WMBF INVESTIGATES: Homeowners association issues continue despite S.C. law passing

WMBF INVESTIGATES: Homeowners association issues continue despite S.C. law passing

MYRTLE BEACH, SC (WMBF) -Beyond Horry County’s manicured lawns and subdivision welcome signs are rules and complex laws governing how homeowners live.

Homeowners associations aim to protect communities but many residents say they don’t always hit their mark.

For years, these associations operated with little oversight and left property owners without tools to fight back.

“It was kind of like the Wild West and there really wasn't a lot of clarity on what board members could or couldn't do,” explained state representative Russell Fry. “There wasn't transparency as far as if you moved into a community, you didn't know what the regulations were because you didn't have access to them.”

Years of outcries over the lack of transparency and accountability led legislators to finally pass a bill setting guidelines and clarification for associations.

Months after it was officially enacted, some homeowners in Horry County continue to feel helpless against board members, changing rules, and foreclosure notices.

Officials call the bill the first step in addressing these issues but WMBF Investigates looks back on the law to explore where it took South Carolina and how much farther the state has to go in protecting its homeowners.

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The new HOA law that went into effect in January 2019 requires associations to be more transparent.

The bill mandates governing documents be recorded with the county and notice must be given before increasing budgets.

Homeowners must also have access to budgets and governing documents. Magistrate courts were also given more power to handle monetary disputes.

Another aspect of the bill appoints the state’s Department of Consumer Affairs to collect resident’s complaints about their HOA and be a resource for owners.

Of the complaints the Department of Consumers Affairs compiled in 2018, 14 percent were from Horry County.

Horry County ranked second in the state for the number of complaints, behind only Richland County.

Multiple HOAs were listed from, Tuscan Sands to Timber Ridge to Dunes Pointe. A majority of the complaints filed by Horry County homeowners were for “failure to adhere to and/or enforce covenants and bylaws.”

For a full list of the complaints, click here.

The grievances are filed and the homeowners association is made aware. The report is also shown to the General Assembly but there are no punishments or penalties in place.

“It's kind of toothless at this point because you can complain, but nothing can be done about it,” said attorney Collin Jewell, with the Floyd Law Firm.

Fry, who was a sponsor on the bill, said the data the department collects will hopefully serve as a guide post on what can be improved in the future.

He explains the aim of the bill was to give homeowners access to information without overregulating neighborhoods.

“We are not here to make a truce between neighbors. That is not our role. That is not the role of government,” Fry said. ”Our role is to make sure that there are pieces in place that allow access to information and the boards themselves and the HOAs themselves can govern themselves without the heavy hand of government coming in.”

Still, he admits the bill could have gone farther.

“I wanted it to go farther, as did the entire delegation of Horry County, but we were looking at a scenario where it wasn't going to pass,” Fry said. “Moving forward, I'm looking forward to seeing what those findings are from the state.”

Fry said he still hears a lot from residents about governing issues, but he believes these can be decreased by making homeowners aware of the what the rules and regulations are before they move into an HOA.

In the future, he said he doesn’t think anything is off the table

“I think we've heard tremendous horror stories from rogue property managers that quite frankly aren't doing their jobs. That's not to say that all of them are like this, but there are a tremendous amount of that, quite frankly, are doing a great disservice to the residents that they're supposed to serve,” Fry said.

Creating a certification and licensing for board and HOA property managers was something considered back in 2015 when a committee was reviewing issues with HOAs.

HOA property managers are often tasked with managing a significant amount of money, handling maintenance, insurance claims and securing service providers.

Ken Skelly is a board member for his HOA in Barefoot Resort and also served on the 2015 committee.

In the 2015 report, Skelly wrote certification “is necessary to protect homeowners from incapable, uninformed charlatans posing as property managers. Licensing by the State is necessary to protect homeowners from the truly larcenous, stupidly criminal or criminally stupid property manger.”

The state requires licensing for real estate agents and rental property managers, but not HOA property managers.

Similarly, there are no training requirements for HOA board members, which can be equally problematic if an association doesn’t have the funds to hire a management company.

“That's a real problem because then you're relying on your fellow neighbors, your fellow homeowner to do all of the management activities, tell people what they can do and cannot do,” Skelly said.

HOA attorney Collin Jewell agreed.

“Some of the biggest issues I see are with self-managed associations because they don't have that professional advice,” Jewel said. “A lot of times, the only way they can get that professional advice is to charge a higher assessment so that they can hire a management company. It's kind of a catch 22, so to speak.”

