New S.C. bill could limit HOA power by eliminating foreclosures

Updated: Nov. 25, 2019 at 7:13 PM EST
Email This Link
Share on Pinterest
Share on LinkedIn

COLUMBIA, S.C. (WMBF) - A bill pre-filed this month would prohibit homeowners associations in South Carolina from foreclosing on homes.

HOAs currently have the power to foreclose on a property if fees and fines go unpaid.

If passed, the bill filed by South Carolina representative Todd Rutherford, D-Richland, would strip the associations from this power.

“Real property used as a primary residence may not be sold if the action was instituted by a homeowners association attempting to collect unpaid dues, fee, or fines,” part of the proposed bill stated.

Residents in the Ashford Estate Homeowner Association said they support this law.

“If you take the foreclosure aspect out of the HOA you’re going to alleviate a lot of problems in the state of South Carolina,” said James Hatton.

In November 2017, more than 50 liens were placed on homes in Ashford Estates.

Hatton was one of 50 homeowners that had to hire a lawyer to keep his house. However, he said others weren’t as fortunate.

“I’ve watched a special needs kid getting thrown out of their homes because they couldn’t afford a $5,000 bill. A $500 bill for dues ballooned into $5,000,” Hatton said.

Hatton said the property management group at the time refused to answer questions for the members, like where their money was going and who was in charge.

DeAnna Douglas-Jackson is another member in the community who is still fighting for her home.

“Everyone has struggles, you know?” she said. “It’s amazing that a management company or an HOA can just say, ‘You know what? We’re going to slap you a fine and keep adding on to it and foreclosure on your home.’”

She had to spend money in court to prevent her home from being foreclosed on.

“You’re taking homes from people who can’t afford an attorney to fight you to keep their home, so you’re going to take their home, make them homeless and it’s just coldhearted,” Douglas-Jackson said.

Her and Hatton are on their HOA board. Douglas-Jackson said the association has removed late fees for unpaid dues to make a more peaceful neighborhood.

Both said they understand dues need to be paid but think there are other ways besides foreclosure.

“You’ve got a big problem here,” Hatton said. “If you want to collect your money, you can throw a lien against it. There are other methods of collecting the dues for the organization.”

Both homeowners said they support the bill and think it would help regulate HOAs in the state.

Darcy Dennis is the vice president of operations at Ally Management. She explained foreclosure is a big mechanism to enforce payment and rules.

“If you don’t have a mechanism in place to enforce those rules and regulations, what is your word worth? We can keep saying, ‘Hey, we’re going to do this. We’re going to do this,’ but if you don’t actually do it or have the ability to do, what does it mean?” Dennis said.

She thinks the big questions will be, how do you enforce that?

HOAs have punishment, like foreclosure in place, because they rely on all members dues to pay for the management of the community.

Collin Jewell, an HOA attorney at Floyd Law, said the bill would make it hard for HOAs to collect unpaid association assessments.

“The association would effectively have to file a lien and wait to collect until the owner/member sells the home,” Jewell wrote in an email. “It would likely also lead to an increase in assessments for the owners/members that do pay.”

Dennis agreed, other HOA members could suffer without a mechanism in place to enforce payment. She also predicted the bill could impact HOAs ability to get loans.

“Banks will often loan money to HOAs to make repairs that are needed and the HOAs can expense that over several years paying that back,” she said. “I can imagine the banking institutions would not be as able to loan money to HOAs if there was not a mechanism set in place for HOAs to recoup that money.”

Dennis said Ally Management handles around 8,000 properties and only two have been foreclosed on.

Ally Management handles mostly condo associations. Rutherford’s bill would apply to primary residences.

The bill will not receive any action or discussion until January at the earliest when lawmakers return to Columbia.

Rutherford did not get back to WMBF about the pre-filed bill.

Copyright 2019 WMBF. All rights reserved.