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2017 Legislation Aims to Diminish Developer Control of Homeowner Associations in South Carolina

Pre-Filed South Carolina Legislation Signals Push to Regulate Developers

Real Estate Alert

January 11, 2017

In 2016, the South Carolina legislature organized a study committee, titled the "South Carolina Committee on Homeowners Associations," which explored various issues affecting the level of authority that developers have over their own development projects.  Various opinions on developer control resulted in a twenty-six (26) page report, submitted to the South Carolina General Assembly by the committee's chairman, Senator Luke A. Rankin (Horry County).

Report Findings

The 2016 study committee report recognized the recommendation of Carri Grube Lybarker, the Administrator for the Department of Consumer Affairs, who submitted that a phased transition from developer to property owners should be established as properties are sold within a development, to begin as soon as twenty-five percent (25%) of the development's properties are sold.  This recommendation was met with opposition, however, legislation implementing this recommendation filed in 2016 survived Senate committee debate and was headed to the Senate floor for discussion before the end of last year's session.  This 2016 legislation was never signed into law, but 2017 marks a new legislative session allowing for renewed debate.  Similar legislation has already been pre-filed in the South Carolina General Assembly.  This 2017 legislation may enjoy a greater likelihood of being signed into law, since 2017 marks the first year of a two-year legislative cycle.

Options for Developers

Currently, developers in South Carolina may choose to maintain control over a homeowner association as long as is desired or is necessary for the economic viability of the project.  This largely protects a developer's ability to have oversight over the completion of the investment and minimizes the risk that a group of property owners may impede the development of the project.  However, 2017 pre-filed South Carolina legislation signals that many lawmakers in South Carolina are interested in regulating this practice.

2017 Senate Bill S.106, sponsored by Senator Chauncey K. Gregory (Lancaster County) seeks to amend the Code of Laws of South Carolina by requiring a declarant of a common interest community to transfer control of the community's homeowner association's executive board to property owners such that:

  • After selling one-third of the total properties within the community, at least one quarter of the voting interest of the association's executive board must be elected by property owners

  • After selling half of the total properties within the community, at least one-third of the voting interest of the association's executive board must be elected by property owners

  • After selling two-thirds of the total properties within the community, at least forty-five percent of the voting interest the association's executive board must be elected by property owners

  • After selling ninety percent of the properties within the community, at least fifty-one percent of the voting interest of the association's executive board must be controlled by homeowner elected members

Since S.106 was pre-filed, the bill was referred to the Senate Judiciary Committee before the beginning of the 2017-2018 legislative cycle where it currently awaits debate.

Other pre-filed bills

Other pre-filed bills seek to affect development in South Carolina in additional ways.  For example, Senate Bill S.122, sponsored by Senator Darrell Jackson (Richland County) titled "The South Carolina Homeowners Association Act of 2017" seeks to allow South Carolina magistrate judges to have civil jurisdiction over actions between a homeowner association and one of its members regarding actions related specific performance of related covenants and restrictions affecting the homeowner association. As with S.106, S.122 was referred to the Senate Judiciary Committee.   In the House of Representatives, House Bill H.3065, sponsored by Representative Mike Ryhal (Horry County) aims to create a Homeowner Association Ombudsman that will have the responsibility to develop and maintain a registry of homeowner associations.  The registry must include the number of units in the association updated quarterly to reflect the number of units no longer owned by the developer, as well as the name, mailing address, physical address, telephone number and email address of the association and each of its officers.  H.3065 was referred to the House Committee on Labor, Commerce and Industry, one of the House's most powerful legislative committees, where it awaits further debate.

John Carroll is an associate with Nexsen Pruet's Real Estate practice group. His experience includes matters in business regulation, construction, litigation and licensing. He previously provided counsel to S.C. Gov. Nikki Haley, worked in the Richland County public defender’s office, and served as staff attorney with the South Carolina Association of Realtors.