Skelly said because HOA boards are run by volunteers, it is already hard to get people to serve, and adding additional training requirements might be a deterrent and training comes with a cost.

Even though training is not required by the state, independent training resources do exist and Skelly explained HOA officials are not free to do whatever they want.

“We all signed the same contract when we moved in here and we have to comply with it,” he said. “Whether we're homeowners or whether we're on the board or whether we're property managers, that that's our Bible. We have to comply with that. If it says that the board has discretion, the board has discretion.”

How they choose to exercise their discretion can cause intra-neighborhood disputes that don’t just end in the community but can be taken to court.

Jewell said most HOA lawsuits he handles deal with collections from homeowners.

If homeowners violate the association’s rules and regulations or don’t pay dues, the association and management company have the power to place a lien on properties.

In November 2017, more than 50 leins were placed on homes in the Horry County community Ashford Estates.

“Well we didn't find out we had the lien on the house until we got the foreclosure notice in the mail,” said Deanna Douglas-Jackson, a resident in the community..”So we were kind of stuck and we were just trying to work like paycheck to paycheck to even try to pay the HOA.”

Douglas-Jackson received a lien for $700 in delinquent assessments and another $700 for attorney fees.

Jewell explained fines and liens are a tool for HOAs to enforce their rules.

“If people are not contributing to that, then, you know, roads don't get fixed, pools don't get fixed,” Jewell said. “It's hard to maintain the association without those assessment payments. So they do need an enforcement mechanism, um, to make sure that those are collect.”

However, Dougals-Jackson said her and others were were frustrated and confused about where their dues were going so many stopped paying.

“The common area is a piece of property that is just grass,” she said. “We don't have a clubhouse. We don't have a pool. We don't have trash pick up. We don't have anything. We have nothing.”

Douglas-Jackson said the property management company at the time, First Service Residential wouldn’t tell owners where money was going.

First Service said in a statement:

“We cannot comment on individual homeowners accounts, or actions that may have been taken at the direction of the association Board of Directors to collect monies owed to the Association. The residents were entitled to see their financial statements for their community association. Updated financial statements were provided each month via the association's website.”

Douglas-Jackson said her family bought a home in the community in 2011 and since then has experienced confusion and a lack of transparency as the neighborhood has gone through multiple different property managers.

First Service no longer manages Ashford Estates but Douglas-Jackson said she thinks laws need to be tighter to prevent similar situations from repeating in the future.

“I want them to make laws so that people like us with two kids, you know, don't lose their home over a discrepancy of who is on the board of directors and how all these paperwork is going to the courthouse,” Douglas-Jackson said.

Kris Graci is another Horry County owner who thinks there is more to be done.

Graci lives in Canada but owned a condo in Myrtle Beach for the last six years. This year she sold her condo and said she would never buy in South Carolina again.

“Never, not until laws changed in this state to protect the owners,” Graci said.

Graci said changes to her HOA management, a new board and regulations drove her out of her condo.

Graci ran an Airbnb in her condo for six years to help pay for the condo.

“Never a nuisance, never a disturbance,” she said. “Only families, no parties, no Bachelorettes, just nice families coming into enjoy Myrtle Beach.”

In March, her HOA changed its rules and regulations to ban short-term rentals. She was fined $1,000 for accumulated weeks of violating the rule. She said the board also threatened to place a lien on her unit.

The HOA did not return WMBF email inquiring about the dispute.

Graci couldn’t afford to fight the action with an attorney and lost the revenue stream that was helping pay for the condo when she was no longer allowed to rent it out on a short-term basis.

These two homeowners aren’t the only ones who admit the new HOA law doesn’t solve everything.

“I think everything's on the table at this point,” Fry said.

Jewell said he thinks mandatory training and issuing a copy of the declaration before signing a contract would help a lot of the legal situations that arise from HOAs.

Despite the holes in the law, it took years for lawmakers to get the HOA Act passed, so it liekly won’t likely be an issue that gets solved soon.

But Fry said he remains hopefully that the data the Department of Consumer Affairs collects will point to the state’s next step in further protecting homeowners.

TIPS TO FINDING A GOOD HOA

  • Talk to the people who live in the community
  • Find out who the management company is:
    • “Are they responsive? You can’t expect a board member to always be able to respond to a request to fix something and board members aren’t gonna fix it. They’re going to call the property manager.” - Ken Skelly, Barefoot Resort HOA board member.
  • Get a copy of the covenants
  • Get financials of the community
  • Find out if there are any assessments in the association

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