South Carolina Community Association Law Blog

Keeping the Reins: Beware of Underhanded Boards and Their Tactics to Remain in Power

2012-01-09T16:09:30Z

Although the SC Nonprofit Code and the governing documents of an association maintain safeguards for fair elections, many boards are coming up with crafty ways to ensure re-election. An article in the Orlando Sentinel lists these as the most popular methods for power-corrupt boards to hold on to their seats:

1. Create a Nomination Committee, stacked with spouses and friends of the sitting board members. They plainly nominate the sitting board members – nobody else -- and the ballot mailed out to the eligible voters will only contain the names of the “wanted” candidates, because the committee declares every other candidate who volunteers not fit to serve. Any owner trying to “nominate himself or herself as a candidate for the board at a meeting” has anyway no chance. The written mailed-in ballots already give the sitting board members the votes necessary for re-election.

2. HOA elections normally require a quorum of 30% of the total voting interests present in person or by proxy. 30% is quite a high hurdle, and the proxies collected by the board will only be used if it serves the advantage of the sitting board. It’s much easier to declare: “No quorum present” – therefore the old board is the new board. Before anybody can object, the board and its supporters quickly leave the meeting room. Election won – no matter how many of the other owners complain about procedure.

3. Mail out general proxies, claiming these proxies only serve the purpose to fulfill the quorum requirements. But since they are actually made out as general proxies, they can be used by the board secretary to count as votes – if necessary.

4. Intimidation is another often used method to swing the election. Sitting board members go door-to-door to “collect” proxies with themselves named as proxy- holders. Especially the many elderly will often sign the proxy, just to live in peace. Violation letters and fines are the common threats used to “convince” the owners who are not voluntarily willing to sign over their voting rights!

This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice. Seek a competent attorney for advice on any legal matter.

Proposed Gun Range in Posh Condo Penthouse

2012-01-09T16:00:33Z

Here's an article from the Balitmore Sun about a penthouse unit owner in the Baltimore Ritz-Carlton Residences seeking to obtain a permit to build a gun range inside the unit. Condo association rules, state laws and local ordinances may prove to be a difficult burden to overcome in getting the firing range approved.

This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice. Seek a competent attorney for advice on any legal matter.

Association Meetings Must be Properly Noticed

2011-12-12T21:09:59Z

Bd. of Managers of Park Regent Condo. v. Park Regent Assoc., No. 2009-04227, N.Y. Supr. Ct., App. Div., March 30, 2010.

A condominium regime in New York was recently involved in litigation over the validity of an association member annual meeting. Several unit owners called the meeting and purported to elect a new board of managers for their regime. The board of managers in place prior to the meeting brought suit for a declaratory judgment that the meeting was invalid for lack of proper notice; therefore no new board members were elected. A unit owner also sued past and current board members for fraud and breach of fiduciary duty. The trial court held that the unnoticed meeting was invalid and issued a permanent injunction against the board members elected at the meeting, preventing them from acting as members of the board. The appeals court affirmed this holding.

The individual unit owner later amended his complaint to recover attorney's fees and expenses, as permitted in the regime's governing documents. This motion was also granted.

In sum, when associations fail to properly give notice of member meetings and board meetings very costly results may follow. Associations should closely read their governing documents for notice requirements and follow these requirements to the letter. Contact an attorney for help in complying with your governing documents.

This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice. Seek a competent attorney for advice on any legal matter.

Board Committees

2011-12-12T21:01:41Z

From time to time, a Board of Directors may find it helpful to delegate responsibilities to Board Committees. Committees are authorized by the Nonprofit Code in S.C. Code Ann. § 33-31-825, except where prohibited by the Association's bylaws or articles.

A majority of Board members must approve the creation of a Committee, unless the Association's bylaws impose a more stringent requirement. Committees must abide by the same rules as the Board in terms of meetings, actions without meetings, notice and waiver of notice, and quorum and voting requirements. Additionally, the Board may delegate non-board functions to Committees.

