules and regulations be available to community members, though, so they still won't have a complete picture. But it will certainly help ensure purchasers are informed of what they're buying into.
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