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hey my name is valerie giovanoli and i'm an attorney with the law firm of mccabe trotter in beverly we represent about 1200 community associations and we are a full service law firm to those community associations we handle everything from collections to governing document preparation to litigation and also just general advice today i'm going to discuss the hoa act that was recently passed in south carolina it was in may of 2018 when it actually was first signed into law but even though it's over two years old we still get an abundant number of questions regarding the hoa act so i feel like an educational seminar would be very productive for the listeners out there um so for starters i think the main takeaways from the hoa act as as i call it shorthand is that all the governing documents of an association must be recorded in public records of the county in which the property is located and when i say public records that typically means a register of deeds in the county in which the hoa is located and sometimes it's also a real estate division of the clerk of court for that county in addition to all of the governing documents having to be recorded all of the rules and regulations must also be recorded um so before i get into that there's a lot of people ask about well what if our documents have they've been in existence since the 70s or the 80s but they're not recorded for example bylaws do we have to record those and the answer is yes they were not grandfathered in under this act rather after the passage of the act all of those documents that were in existence but not yet recorded were required to be reported by january 10th of 2019. hopefully most of all the community associations out there have complied with that deadline if they have not yet i would strongly urge you to record those documents as soon as possible not only that but you probably should seek the advice of an attorney before doing so with the rules and regulations they're a little more specific in the act because rules and regulations are often changed adopted amended pretty pretty commonly throughout the year they are actually effective upon their adoption so let's say you your board of directors adopts a new rule or regulation in may of the year they are effective immediately upon the adoption but they have to be recorded by january 10th of the year following their adoption so if you adopted some new rules and regulations today you have until january 10th of 2021 to get them recorded for them to remain enforceable our common practice is to record them as soon as you adopt them otherwise you kind of forget about them time goes on before you know it you've passed january 10th of the following year and you're in a really difficult sticky situation with regard to the enforceability of those rules and regulations um also as part of the act the rules and regulations have to be made available to all homeowners upon their request that's unless you have posted them in a conspicuous place in the common area or on a website maintained by the hoa and i think it's pretty common these days now and relatively easy to maintain those on a website on an hoa website so that you don't have to deal with the records requests from homeowners for those rules and regs so one of the questions i get after i discuss the recording requirements under the hoa act is what exactly is the definition of governing documents and i like to um talk about this in two different contexts the legal definition under the act they actually defined it in my opinion it's a very narrow definition but they defined the governing documents as the declaration master deeds bylaws or any amendments to those documents and so i find that that's a fairly narrow definition colloquially and in common use with our clients and amongst the community we oftentimes refer to governing documents we mean anything and everything that affects the homeowners association the operation of it so we would include rules and regulations architectural guidelines collection policies those are the types of documents that we typically are you know referring to when we say governing document but the act has a more narrow definition in addition to the recording requirements of the act another a couple more takeaways from the act number one is that it basically bestowed on the magistrate courts the jurisdiction to hear matters involving hoas where the dollar amount and controversy does not exceed seven thousand five hundred dollars um i'm not exactly sure that this was any real change in the law magistrate courts already had the authority to hear civil actions um where the amount in controversy does not exceed 7 500 um i think one of the things about this portion of the act that confuses a lot of hoa members and directors is that does this mean that magistrates can hear any and all hoa cases as long as the dollar value doesn't exceed 7 500 and my opinion is that it does not it does not allow the magistrate courts to exercise jurisdiction over equitable matters and when i say equitable matters i'm referring to whenever someone wants to bring an action and seek equitable relief which is not necessarily money damages which is a legal relief but an equitable relief such as an injunction court i want you to tell my board of directors to stop enforcing um the no garbage can on the street rule or court um this board of directors wants you to tell this homeowner to stop the construction of a shed in his backyard um this act did not bestow upon the magistrate courts the ability to hear equitable causes of action so again i don't know that that's a takeaway from the act but i don't know that this portion of the act really substantially changed the law existing prior to this act another takeaway from the hoa act um is that the residential disclosure actually it's called residential property disclosure act which was a prior statute that requires a seller of property to disclose any and all defects and other items whenever they are selling property to another uh to a buyer they actually require that as part of this disclosure form um that the seller disclosed whether or not the property was governed by and homeowners association i think this is a is an excellent addition to the residential property disclosure act going forward pardon me um so another takeaway of the hoa act or i feel like this is a whole different part a whole different section is this whole creation of well not creation but the department of consumer affairs they basically granted them the authority to receive and record data from complaints from homeowners or members of homeowners associations first and foremost they were authorized to start a website to essentially provide a bunch of information one contact information for the department of consumer affairs both the website as well as a telephone number there is also a complaint submission portal on this website if you choose to submit a written complaint you could also call the number on their website to file a complaint verbally