Some examples of Committees include: a Nominating Committee, Architectural Standards Committee, Covenants Committee, and a Social Committee. Board Committees should always exercise reasonable care in delegating and supervising Committees and Committee members, as this delegation of authority does not exonerate Board Members from their responsibilities to the Association.

This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice. Seek a competent attorney for advice on any legal matter.

Ambiguous Covenant Construed to Permit Pet Bird

2011-12-12T20:58:59Z

Breakwater Cove Condo. Ass'n v. Chin, No. A-1420-09T3, N.J. Super. Ct., App. Div., Dec. 2, 2010.

A unit owner at Breakwater Cove kept two birds in her unit. The association informed her that she was in violation of the master deed and her birds were a nuisance to other owners. The Master Deed provides: "No bird, reptile or animal of any kind shall be raised, bred or kept in any unit or anywhere else upon the property except that dogs, cats or other household pets are permitted, not to exceed two in the aggregate, provided they are not kept, bred or maintained for any commercial purpose, are housed within the unit and abide by all applicable rules and regulations. No outside dog pens, runs or yards shall be permitted."

The association pursued alternative dispute resolution with a mediator in hopes of resolving the dispute. When mediation did not resolve the issue, the association sued the owner. The trial court sided with the association, finding that the owner's birds did not qualify as "other household pets" under the master deed. The trial judge also determined that the birds were a nuisance based on testimony of other owners.

On appeal, the court determined that the pet policy in the master deed was ambiguous because it is reasonably susceptible to two meanings. The court held that based on this ambiguity, the covenant did not provide fair notice to unit owners and could not be upheld.

This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice. Seek a competent attorney for advice on any legal matter.

Association Can Enforce Zoning Regulations

2011-12-12T20:56:55Z

Ariyan v. Pine Orchard Ass'n, Inc., No. CV084034207S, Conn. Super. Ct., Dec. 3, 2010.

The court in this case held that the Pine Orchard Association had the authority to enforce zoning regulations within the association. Ariyan began constructing a gazebo on her lot, which is zoned with a 20-foot rear setback. Behind her lot is a private, unimproved right-of-way. Ariyan did not initially seek approval of the zoning board before starting construction. However, she eventually did submit an application for a permit, which was denied. She later submitted a second application for a permit and that was also denied based on the setback requirement.

Ariyan then submitted a variance request for the setback requirement, arguing that because there was no barrier between her property and the private right-of-way, the gazebo would not be noticeable if it violated the required setback requirement. Her variance was also denied, and was shortly followed with a cease and desist order for the partially constructed gazebo. Ariyan was asked to remove the gazebo. After the Zoning Board of Appeals upheld the decision, Ariyan appealed to the Connecticut Superior Court.

Ariyan argued on appeal that the decision was illegal, arbitrary and an abuse of discretion. She based most of her argument on the fact that the regulations did not define "structure." The court found this unconvincing and held that "structure" is defined using its common and usual meaning. The court also held that the appeal lacked merit because zoning regulators are required to apply the regulations when appropriate, and the fact that the gazebo would not obstruct her neighbors' views was irrelevant.

This site and any information herein is intended for informational purposes only and should not be construed as legal advice. Seek a competent attorney for advice on any legal matter.

Lien for Unpaid Assessments is Superior to Unrecorded Tax Lien

2011-12-12T14:13:47Z

Mira Owners Ass’n v. Lawrence, No. C10-630RAJ, U.S. Dist. Ct., W. Dist. Wash., Feb. 16, 2011.

An association member became delinquent on assessment payments and also failed to pay his federal income tax. In November, 2008, the association brought suit to foreclose on its lien. Subsequently, the IRS filed a federal tax lien on January 16, 2009. The Washington district court determined that the association was a secured creditor and its lien related back to the time that the assessments became delinquent. Additionally, the court also held that the association’s lien was automatically perfected at the time of delinquency; recording the lien was not necessary for perfection. The association’s governing documents provided that the association’s lien was superior to all other liens except “liens for real property taxes and other governmental assessment or charges against the unit.”

