February 24, 2017
In an opinion expected to affect community management companies and owners’ associations throughout the State, the South Carolina Supreme Court has provided clarification as to what it deems to constitute the unauthorized practice of law, particularly as it relates to the management of various owners’ associations.
Pursuant to this recent Opinion, the following conduct of community management companies constitutes the unauthorized practice of law:
- Bringing actions in Magistrate’s Courts on behalf of associations to collect unpaid assessments owed to the associations;
- Filing with the Circuit Court judgments entered by Magistrate’s Courts;
- Preparing and recording lien documents; and,
- Advertising its ability and willingness to undertake all of these tasks.
In Rogers Townsend & Thomas, PC v. Stephen H. Peck, Thomas Moore, and Community Management Group, LLC, , a declaratory judgment action accepted by the Court pursuant to its original jurisdiction, the Court undertook the analysis of whether the following conduct of Respondents constituted the unauthorized practice of law. Community Management Group, LLC (“Management”) manages homeowners’ and condominium associations in Charleston, Berkeley and Dorchester counties. In addition to managing the grounds and common areas for various associations, it also handled financial matters, including the preparation and recordation of liens and filed actions in magistrate’s court, on behalf of associations to collect unpaid assessments. If such actions were successful, it filed any judgment rendered by the Magistrate’s Court with the Circuit Court, again on behalf of associations.
Pursuant to the power granted under the South Carolina Constitution, the Supreme Court has the power to regulate the practice of law. While there is no comprehensive definition of the practice of law, the Court has found that the practice of law includes the preparation of pleadings and other papers required in the pursuit of actions as well as the management of such actions on behalf of clients before judges and courts. See State v. Despain. The Court has also held that the practice of law “extends to activities…which entail specialized legal knowledge and ability.” Linder v. Ins. Claims Consultants, Inc. Otherwise stated, the Court will decide what constitutes the practice of law based on the facts and in the context of each case before it. See Roberts v. LaConey.
In In re Unauthorized Practice of Law Rules Proposed by South Carolina Bar, , the Court found that a business may be represented by a non-lawyer, officer, agent or employee. Additionally, the Court promulgated South Carolina Magistrate Court Rule 21 which allows a non-lawyer officer, agent or employee to represent a business in a civil magistrate court proceeding. Here, the Court clarifies that “agent” as previously referenced, also includes individuals who are not officers or employees of a business but who have some connection to the business arising from its corporate structure, such as a member of a corporation’s board of directors. However, the Court, by way of further clarification, never intended for non-lawyer third party entities or individuals, such as Management, to be construed as agents.
Petitioner also asked that Court to find that Management engaged in the unauthorized practice of law by interpreting covenants for homeowners; addressing disputes between owners and associations and even advising associations on remedies available to collect unpaid assessments. The Court declined to such determination based upon the Petitioner’s failure to provide specific facts or details about Management’s activities.
The Take Away:
Community management companies need to carefully examine whether their activities constitute the unauthorized practice of law and, when in doubt, consult skilled, licensed attorneys. Additionally, owners’ associations should review the scope of work performed by retained community management companies to determine whether the management companies are engaging in activities that constitute the unauthorized practice of law. Owners’ associations should also assess whether these activities should be conducted by employees and/or board members of the associations or managed by competent legal counsel.
The Court’s decision not to address other potential instances of the unauthorized practice of law was based solely on the failure of Petitioner to provide specific facts and details to the court of Management’s additional activities. Do not assume that the additional, referenced actions, such as interpreting covenants for owners would be accepted by the Court, given the right set of circumstances.
Cheryl D. Shoun is a trial attorney and certified mediator whose experience includes construction law, insurance defense, personal injury defense, employment litigation and medical malpractice.
Co-author William “Chase” McNair is an associate practicing in Nexsen Pruet’s Charleston office. He is a member of the firm’s Business Litigation Practice Group.