there's educal educational reference material for owners and one of the main jobs of the department of consumer affairs which i may refer to as dca is to receive these complaints and and so doing the purpose of receiving these complaints is not to act as an arbitrator or a mediator or a judge it is rather for the purpose of collecting and compiling data so what the act didn't do was vest any authority in the dca to actually serve as some type of mediator or arbitrator or some have some sort of authority to make a decision that would be binding on the parties to the complaint um so really this portion of the act was essentially a means for the general assembly to compile and obtain more data so that they may potentially consider it for future legislation so from those complaints that are filed throughout the year the dca essentially generates a report annually and they provide that to the general assembly um also important with regard to the dca and their reception of complaints they actually publish those complaints on their website um so if you were a homeowner shopping around uh for a home and you wanted to see hey are there any complaints filed against this hoa i'm looking at buying into you're able to go there look at the published complaints and see what type of complaints are being filed against that hoa i do usually recommend that if an hoa has a complaint filed against it to number one seek legal counsel and number two file a response because in addition to the complaints being published the response to those complaints are also published so we've all been in situations where a dissatisfied owner may file a complaint it's one-sided it makes the allegations that may or may not be true and i think in the abundance of caution and fairness that the hoa is entitled to respond to that complaint and defend the allegations against it and those responses are also published on the department of consumer affairs website so moving along there is also another section of the act that actually requires an hoa to provide at least 48 hours notice prior to a meeting in which they are going to decide to raise the annual budget for the association i think that it goes into kind of specifying what type of notice is required which i've outlined here on the powerpoint um but i'm not going to spend too much time on this because there's a giant exception to that that uh requirement for the notice and that is that if an hoa is incorporated as a non-profit corporation then that specific statute does not apply to them so the notice requirement does not apply to them in my practice i would estimate approximately i'd say 99 of our community associations are incorporated as non-profits um so it does not apply to very many associations out there um so in addition to that provision there's also a provision that makes another reference to the non-profit act um and that says that section 1602 1603 1604 and 1605 of the non-profit act which is another south carolina statute apply to homeowners associations and this is not something you know we didn't know again about 99 percent of commun community associations are incorporated as non-profits so they do have to comply with the nonprofit act and the non-profit act is gosh i'd say 50 20 30 40 times as long as the hoa act it's a very comprehensive act so not going to go into that in this presentation but you should certainly familiarize yourself with the non-profit act or at least consult with an attorney who is familiar with that act if you are involved with a community association okay and this is uh this is a little bit outside the scope of the actual act but it's a question i get a lot and it's that um what is the difference between homeowners associations and neighborhood associations as we use that term and our neighborhood associations um obligated to comply with the hoa act and basically the way that we use these terms generally a homeowners association is an entity that's developed to manage and maintain a planned community or horizontal property regime they usually have a declaration or a master deed they are usually incorporated as a nonprofit corporation and the documents usually require mandatory membership on the other hand a neighborhood association is more like what i would i would call an advocacy group it's usually a group of folks who are in a certain geographical area in proximity to one another who voluntarily group up together um to sort of pursue a common goal or interest and so it's a voluntary organization or club and they are not required to comply with the hoa act um another question that i i get generally are about what about the responsibilities of nhoa and does the hoa act provide for additional responsibilities of the hoa well separate aside from what i've already discussed that the act requires there are additional responsibilities of homeowners associations they are essentially charged with the duty of administering and managing managing the affairs of the community as outlined by their governing documents so that can vary wildly from neighborhood to neighborhood based on what what exactly is in their governing documents um and so in carrying out any of the functions the directors the board of directors are essentially the group of folks who are elected or appointed to manage the affairs of the association they are bound by a duty of good faith loyalty and due diligence and essentially that means they can't get elected to the board and then use the the hoas bank account as their personal biggie bank um they certainly cannot commit fraud against their hoa and the members of the hoa due diligence requires for them to if they're looking to replace roofs on on town homes they don't just go to bob roofman roof guy who says hey for twenty thousand dollars i can fix your roof um never fix the roof of my life but give me your money and i'll help you they're actually obligated to research and investigate and make informed decisions whether that is getting multiple bids and and researching backgrounds of potential contractors seeking the advice of accountants property managers lawyers they are required to make decisions based on inform information from due diligence another question i often get that i wanted to talk about with hoas um are they required to register with the secretary of state um and as i mentioned before hoas are typically incorporated as nonprofit corporations and that does require certain filings with the secretary of state usually that's articles of incorporation um so yes to the extent that they are incorporated as a nonprofit or a for-profit they do have to file articles with the secretary of state i'm actually going to [Music] skip over that part and [Music] questions i know that this is just a solo seminar but i welcome any and all questions our website site is mccabe trotter.com from there you can find how to contact us we have a contact form we certainly welcome any questions comments feedback anything through our website portal so i appreciate you guys's attention and i look forward to working with you