H 4806 General Bill, By Bales
 A BILL TO AMEND THE CODE OF LAWS OF SOUTH CAROLINA, 1976, BY ADDING ARTICLE 3
 TO CHAPTER 31, TITLE 27, SO AS TO PROVIDE FOR GOVERNANCE OF A HOMEOWNERS'
 ASSOCIATION, INCLUDING PROVISIONS FOR ADOPTING OR CHANGING AN OPERATING RULE,
 PROCEDURAL FAIRNESS IN THE OPERATION OF THE ASSOCIATION'S PROPERTY AND
 AFFAIRS, FILING OF GOVERNING DOCUMENTS WITH THE SECRETARY OF STATE, REVIEW BY
 THE SECRETARY OF STATE OF GOVERNING DOCUMENTS FOR COMPLIANCE AND NOTICE OF
 NONCOMPLIANCE TO HOMEOWNERS AND THE DEPARTMENT OF CONSUMER AFFAIRS,
 RECOGNITION OF THE DETERMINATION AS EVIDENCE PER SE OF NONCOMPLIANCE IN AN
 ENFORCEMENT ACTION, ENFORCEMENT OF COMPLIANCE BY THE DEPARTMENT THROUGH FINES
 AND INJUNCTIONS, AND A CAUSE OF ACTION AGAINST THE BOARD OF DIRECTORS OF A
 HOMEOWNERS' ASSOCIATION FOR BREACH OF ITS FIDUCIARY DUTY TO THE ASSOCIATION
 FOR NONCOMPLIANCE WITH THIS ARTICLE.

   02/19/04  House  Introduced and read first time HJ-12
   02/19/04  House  Referred to Committee on Labor, Commerce and
                     Industry HJ-13

TO AMEND THE CODE OF LAWS OF SOUTH CAROLINA, 1976, BY ADDING ARTICLE 3 TO CHAPTER 31, TITLE 27, SO AS TO PROVIDE FOR GOVERNANCE OF A HOMEOWNERS' ASSOCIATION, INCLUDING PROVISIONS FOR ADOPTING OR CHANGING AN OPERATING RULE, PROCEDURAL FAIRNESS IN THE OPERATION OF THE ASSOCIATION'S PROPERTY AND AFFAIRS, FILING OF GOVERNING DOCUMENTS WITH THE SECRETARY OF STATE, REVIEW BY THE SECRETARY OF STATE OF GOVERNING DOCUMENTS FOR COMPLIANCE AND NOTICE OF NONCOMPLIANCE TO HOMEOWNERS AND THE DEPARTMENT OF CONSUMER AFFAIRS, RECOGNITION OF THE DETERMINATION AS EVIDENCE PER SE OF NONCOMPLIANCE IN AN ENFORCEMENT ACTION, ENFORCEMENT OF COMPLIANCE BY THE DEPARTMENT THROUGH FINES AND INJUNCTIONS, AND A CAUSE OF ACTION AGAINST THE BOARD OF DIRECTORS OF A HOMEOWNERS' ASSOCIATION FOR BREACH OF ITS FIDUCIARY DUTY TO THE ASSOCIATION FOR NONCOMPLIANCE WITH THIS ARTICLE.

Be it enacted by the General Assembly of the State of South Carolina:

SECTION    1.    Chapter 31, Title 27 of the 1976 Code is amended by adding:

"Article 3

Section 27-31-510.    For purposes of this article:

(1)    'Homeowners' association' means an organization organized and operated to provide for the acquisition, construction, management, and maintenance of real and personal property owned by the association for the use, benefit, and enjoyment of the members of the association.

(2)    'Governing documents' means articles of incorporation, bylaws, declarations, operating rules, voting agreements, statements of fees and assessments, and any other document setting forth the authority for and the manner of operation of the association's property.

(3)    'Operating rule' means a regulation adopted by the board of directors of a homeowners' association that applies generally to the management and operation of the association's property or the conduct of the business and affairs of the association.

(4)    'Procedural fairness' means in accordance with requirements of reasonable notice, opportunity to be heard, factually based decision, and process for appeal.

(5)    'Rule change' means the adoption, amendment, or repeal of an operating rule.

Section 27-31-520.    (A)    An operating rule or a rule change of a homeowners' association is valid and enforceable only if the rule is:

(1)    in writing;

(2)    authorized by the governing documents of the association or pursuant to authority conferred by law;

(3)    otherwise consistent with governing law and the governing documents;

(4)    adopted, amended, or repealed in good faith and with procedural fairness.

(B)    The adoption, amendment, or repeal of an operating rule is considered fair if it substantially complies with procedural due process standards for reasonable notice, hearing, decision-making, and review, which procedure must be included expressly in the association's governing documents.

(C)    Reasonable notice requires written notice to each member of the homeowners' association in such a manner and within a time frame so as to encourage a member to exercise his right to be heard on the proposed rule or change.

Section 27-31-530.    (A)    A homeowners' association must file every governing document of the association with the Secretary of State within ten days of its original adoption and every amendment to it.

(B)    The Secretary of State shall review each governing document of the association so as to determine its compliance with:

(1)    existing law;

(2)    other governing documents;

(3)    procedural fairness; and

(4)    statutory completeness.

(C)    The Secretary of State shall inform each member of the homeowners' association and the Director of the Department of Consumer Affairs if the association's governing documents fail to meet the compliance requirements of subsection (B). The express determination of noncompliance by the Secretary of State constitutes evidence of noncompliance per se in an administrative or legal enforcement action.

Section 27-31-540.    The Department of Consumer Affairs is responsible for administrative enforcement of this article through the imposition of fines or injunctions, or both, against the board of directors of a homeowners' association.

Section 27-31-550.    The board of directors of a homeowners' association is jointly and severally liable for breach of its fiduciary duty to the association if it fails to manage and operate the association's property or conduct the business and affairs of the association in compliance with this article."

SECTION    2.    This act takes effect upon approval by the Governor.