4.11 Restrictions on the Sale of Units

• Library: South Carolina Community Association Law: Condominiums and Homeowners Associations (SCBar) (2019 Ed.)

4.11 Restrictions on the Sale of Units³⁰¹

Condominium documents commonly allow associations to control the resale of units. Most Condominium Acts include provisions enabling or limiting rights of first refusal or other restrictions on sale, but the SCHPA does not. Some statutes provide that the rule restricting unreasonable restraints on alienation will not be applied to defeat a condominium provision restraining alienation of condominium units, or allow that the rule against perpetuities will not defeat restrictions on transfers of units.³⁰² Courts are divided on whether the rule against perpetuities applies to condominium rights of first refusal.³⁰³ There are also differences about the application of the rule against unreasonable restraints on alienation.³⁰⁴

A sales restriction employed to promote a "community of congenial residents'' has been found permissible.³⁰⁵ However, the use of such restrictions presents many dangers. Councils may be subject to suits for discrimination,³⁰⁶ tortious interference with a contractual relationship,³⁰⁷ or breach of fiduciary duty.³⁰⁸ Additionally, a regulation of the South Carolina Human Affairs Commission proscribes discriminatory housing practices, specifically prohibiting: "Denying or delaying the processing of an application made by a purchaser or renter or refusing to approve such a person for occupancy in a cooperative or condominium dwelling because of race, color, religion, sex, handicap, familial status, or national origin."³⁰⁹ In exercising whatever rights are granted it by the condominium instruments, the council of co-owners must follow any procedures in the documents or risk having its actions declared void.³¹⁰

In Westbridge Condominium Ass'n v. Lawrence,³¹¹ the association adopted another kind of regulation on transfers of property: a "move-in" fee, apparently implemented to defray costs the association believed it incurred when a new resident moved into the condominium. The court found the fee to be invalid because the condominium documents granted ".only one method for making an assessment for common elements expenses, a pro rata allocation of costs among all unit owners, thereby limiting the power of the Board of Directors to impose a move-in fee under an alternative method of assessment."³¹² The case does, however, imply that if the condominium documents provided for a move-in fee that one could be assessed.³¹³ The South Carolina Attorney General evidently agrees with that proposition. The Attorney General was asked whether a homeowners association may impose a transfer fee on purchasers of homes in a community over which the association has jurisdiction, and concluded it could.³¹⁴ Often these fees are considerably larger than move-in fees.³¹⁵ They also can serve a different purpose. A move-in fee is usually assessed to defray expenses whereas a transfer fee can be a means of shifting the financial burden of increased dues and special assessments to new residents. The Attorney General's opinion concluded that if an association is organized under the South Carolina Nonprofit Corporation Act, it benefits from a section of the Act that authorizes imposition of transfer fees.³¹⁶ More broadly, the opinion states that, as a private organization, the ability of a homeowners association to collect fees and assessments is a private matter between the association and its members and whether the association may collect a fee must be determined by examining the community's documents.

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^[301] See generally...