With the multitude of tasks South Carolina homeowners association (HOA) boards are responsible for at the ground-level of their communities, it can be all too easy to overlook administrative obligations at the governmental and regulatory level. One of these obligations which we have found to be occasionally overlooked is the continuous maintenance of a registered office and agent on file with the South Carolina Secretary of State. While this responsibility can be easily overlooked, it can result in serious practical and legal consequences for your HOA.
First, a familiar refrain for frequent readers of our articles: the overwhelming majority of HOAs in South Carolina are nonprofit corporations.
Accordingly, this article applies to those South Carolina HOAs that are nonprofit corporations and therefore subject to South Carolina’s Nonprofit Corporation Act (the “Act”) and its provisions regarding registered agents and offices.[1]
The maintenance of a registered office and agent is not a suggestion of the Act, but rather an express requirement. Pursuant to the Act, each corporation must maintain in South Carolina registered office with the same address as that of a registered agent, and a registered agent may be:
- An individual who resides in this State and whose office is identical with the registered office; or
- A domestic business or nonprofit corporation whose office is identical with the registered office; or
- A foreign business or nonprofit corporation authorized to transact business in this State whose office is identical with the registered office.[2]
For practical purposes, it is obviously important that residents and outside entities can look up the HOA and verify an official point of contact for the HOA.
Of course, HOA leadership generally includes several different people, and a current registered office and agent helps to ensure communications are received by, and filtered through, the proper channel so they can be brought to HOA leadership’s attention. Also, regularly updating the registered office and agent as may be necessary helps to ensure that communications are not being delivered to individuals who are no longer serving on the board or perhaps a management company that no longer manages the HOA.
From a legal standpoint, failure to maintain a current registered office and agent can actually lead to harsh consequences under the Act itself. In fact, the absence of a registered agent or office in the State allows the Secretary of State to commence a proceeding to dissolve the corporation.[3] Moreover, HOA directors are required to discharge their duties in good faith, with the care an ordinarily prudent person in a like position would exercise under similar circumstances; and in a manner which the director reasonably believes to be in the best interests of the HOA.[4] Therefore, the failure to competently and continuously maintain a registered agent and office could give rise to claims for breach of duties. Moreover, HOAs are typically served with legal documents, to include lawsuits, through their registered agent. If a lawsuit against the HOA is served on its registered agent, but that registered agent has not been updated and it is perhaps a former board member who is not monitoring the address/mail or is otherwise disinterested, then it is easily foreseeable that the HOA will not be adequately informed of the lawsuit and fail to respond in time. This can result in the HOA being subject to a default judgment, where it loses the lawsuit simply as a result of failing to properly respond.[5]
We most often see failures to update and maintain registered offices or agents when HOAs do not have community association management companies.
Often, the community’s management company serves as its registered office and agent and also takes care of the necessary paperwork. This can be an efficient arrangement as management companies are generally equipped to handle the influx of correspondence that comes with the role of a registered agent. For HOAs without management companies, it is a best practice to designate a registered agent who is a trustworthy director prepared to regularly field correspondence and bring the same to the board’s attention accordingly. When there is board turnover or a change in management companies, however, it is important to ensure your HOA’s registered agent is updated, if necessary, to ensure compliance with the Act and efficient administration of your community. Your HOA counsel can also certainly assist with the process and necessary filing with the Secretary of State.
This article is not intended to be an exhaustive discussion of applicable law regarding registered offices or agents, 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.
Ashley Green
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.
[1] S.C. Code Ann. § 33-31-101 et seq.
[2] S.C. Code Ann. § 33-31-501.
[3] S.C. Code Ann. § 33-31-1420(2)-(3).
[4] S.C. Code Ann. § 33-31-830(a).
[5] Rule 55, South Carolina Rules of Civil Procedure.