Although a tax lien arises automatically when the tax is assessed and tax liens are usually superior to other liens, the court held that there is an exception to the general rule when the IRS and another secured party are battling for lien priority. Priority then turns on when the IRS filed notice of its lien. Because the federal tax lien was filed after the association’s lien became perfected, the association’s assessment lien had priority over the tax lien.

This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice. Seek a competent attorney for advice on any legal matter.

Alligator Liability?

2011-11-11T15:34:21Z

The Georgia Supreme Court has decided to hear a case involving a woman who was eaten by an alligator in a homeowner’s association lagoon. 83 year-old Gwyneth Williams was housesitting for her daughter and son-in-law in a Savannah subdivision. She was discovered floating in one of the association’s lagoons and the 8 foot alligator was later trapped and killed.

The woman’s family brought suit against the association arguing that it was negligent by failing to reasonably maintain the common areas to ensure safety of visitors and residents. The association claims that it has no liability for animals ferea natura (wild animals).

In the South Carolina case Singleton v. Sherer, our Court of Appeals analyzed liability for injuries caused by wild animals, namely a raccoon. The court first determined that the duty of care owed by the landowner depends on whether the guest is classified as an invitee (expressly or impliedly invited business visitor) or a licensee (person who enters the property with consent of the landowner and for his or her own benefit).

In that case, the court determined that because the guest was a licensee, the landowner only had a duty to warn him of concealed dangers, not open and obvious dangers. If Ms. Williams’s case was heard in South Carolina, it is likely that the court would decide under Singleton that since Ms. Williams was a licensee and alligators are indigenous in coastal waters, the association had no duty to take action or to warn her of the patent danger. While this case is an unfortunate incident, the court will have to take existing law and public policy concerns into account to determine the outcome. A decision against the association would change the way associations, developers and business owners allocate their risk of liability for wild animal attacks.

This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice. Seek a competent attorney for advice on any legal matter.

Disabled Resident's Abusive Conduct Violates Covenants

2011-09-30T14:06:41Z

Connor v. Lake Dexter Woods Homeowners Ass'n, Inc., No. 2D09-5382, Fla. App. Ct., Dec. 29, 2010.

The Lake Dexter Woods Homeowners Association sued for an injunction against a disabled resident with an "angry" personality disorder. Watson, the developmentally disabled resident, lives in the subdivision under the care of his guardian advocate, Connor. The trial court determined that Watson's longstanding behavior constituted a nuisance and violated the declaration of covenants, conditions, and restrictions for Lake Dexter Woods. Based on the facts, Watson frequently yelled abusive obscenities at other residents, made physical threats against them, and drove his car erratically, often aiming at pedestrians.

The appeals court reluctantly affirmed the injunction, in spite of the fact that it is unlikely to remedy the problem. The guardian advocate is charged with taking all reasonable steps to keep Watson under control, and has spent more than $47,000 in legal fees for Watson's defense.

Although this is an unfortunate situation, the board of directors in this case likely decided that the risk of personal injury was too much to ignore the problem any longer and seeking an injunction was the association's only viable option.

This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice. Seek a competent attorney for advice on any legal matter.

Liability for Wood Floor Installation in Unit

2011-09-30T14:04:09Z

Baldwin v. Village Walk Condo., Inc., No. FSTCV085007925S, Conn. Super. Ct., Nov. 19, 2010.

A Connecticut condo owner recently sued her neighbors, her condo association, and the property management company for 42 claims resulting from her upstairs neighbors' installation of hardwood flooring. Baldwin claims the wood floors caused an excessive noise level and prevented her from selling her unit. While the court dismissed most of Baldwin's claims, allegations of intentional infliction of emotional distress, unjust enrichment, breach of contract, and a few others survived the defendants' motions to strike.

