While serving on a homeowners association (“HOA”) board of directors can sometimes be a thankless job, director seats are also often hotly contested given the importance of those positions for their communities. On the other hand, directors in some communities may find themselves serving for even longer than they intended due to the lack of willing replacements. In any event, to avoid legal challenge, it is important for HOA board members to be aware of the specific provisions of their governing documents concerning their director terms, as well as a couple provisions of South Carolina law which we are concerned may sometimes go overlooked.
While it is common, and perhaps even advisable, for HOAs to have staggered terms for their directors for the purposes of leadership continuity and fairness, boards should ensure that their governing documents actually provide for such an arrangement. If the bylaws provide for specific term lengths, then the HOA is generally going to be held to those director term lengths absent a procedurally proper amendment to those bylaws. It may be tempting for an HOA to simply allow for a certain term of directors in practice because it is convenient or perhaps because that is how the HOA has “always done it.” However, implementing director term lengths which are not in compliance with the HOA’s governing documents can foreseeably lead to successful legal challenge to actions taken by the HOA under the leadership of that board.
Most South Carolina HOAs are nonprofit corporations and therefore subject to the South Carolina Nonprofit Corporation Act (the “Act”), which sets forth some important provisions regarding director terms.[1] Some HOAs are likely unaware of a particular provision of the Act which provides that, in the absence of a term specified in the articles or bylaws, the term of each director is one year.[2] The existence of this provision may come as an unwelcome surprise to HOAs whose governing documents did not specify term lengths, and so the HOAs had been proceeding under the understanding that they themselves could just proceed with their own desired term lengths without specification in their bylaws. While it seems most HOAs’ bylaws do provide for specific term lengths, the Act is clear that in the absence of such specification, director terms are for merely one year. Of course, one-year terms do not facilitate much consistency for a board and also necessitate the inconvenience of frequent, sweeping elections. Therefore, HOAs without any specification of term lengths in their governing documents may very well want to explore amending their bylaws to provide such specification to avoid being “defaulted” to one-year terms under the Act.
While we recommend any HOA boards or other nonprofit corporation boards refer to the Act and review all of its provisions regarding director terms, another high point from the Act is that the terms of directors may not exceed five years.[3] This is noteworthy as some HOAs who rarely have any candidates to replace the current directors may be tempted to just provide for very long term lengths to avoid the inconvenience of having an election in which there will be no challengers, but nevertheless, the Act is clear that terms may not exceed five years. That being said, while there is a limit imposed on the length of terms, the Act still provides that directors may be elected for successive terms, so there is no restriction under the Act as to how many terms a director can be elected, or reelected, to serve.[4]
This article is not intended to be an exhaustive discussion of applicable law regarding HOA director terms, 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.
[1] S.C. Code § 33-31-101, et seq.
[2] S.C. Code § 33-31-805(a).
[3] Id.
[4] Id.