Category Archives: Legal Compliance

Why Incorporate?

    Although there is no requirement in South Carolina mandating community association incorporation, it is nevertheless strongly advisable. There are many benefits to incorporation, and I have summarized a few important considerations below.

    First, incorporation acts to protect association members individually by creating a “corporate shield.”  This shield blocks members’ personal assets in the event that the association becomes liable for large sum.  Just like in every other business, association members have to contemplate the potential for liability and the need to protect their individual interests.

    A second advantage of incorporation is that it gives an association the ability to borrow money from a financial institution. Getting a loan may be necessary for a struggling association in light of today’s economic hard times and high rates of assessment delinquency.  Even if your association has adequate reserve funding and seems financially secure, a loan may be necessary to avoid astronomical special assessments in the event of an emergency. 

    Third, when issues or questions arise an incorporated association can turn to the South Carolina Nonprofit Corporation Act and applicable corporation case law to find solutions and procedural guidelines.  This can provide peace of mind to a concerned association when confronted with uncertain situations.

    The fourth, and probably most important reason to incorporate a community association has to deal with the association’s ownership of property.  An incorporated association can hold the fee title to real property in its own name, without the need of an expensive trust.  This can save the association a great deal of money and also simplify the title to common area property.
    
    If your association is unincorporated or if you are unsure of its legal status, you may want to consider further exploration of the benefits of incorporation and the process of filing the appropriate paperwork with the Secretary of State.

    This site and any information

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Two-family rental may violate codes

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(Michael Hunter, Association Answers) Q: Last year our HOA’s rental policy was challenged by a developer. We had previously not allowed rentals. After a new vote, property owners are now allowed to rent their properties. However, our restrictive covenants clearly state that homes are for single-family use only. There is a home in our community which has multiple levels and was marketed by a Realtor last year as having multi-family capability. Citing our restrictions, our board asked him not to market the house as multi-family. The house was recently sold and the new owner intends to rent the home. During a conversation with me he stated that he intended to rent the downstairs and occupy the upstairs himself. Our board feels this is a violation of the restrictive covenants. What recourse does our board have?

You indicate that your CCRs (covenants, conditions and restrictions) restrict homes to “single-family” use. Is

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Two-family rental may violate codes

Q: Last year our HOA’s rental policy was challenged by a developer. We had previously not allowed rentals. After a new vote, property owners are now allowed to rent their properties. However, our restrictive covenants clearly state that homes are for single-family use only. There is a home in our community which has multiple levels and was marketed by a Realtor last year as having multi-family capability. Citing our restrictions, our board asked him not to market the house as multi-family. The house was recently sold and the new owner intends to rent the home. During a conversation with me he stated that he intended to rent the downstairs and occupy the upstairs himself. Our board feels this is a violation of the restrictive covenants. What recourse does our board have? You indicate that your CCRs (covenants, conditions and restrictions) restrict homes to “single-family” use. Is the term “single-family” defined in your CCRs?

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Residential Development Owner Has No Obligation to Pay Sewer Fees


    The Court of Appeals reversed the master’s holding which allowed Dorchester County to bill the development owner for tenants’ sewer charges. Tranquil Properties, Inc., v. Dorchester County, 387 S.C. 474, 693 S.E.2d 24 (2010).

    This case involves a planned development in Dorchester County consisting of 40 individual units. Title to 39 of the units and the common areas was transferred to Tranquil Properties in 2006, subject to easements, restrictions and covenants of record. Each of the four buildings in the development connects via a feeder line to the main sewer tap located under a slab in the common area. Originally, the development used a private septic tank system, but later switched to the public sewer system.


    Prior to 2007, the County billed each unit individually for sewer use. However, in June of that year the County suddenly began billing Tranquil Properties directly for the entire development’s service. In response, Tranquil Properties brought a declaratory judgment action against the County.


    The master-in-equity referred to the original association covenants. Based on the association’s ability to assess fees “to promote the recreation, health, safety and welfare of the residents and for the improvement and maintenance of Common Areas,” the master determined that as owner of the common areas and successor to the association, Tranquil Properties had the responsibility to provide sewer service to its tenants.


    The court of appeals, however, determined that it was “too great a leap” to require Tranquil Properties to pay monthly sewer service. The court strictly construed the original covenants, and in doing so, found that there was no specific mention of this requirement. The court concluded by finding “no basis in the covenants to redirect that obligation.”


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

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