Baldwin alleged that her neighbors and the association should have known that removing carpet and installing wood flooring would create an intolerable noise level to the unit below. In her claim for unjust enrichment, she alleged that the association and property management company profited by "failing to perform their duty to inspect and abate the nuisance." Furthermore, Baldwin was forced to pay for expensive soundproofing improvements to her unit as a result of the wood flooring above her. The court denied her claims of unjust enrichment against the association and property management company.

Baldwin also alleged that the defendant neighbors were unjustly enriched at her expense because the wood flooring in their unit increased their property value while simultaneously reducing her property value because of the excessive noise. The court upheld her allegations against the defendant neighbors.

Finally, the court upheld Baldwin's allegations of breach of contract, finding that the declaration is a contractual agreement, and determined that she had standing to assert the claim.

This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice. Seek a competent attorney for advice on any legal matter.

Recouping Money from Banks that Foreclose on Units

2011-09-30T13:33:52Z

I like this idea from a recent Palm Beach Post article:

“Parra's methods include charging a $1,000 fine if exterior door locks are not the same. When a bank repossesses a unit, it typically changes the locks but doesn't read the association rules requiring uniformity and ends up owing the fine. The same goes for leaving the trash can out - a $100-a-day mistake that can cost banks up to a maximum of $1,000.”

This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice. Seek a competent attorney for advice on any legal matter.

Pet Policy Must Allow for Reasonable Accommodations Under Fair Housing Act

2011-07-22T14:38:13Z

Casagmo Condo. Ass'n v. Venegas, No. DBCV094010514S, Conn. Super. Ct., Aug. 31, 2010.

Ms. Venegas purchased a condo unit in the Casagamo Condominium Association in 2008. Before closing, she received the association's governing documents, which included a regulation prohibiting pets in all units. Shortly after moving in, Ms. Venegas got a dog. The association notified Venegas that she was in violation of the CCRs and requested her appearance at a hearing before the board of directors. At the hearing, Venegas told the board that the animal was prescribed to her because she suffers from a mental illness.

The board rejected this explanation, and began fining Venegas for her violations. Venegas maintained the dog in her unit and refused to pay the assessed fines. In response, the association filed suit against Venegas seeking an injunction to prohibit her from keeping the dog in her unit. Venegas asserted the defense that the dog was a service animal, and under the Fair Housing Act the dog should be permitted as a reasonable accommodation to the association's regulations.

The Fair Housing Act prohibits discrimination in housing against, among other classes, handicap persons. A person is handicapped if a physical or mental impairment substantially limits one or more life activities. Under the Act, "a refusal to make reasonable accommodations in rules, policies, practices, or services, when such accommodations may be necessary to afford such person equal opportunity to use and enjoy a dwelling" is considered discrimination.

In this case, the trial court denied the association's motion for summary judgment because several issues of material fact still existed.

This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice. Seek a competent attorney for advice on any legal matter.

Associations Can Collect Delinquent Assessments Accruing After a Homeowner Files Bankruptcy

2011-07-22T14:22:59Z

After a debtor files a bankruptcy case, the court enters a discharge order, which forever discharges and makes unenforceable many debts owed by the debtor. However, the bankruptcy code exempts certain debts from this discharge. Among these are debts "for a fee or assessment that becomes due and payable after the order for relief to a membership association with respect to the debtor's interest in a unit that has condominium ownership, in a share of a cooperative corporation, or a lot in a homeowners association, for as long as the debtor or the trustee has a legal, equitable, or possessory ownership interest in such unit, such corporation, or such lot, but nothing in this paragraph shall except from discharge the debt of a debtor for a membership association fee or assessment for a period arising before entry of the order for relief in a pending or subsequent bankruptcy case." 11 U.S.C. § 523(a)(16).

