Naturally, homeowners associations (HOAs) would prefer to avoid going to court to enforce the covenants of their community. While litigation is most often something of a last resort for HOAs to enforce their covenants, it is nevertheless occasionally the last realistic option for the HOA to uphold its duty to enforce the covenants when “out-of-court” efforts fail. One of the most important considerations an HOA board has to keep in mind prior to filing suit is the anticipated financial cost of the litigation. HOAs might assume that they will simply recover their attorney fees from the violating homeowner if the HOA prevails in the lawsuit. While it may seem only fair that the violating homeowner would be responsible to reimburse the HOA for all of its legal fees, it is not always that simple. This article explains why some South Carolina HOAs may be able to recover legal fees for covenant enforcement lawsuits while others may not, as well as some principles of South Carolina law that can impact the HOA’s recovery.
First, except in limited circumstances and for certain claims, an HOA cannot recover attorney fees from covenant enforcement litigation unless the covenants of the HOA specifically provide the HOA that right.
While attorney fee provisions in HOA governing documents vary, an example one might see would be, “In any legal proceeding brought by the HOA to enforce these covenants, the HOA shall be entitled to recover its reasonable attorney fees and costs.” The reason the right to recover attorney fees must be in the HOA’s covenants is because South Carolina, like most states, generally follows the “American Rule” regarding attorney fees, which effectively means that each side is responsible for their own attorney fees.[1] However, South Carolina does allow for the recovery of attorney fees when authorized by a contract or a statute.[2] Restrictive covenants are construed like contracts in South Carolina, and the inclusion of an effectively drafted attorney fee provision does therefore make it possible for an HOA to recover its attorney fees if it prevails in court against a violating homeowner.[3]
If your HOA does not have an effective attorney fee recovery provision in its covenants, you might consider pursuing an amendment to the covenants to add such a provision.
We recommend consulting with legal counsel to ensure this is done properly and pursuant to the procedural requirements of your specific community. The HOA may be able to make a convincing argument to members that amending to include an attorney fee provision could end up saving the HOA, and its members, significant sums of money in the future. Moreover, an attorney fee provision can serve as a deterrent against violations when a violator knows they may be held responsible for the HOA’s attorney fees in a lawsuit.
While it is great for an HOA to have an effective attorney fee recovery provision in its covenants, it is important to note that the actual award of attorney fees is ultimately left to the discretion of the trial judge.[4] Therefore, while HOAs sometimes do recover all of their attorney fees from the violating homeowner after prevailing at trial, it is also not unusual for a trial judge to ultimately award less, and sometimes much less, than the actual attorney fees incurred depending on various factors and the circumstances of the specific case. Therefore, an attorney fee provision is important to have in the covenants to allow for a realistic chance of recovery, but it would be imprudent for an HOA to go into litigation fully assuming that it will recover all of its attorney fees without being financially and strategically prepared for another outcome.
An HOA and its members would surely prefer to spend money on a multitude of projects rather than a lawsuit. That said, an HOA board generally has a fiduciary duty to enforce the covenants of the HOA, and failing to enforce those covenants can jeopardize not only the community’s wellbeing, but the HOA’s legal standing and rights to enforce the covenants in the future. Therefore, sometimes an HOA simply must sue to enforce the covenants even when the HOA does not have the right to recover its attorney fees. Ultimately, the HOA serves to uphold the standards and covenants of the community even if it means doing so at its own cost, but an understanding of your specific HOA’s attorney fee provisions, together with the applicable case law, can help inform your HOA board as it makes the appropriate budgetary preparations in the event of covenant enforcement litigation.
This article is not intended to be an exhaustive discussion of applicable law regarding attorney fee recovery 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.
Myers Truluck
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] Layman v. State, 376 S.C. 434, 451, 658 S.E.2d 320, 329 (2008).
[2] Dowaliby v. Chambless, 344 S.C. 558, 561, 544 S.E.2d, 646 647-648 (Ct. App. 2001).
[3] See Kinard v. Richardson, 407 S.C. 247, 257, 754 S.E.2d 888, 893 (Ct. App. 2014).
[4] See Blumberg v. Nealco, Inc., 310 S.C. 492, 493, 427 S.E.2d 659, 660 (1993).