HOAs have almost all of the capabilities of a municipal government, but without the concomitant rules. That’s a situation in need of change, as Sunday’s editorial shows:
Fifty years ago this past Friday, South Carolina’s Horizontal Property Regime Act went into effect, legalizing a new-fangled property experiment called condominiums. It would probably be safe to say that the authors of that 1962 law had no idea of how much the idea would take off. The concept was still so novel that in 1965, The Sun News ran an article entitled “Condominium Ownership: What It Is, How It Works.”
Today, a half-century later, the Grand Strand is not only familiar with condos, but with community associations of all sizes and shapes. Many, if not most, are now governed not by that 1962 act, but by no state association law at all.
How much has the idea caught on? The Community Associations Institute, a national advisory group, estimates that in 1970, about 1 percent of the U.S. lived in some sort of association. By 2011, that had grown to 20 percent. Here on the Grand Strand, that number is almost certainly higher, but no one is quite sure, because nobody keeps track. Neither the county, the state or local Realtors could say how many associations exist in our area. Robert Barlow, liaison for the CAI’s Grand Strand Regional Advisory Council, could only offer an educated guess that about 80 percent of the developments in the area were governed by some type of association.
But while thousands of local residents live inside a community association, the groups themselves are governed by very few rules beyond the ones they set for themselves. Given the scope of authority granted to most of these homeowners associations or property owners associations or condominium boards, that’s preposterous.
Some of the larger HOAs in particular act more like their own town than simply a neighborhood. Barefoot Resort in North Myrtle Beach, to take just one example, is home to about 7,000 people, according to Tom Powell, vice president of the Barefoot Resort Residents Association. That’s more than Surfside Beach, Loris and Atlantic Beach combined. In fact, it’s larger than 80 percent of the municipalities in South Carolina.
The elected HOA board oversaw a budget with revenues of more than $1.9 million in 2011. The neighborhood runs its own bus service to the beach. It has its own newsletter. The gated communities inside Barefoot pave their own roads. And those in leadership can levy assessments against neighborhoods or even single residences largely as they see fit. “We’re kind of like a little city over here,” Powell said.
But it is not a city. And neither are the other dozens or hundreds of associations on the Strand. Instead they are what state Rep. Tracy Edge called “kind of a quasi-government,” running residents’ lives with none of the oversight or rules that apply to regular governments in our state.
Actual S.C. cities and towns must abide by numerous state laws, rules that set limits on how much they can raise taxes at a time, that limit who can run for office and that require all candidates to disclose potential conflicts of interest. Municipalities must also abide by open meetings laws, let interested residents know of meeting times, provide documents in a timely manner and complete regular financial audits. Community associations are subject to none of those laws.
Many HOAs, it must be said, function just fine without the burden of more regulation. They’re staffed by dedicated leaders who generously give of their free time to help their neighbors and who take seriously their responsibility of neighborhood caretakers.
“When they’re working within their guidelines or the scope of their authority,” said Nick Kremydas earlier this month, “HOAs are generally a good thing for their communities.”
But Kremydas, CEO of the S.C. Realtors Association, also pointed to some of the same concerns about the great power given to these boards. “The biggest issue is just as a property rights issue, beyond the real estate business,” he said. “What role, what scope of authority do HOAs have in South Carolina?”
Kremydas said the main complaint he hears from Realtors about associations is a lack of access or openness. Realtors want access to covenants or financial records. They want to know, for example, if the community is two months from imposing a $20,000 assessment, a situation that could scuttle a sale in the works. And Realtors don’t want to be charged exorbitant fees for access to that information.
Edge agreed. “There ought to be rules requiring the books to be open and accessible and the meetings to be open, things like that.”
But despite agreement that some more oversight – and perhaps required training for leadership – is in order, there has been little appetite for real changes. The same Homeowners Association Act has been proposed and then ignored each legislative session since 2004. Barlow, the local CAI liaison, said that his group and other interested parties have been tweaking the bill to make it more palatable and hope to have their own version proposed by this time next year. Without knowing the details, it would be premature to endorse it as a step forward, but nearly any new oversight would be welcome. It’s time to pass some version of the HOA law.