The bankruptcy code appears to allow the association to continue to collect, and even foreclose on its lien for assessments that accrue after a debtor files bankruptcy. However, the association cannot pursue assessments that were due and payable before the debtor filed for bankruptcy. Always seek advice from competent legal counsel in complicated collections matters, as mistakes can be costly.

This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice. Seek a competent attorney for advice on any legal matter.

NASCAR Driver Challenging ARB Guidelines Loses in NC Supreme Court

2011-07-13T13:23:24Z

Here is an interesting article about a NASCAR driver in North Carolina who challenged his HOA board's decision requiring the removal of a pool house and tiki hut in his backyard. The association claimed Todd Bodine never had ARB approval to build the massive structure. Bodine claimed he was targeted based on his ability to pay the fines. Bodine will now have to pay the HOA's attorney's fees and fines upwards of $40,000 after this four year legal battle. He will also have to tear down the pool house and tiki hut.

This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice. Seek a competent attorney for advice on any legal matter.

New FL HOA Bill Passes- Good News for SC?

2011-07-13T13:22:00Z

On July 1, 2011, Florida legislatures passed HB 1195, a law intended to revise and clarify issues relating to condo, cooperative, and homeowners' associations. HB 1195 is often referred to as the "glitch" law. One important provision of HB 1195 allows associations to collect the full rent from tenants of delinquent owners as a method of recouping assessments. This is a huge benefit to associations with absentee owners.

Although South Carolina lacks a similar law, our courts always keep an eye on Florida when South Carolina law does not cover a particular community association issue. In fact, the South Carolina Court of Appeals stated that Florida law is "cited approvingly in jurisdictions throughout the country" and "when faced with unresolved questions in horizontal property law, courts often look to Florida law." Queens Grant II Horizontal Prop. Regime v. Greenwood Dev. Corp., 368 S.C. 342, 363, 628 S.E.2d 902, 914, n. 12 (Ct. App. 2006). This could mean that South Carolina won't be far behind it's neighbor to the south.

Many governing documents may entitle the association to collect rent from tenants when the owner falls behind on payments, but associations should proceed with caution if the documents are not clear. If your association is struggling with delinquencies, contact an attorney to review your governing documents to find out if this collection method will work for you.

This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice. Seek a competent attorney for advice on any legal matter.

Conflicts of Interest and the Board

2011-06-08T12:52:44Z

Board members are volunteers with big jobs and generally no compensation. Part of a board member's responsibility includes making decisions on behalf of the association. Two duties are involved in every decision a board member makes: a duty of loyalty and a duty of care.

A conflict of interest exists when a board member has a direct or indirect interest in a transaction that prevents the member from making a decision with the association's best interest in mind. These outside interest may be financial, business-related or personal. When a potential conflict arises, the board member involved should raise the issue to the rest of the board. The governing documents for the association may include a provision on handling conflicts. Incorporated associations should also refer to the South Carolina Nonprofit Corporations Act ("Act"). S.C. Code Ann. § 33- 31-101.

According to the Act, board members are not required to recuse themselves from a vote involving a conflict of interest. However, the quorum and voting requirements are altered in this situation. A quorum is present and a conflict of interest transaction is approved when a majority of board members who have no direct or indirect interest in the transaction vote to authorize it. The interested board member may be present during the vote, and may even vote herself, so long as a majority of uninterested members approve the transaction. Bear in mind that an association's CCRs or by-laws may have more stringent requirements.

This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice. Seek a competent attorney for advice on any legal matter.

Communication with Residents

2011-06-04T01:50:22Z

Board members have certain responsibilities that they owe a community association, among these responsibilities is the duty to keep an open line of communication with residents. However, this often opens the door to harassing phone calls and emails.

Board members should consider having a separate email account dedicated to association business to aid in protecting their privacy. There is no obligation to make cell phone or home phone numbers available, unless so desired. Association board members are volunteers who work hard for no compensation, but they still have to fulfill their obligations to the association and its members.

