8.10 Governmental Functions of Associations

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

8.10 Governmental Functions of Associations

A. Fines

Fining association members for violations of the covenants or association rules can be an effective means of gaining compliance. Many courts, however, refuse to enforce fines levied by associations without statutory authority for the fining power.⁵⁸⁰ An unpublished opinion of the South Carolina Court of Appeals, however, found authorization for associations incorporated under the South Carolina Nonprofit Corporation Act to levy fines where the bylaws allowed the association to impose fines on members for covenant violations. At the same time, where the governing documents did not provide that unpaid fines would constitute a lien on a member's property, the association lacked authority to record a purported lien for unpaid fines.⁵⁸¹

B. Architectural Review Boards

An architectural review board (ARB) or architectural committee (AC) is a common feature of homeowners associations. These boards are authorized to review and approve —or disapprove — plans put forward by members to build on their properties or change the appearance of their homes.⁵⁸² This function may be exercised by the governing board or a committee of residents appointed by the governing board. Sometimes the initial members of the ARB are named in the Conditions, Covenants, and Restrictions or an equivalent document, and those members are authorized to appoint successors. In that case the initial members are appointed by the development company and are usually employees of that company.

The actions of ARBs are often challenged in court, but the boards generally have broad authority. For example, in a case before the South Carolina Supreme Court, a homeowner argued that disapproval by the ARB of his proposed modifications for aesthetic reasons was arbitrary and that some standard for approval of modifications had to be clearly set out in connection with a general plan of development. The court responded that refusal to approve plans for aesthetic reasons will be upheld where the covenant provides guidelines for enforcement and expresses the purpose of the restrictive covenant. The court found that the rejection by the ARB of the proposed modifications based on aesthetic considerations was not arbitrary but bore a sufficient relation to the subdivision's general plan of development.⁵⁸³ The court added in another case that disapproval by an ARB does not have to be grounded on a violation of a specific restrictive covenant.⁵⁸⁴

No matter how broad the authority of an ARB may be, it cannot approve that which is prohibited by a covenant. For example, CC&Rs provided no fence could be constructed without the approval of the review board. A specific covenant prohibited fences on lots abutting a lake, lagoon, or golf course with certain prescribed exceptions. The court said there was no conflict in the covenants or ambiguity. The covenants did not allow the board to approve fence construction applications for lots abutting a lake, lagoon, or golf course except in the stated limited circumstances.⁵⁸⁵

In addition to the extensive authority boards enjoy, the South Carolina Supreme Court has limited any judicial review of their actions. First, the court has refused to impose a fiduciary duty on them. Instead, under the correct standard, the Court has said, an ARB has a duty to exercise judgment reasonably and in good faith.⁵⁸⁶ Courts will refuse to enforce the decision of an ARB that it finds constitutes an unreasonable exercise of the board's discretion.⁵⁸⁷

The covenants, or guidelines adopted by the ARB,⁵⁸⁸ often specify the procedure by which an application to the board is reviewed, including how an applicant is notified of a denial and how long the board has to review plans submitted to it. Generally, unless the board is required to provide notice of denial in writing, verbal notice is sufficient, although it is wise for an ARB to have written evidence of its decision.⁵⁸⁹ It is common for covenants to require that an ARB act on proposals submitted to it within 30 days, otherwise the proposal is deemed approved. Courts will enforce that requirement.⁵⁹⁰

Practice Tip: Local government boards of adjustment or zoning appeals are often required by ordinance or state statute to act on petitions within 30 days. There is extensive case law interpreting the meaning of these requirements that may prove persuasive to a court in a case concerning an ARB in a homeowners association.

An exculpatory clause in the covenants that is intended to protect ARB members from liability may be enforceable, but they are generally disfavored and will usually be strictly construed against the party that seeks to enforce them.⁵⁹¹

C. Private Roads

Under South Carolina law, certain statutes apply to private roads if the owner, including any corporation or homeowners association that holds title to community roads — excluding those only holding easements over those roads — files a written consent stating that it is the owner of the private roads shown on an attached plat and consents to application of the pertinent statutes for purposes of highway safety on the private roads.⁵⁹²The statutes are found in the South Carolina Motor Vehicle Registration and Licensing Act,⁵⁹³ the Uniform Act Regulating Traffic on Highways (UART),⁵⁹⁴ the Motor Vehicle Financial Responsibility Act,⁵⁹⁵ as well as statutes regarding driver's licenses,⁵⁹⁶ traffic tickets,⁵⁹⁷ and motor vehicle registration and financial security.⁵⁹⁸ Filing the consent does not constitute a dedication to the public of the roads or permission from the association for the public to use the roads.⁵⁹...