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Legalease
Legalease, Lawyer
Category: Real Estate Law
Satisfied Customers: 14529
Experience:  13 years experience in RE Law, including LL/Tenant, contractor disputes, comm'l prop. issues
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Re: SC HOA Law - in SC, HOAs are subject to non-profit corporate

Resolved Question:

Re: SC HOA Law - in SC, HOA's are subject to non-profit corporate law. I am on the Board, the 2nd BOD since the developer turned management over through an advisory board and we had our first election. We are an over 55 community of 108 single family homes. Our dues (base assessments) include those "common expenses" associated with the maintenance of our "common area" including a clubhouse, pool, parking lot, retention pond, etc., etc. From the beginning, the developer included weekly trash services to all 108 residents in the monthly dues.

Our Covenants obviously are from a general template used by the developer which include sections that could be applicable to an HOA which also could have separate sub-divisions of condos or townhouses, as well as single family homes. In the case of a "neighborhood" within an HOA comprised of condominiums, services to the individual members (residents) such as trash service, lawn services, cable, etc. may be included as a "common expense" within the dues from which no member could be exempt. That makes sense and is reasonable due to one shared building, one shared parcel of property to be maintained, and probably one dumpster in the parking lot where the residents take their trash.

About 15% of the homeowners in our community don't even live here full time yet, are still working up north where they maintain a primary residence, and only come to their home in our HOA for a vacation until they can retire. They don't want to pay for weekly trash when they aren't here. The Article within our Covenants applicable to "services to the members" is clearly intended to apply to situations such as a condo sub-division as described above, and states, "No owner shall be exempt from the obligation to pay for such services IF provided to all owners as a "Common"Expense". So, since we are comprised only of single family homes, our Board signed a resolution changing "trash services" from a "common expense" (which it clearly is NOT by definition), to a ""service to the members". We then allowed residents to "opt out", and take their trash to the local dump 1/2 mile up the road when they are here for vacation. We had 17 opting out and 91 who still wanted weekly trash service. The trash company agreed to this without increasing the very competitive contract cost negotiated by the board and gave us a two year term with no change in price. Our Management Company agreed to this and said they could do "split billing" to produce monthly coupon books for those with trash service and those without. The trash income collected was exactly what was paid out to the trash Company. The 17 residents who opted out were very happy and appreciative not to have to pay for a service they wouldn't use. No one complained at all...until almost 4 months later after the changes were in effect. Four residents and 3-4 other supporters spoke out accusing the Board of violating the Covenants; that trash services to members were treated as a common expense from the beginning; that anyone who purchased a home in our community knew full well that their dues included trash services, "from which no owner shall be exempt". The Board spent considerable time and effort preparing a two page document quoting pertinent provisions from our covenants in an attempt to support that the builder should never have included individual trash services in the dues since it does not meet the definition of a common expense for a single family HOA. Subsequently the four residents went to an attorney who sent the Board a letter threatening to sue if we didn't rescind the trash opt out based on a violation of the covenants. We took the letter to our Association attorney, who said we didn't technically violate the covenants, but he would have advised against it because historically HOA's function on the "all in" or "all out" principal for services provided by the HOA, and to deviate from that practice would probably result in opposition and trouble. So, effective 1/1/14 we are reversing our resolution and making trash services mandatory to all residents whether they use the service or not.

This seems so unfair and unreasonable to me! No one was hurt by it. Those who wanted trash service got it, and those who didn't no longer had to pay for a service they weren't going to use. After all, it is the trash company who gets to keep the money from 17 residents who don't use their service; not the Association!

Please explain the logic and legality of this situation. It is beyond my understanding.
Thank you.

Linda Darch
Submitted: 1 year ago.
Category: Real Estate Law
Expert:  Legalease replied 1 year ago.