The Board should consider adopting a communication policy outlining when responses to email inquiries will be issued and to whom the residents should address their particular questions. When a homeowner begins harassing board members, all communication should be handled in writing and should preferably "cc" another board member for transparency purposes. Threatening emails need not be responded to, as they may further inflame homeowners.

Consistency and transparency are key in maintaining positive board and member relationships. With a policy in place, board members will be more comfortable dealing with association members.

This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice. Seek a competent attorney for advice on any legal matter.

North Myrtle Beach Condo Scam

2011-06-03T02:22:00Z

Prison time and restitution await the players involved in two proposed Myrtle Beach condo projects. The developers, a mortgage broker, a real estate agent and a loan officer were all involved in this real estate scheme that defrauded more than 50 victims.

Here's a link to TheSunNews.com article for the full story:

This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice. Seek a competent attorney for advice on any legal matter.

Proposed S.C. Bill Requires Community Managers to be Licensed

2011-04-18T13:10:00Z

Senator McConnell introduced S. 699 in the Senate on March 16, 2011. This bill proposes to require all persons "employed for compensation to manage a community association" to acquire a professional credential by July 1, 2012. In addition, managers must complete continuing education requirements to maintain licensure. The Department of Consumer Affairs is delegated with the task of ensuring compliance with all licensing requirements and with providing a website listing managers who have completed professional credentials.

There is an exception to the licensing requirement for those who are currently, and have been for the past five years, actively employed as association managers. A break in employment for more than 3 years will negate this exception.

A violation of this provision will qualify as a misdemeanor and are punishable by fine between $500-$1,000.

This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice. Seek a competent attorney for advice on any legal matter.

Waiver of Covenant Enforcement

2011-04-13T13:17:00Z

Association boards must be vigilant to consistently enforce the association's CCRs and bylaws. Inconsistency or looking the other way can create a defense of waiver or estoppel for the errant homeowner to use against the association in court. However, in Kneale v. Bonds 452 S.E.2d 840 (S.C. Ct. App. 1994), the South Carolina Court of Appeals held that [a] party's waiver of the right to object to a minor violation of a covenant does not result in waiver of his right to object to a subsequent and more substantial violation."

In the Kneale case, the Bonds submitted an application to extend their condo by 2,200 feet, which would extend the unit into the common elements of the Condo Association. The Board approved the application, but several property owners brought suit against the Bonds seeking a temporary restraining order and to enjoin them from further construction. In return, the Bonds filed an injunction against the other property owners seeking to have them remove additions that had previously been made to their condo units. Although the master deed required board approval and a majority of property owners' assent to make alterations or improvements to the common elements, since inception the association's policy was to only get approval from the board.

The trial court determined that both the Bonds' improvements and the other property owners' improvements were approved by the Board, albeit some impliedly. In addition, the court denied both parties' requests for injunctive relief and dissolved the initial temporary restraining order granted against the Bonds.

On appeal, the court looked at the Horizontal Property Act and stated that the bylaws and covenants should be strictly enforced. Included in the right to enforce, is the ability to seek an injunction requiring the property owner to repair or remove improvements made in violation of the association's restrictive covenants.

In deciding whether or not to issue an injunction, the court will balance the equities involved to ensure that great detriment will not fall on one party with only minor benefit to the other. The court held that although there had been alterations made in violations of the covenants in the past, they were non-structural and were made to the limited common areas. In contrast, the Bonds' vast improvements were structural in nature and encroached on general common areas of the association.

Property owner acquiescence toward the minor alterations in violation of the covenants did not equate to an overall waiver of the right to enforce the covenants. The court issued an injunction against the Bonds requiring them to remove the improvements, and also found that the Bonds' action against the other property owners was barred by the doctrine of laches because they sat on this right for such an extended period of time.

This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice. Seek a competent attorney for advice on any legal matter.