Homeowners association (HOA) members in South Carolina are entitled to inspect certain records.  Facilitating such inspection appropriately is not only a fundamental duty of an HOA board, but also a responsibility that frequently gives rise to legal conflict when one or more parties are confused about the applicable legal requirements. Homeowners are rightfully interested in the governance of their community. Therefore, HOA boards should expect to receive requests to inspect records and understand their obligations to help ensure a smooth process. This article is a very brief overview of South Carolina law regarding HOA record inspection which will hopefully be helpful to HOA boards and members alike.

As the overwhelming majority of HOAs in South Carolina are nonprofit corporations, a key statutory authority establishing inspection rights for members is the South Carolina Nonprofit Corporation Act (the “Act”).[1] The Act provides that a member of a corporation is entitled to inspect the following records at a reasonable time and location specified by the corporation if the member gives the corporation written notice (or demand) at least five business days before the date on which the member wishes to inspect:

• the articles or restated articles of incorporation and all amendments to them currently in effect; and
• the bylaws or restated bylaws and all amendments to them currently in effect; and
• resolutions adopted by the board relating to the characteristics, qualifications, rights, limitations, and obligations of members or any class or category of members; and
• the minutes of all meetings of members and records of all actions approved by the members for the past three (3) years; and
• all written communications to members generally within the past three (3) years, including the financial statements furnished for the past three (3) years under S.C. Code § 33-31-1620;
• a list of the names and business or home addresses of its current directors and officers; and
• its most recent report of each type required to be filed with the Secretary of State under the Act. [2]

That said, there are some records a member is entitled to inspect, but only pursuant to certain conditions.

Pursuant to the Act, a member is entitled to inspect the following records if the member gives the corporation written notice at least five business days before the date on which the member wishes to inspect but only if (1) the member’s demand is made in good faith and for a proper purpose; (2) the member describes with reasonable particularity the purpose and the records the member desires to inspect; and (3) the records are directly connected with that purpose:

• minutes of all meetings of its members and board of directors, a record of all actions taken by the members or directors without a meeting, and a record of all actions taken by committees of the board of directors as authorized by Section 33-31-825(d) of the Act to the extent that any of these are outside of and beyond “the minutes of all meetings of members and records of all actions approved by the members for the past three years.”; and
• accounting records of the corporation; and
• the membership list, subject to certain additional provisions set forth in the Act at S.C. Code § 33-31-1605.[3]

While there is not a hardline rule on how to determine whether a member’s demand is made “for a proper purpose,” it is important to note that the board does not have to “like” the purpose for it to be a “proper purpose.” For example, a member may demand to inspect accounting records and declare that the purpose is that they suspect the HOA board of unethical dealings, or perhaps a member would like to inspect the membership list for the purpose of reaching out to fellow members about voting out the current board. While these purposes may be upsetting for the board, these would most likely be construed by a court to be “proper purposes” for inspection as they are part of lawful activities of HOA participation.

The Act further provides that a member’s agent or attorney has the same inspection and copying rights as the member the agent or attorney represents.[4] Unless the HOA’s governing documents provide otherwise, the HOA may impose a reasonable charge, covering the costs of labor and material, for copies of any documents provided to a member. However, this charge may not exceed the estimated cost of production or reproduction of the records.[5]

In addition to the inspection rights set forth in the Nonprofit Corporation Act, it is vital that an HOA board review its community-specific bylaws and other governing documents to determine if their governing documents provide for additional inspection rights.

It is very common for HOA governing documents to provide for even broader inspection rights than the provisions of the Nonprofit Corporation Act. Therefore, an HOA board should be sure to review its governing documents in case simply complying with the Act is not enough to uphold their responsibilities for their community.

Failure for an HOA board to properly allow for inspection of records under the Act or their governing documents can have the obvious negative effect of sowing distrust and suspicion of the HOA’s governance. Furthermore, a breach of this duty gives rise to legal liability for the HOA and potentially even for individual board members. The Act also provides that if a corporation does not within a reasonable time allow a member to inspect a record to which they are entitled under the Act, the court can require the HOA to allow the inspection and make the HOA pay the member’s attorney fees.[6] Therefore, familiarity and compliance with member inspection rights can help an HOA avoid problems in their community and the courtroom.

This article is not intended to be an exhaustive discussion of applicable law regarding HOA record inspection rights, nor any guarantee of the outcome of any litigation regarding the same. Our attorneys at McCabe, Trotter & Beverly, P.C. are experienced and well-equipped to answer questions you may have regarding this topic. Please contact us at (803) – 724 – 5000 for further information.

Christian Saville

McCabe, Trotter & Beverly, P.C. blogs and other content are for educational and informational purposes only. This is not legal advice and does not create an attorney/client relationship between McCabe, Trotter & Beverly, P.C. and readers. Readers should consult an attorney to understand how this information relates to their personal situation and circumstances. You should not use McCabe, Trotter & Beverly, P.C. blogs or content as a substitute for legal advice from a licensed attorney.

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[1] S.C. Code § 33-31-101 et seq.

[2] S.C. Code §§ 33-31-1601; – 1602(a).

[3] S.C. Code §§ 33-31-1601(a); -1602(b)-(c).

[4] S.C. Code § 33-31-1603(a).

[5] S.C. Code § 33-31-1603(c).

[6] S.C. Code § 33-31-1604.