Hello there Linda --

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As an independent HOA or condo association every board of owners who convene a board meeting has the legal right to propose changes to the covenants, rules and regulations of the association and by a majority vote of the board, any covenant, rule or regulation may be altered or changed by the board as the board sees fit to do. The board was perfectly within its legal rights to review the trash service rules and to make the changes to the trash service that it wanted to make. The argument of the attorney that a few of the owners hired was not a good argument at all and when consulting with your attorney (the board's attorney) it sounds to me like your attorney simply believed that it was easier to use the traditional method of trash collection and fee payment for those services rather than to "rock the boat" and end up having to charge your board a whole bunch of legal fees to fight back against any lawsuit that these select owners might have filed.

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The non profit status has nothing to do with such rules and regs -- it has everything to do with the SC HOA / condo statute and those statutes simply give the HOA the right to organize into an association, the right to adopt covenants and rules and regulations to effectively run and operate the HOA and the right to convene meetings of the board where they can consider and adopt any rules/regs that they please and they have the power to change the covenants / rules and regs as they see fit and for the betterment of the HOA owners as a whole.

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It really does not make a lot of sense to have to revert back to the prior method of collecting and paying for the trash pick up and the only thing I can think of is that the old method of payment and collection somehow benefitted some owners over other owners -- and then it simply becomes a tactical decision on the part of the HOA if the HOA wants to draw a line in the sand and tell the attorney and the few owners who were against the later method to "go ahead and sue because we have the legal right to adopt any method that we wish to use for any and all services granted and common expenses collected for within the HOA property".

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MARY

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Customer: replied 1 year ago.
Mary, thank you so much for such a prompt and encouraging response! I will surely give you an "excellent rating". I do want to ask if your response is definitely applicable to South Carolina however.

Also, we are not changing any of the covenants, which would require a vote by the residents. Our covenants define 4 Assessments:
Base Assessments, which are for the payment of "common expenses"; Special Assessments to pay for unbudgeted expenses;
Specific Assessments, for any menu of special services which the Association may offer and can include lawn service, trash collection, cable service, etc.; and
Neighborhood Assessments, which are applicable to a particular sub-division within an HOA to fund budgeted expenses and could also include lawn service, trash service, cable, etc. (this, to me would apply to a condo or townhouse sub-division within an HOA which may have particular services unique to their type of neighborhood).

So we, the board, merely passed a resolution removing trash service from a "Base Assessment" to a "Specific Assesment" as a service provided to the residents. The Board maintained control of and negotiated the trash contract for the maximum benefit of the residents, and allowed those transient, part time owners to opt out until they can become permanent residents.

So what is so bad? Actually our attorney said we didn't technically violate the covenants, acted in good faith, were fair and reasonable, and if we wanted to challenge the opposition, he could probably do a very good job of defending us. But he would have advised against our decision knowing a few would raise their ugly heads and cause trouble....and was it worth it? Did we want to subject the residents to the possible expense of defending our decision...after all, we would be spending the residents money to do so. On the other hand, are we subjecting ourselves, The Board, to possibly being sued by the 17 residents who have opted out and would now be forced to pay $108 each per year for a service they don't use, or be sued by current buyers of homes that are up for sale when the buyers have already been told by the realtors that they can opt out of trash?

What would be your suggestion as the best thing to do in this situation? Unfortunately we have about 8 residents who are trouble makers and power mongers. I just hate to see them get their way when I feel so strongly we implemented a change that was fair to everyone. It was a win-win change.

Thanks again for your help and advice!
Expert:  Legalease replied 1 year ago.

Hello again Linda --

-

Yes, what I have told you applies to SC HOA law. The HOA board has the rights in the statute to perform their duties and one of those duties is to be able to propose amendments to the covenants, rules and regulations and to vote on those changes and/or to put the matter out for a vote from all of the residents. Your attorney also agrees with my assessment of the SC HOA law -- that you had the right to change and adopt a different manner of handling the trash -- it is just a matter of whether or not you want to take on the aggravation of a full lawsuit here from the few owners who do not like itl

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MARY

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Legalease, Lawyer
Category: Real Estate Law
Satisfied Customers: 14529
Experience: 13 years experience in RE Law, including LL/Tenant, contractor disputes, comm'l prop. issues
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