Kiawah Island Community Association

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-May 15 Update-

The SC Association of Realtors (SCAR) opposes a capital transfer for the state's community associations, believing it is a barrier or disincentive to buying property within a community association. [At Kiawah, this transfer is called a Contribution to Reserves (CTR) and it is 0.5% of the purchase price of the home. This amount, paid by the purchaser at closing, contributes to the extraordinary expenses for repairs, replacements and additions to community association roads, drainage, buildings, infrastructure and other common-property.] SCAR has introduced language into bill SB-30 to remove CTRs and require that all members pay the same amount for assessments. This language was incorporated into the draft dated April 17 (click here to view the draft), under section 27-52-50(B).

Kiawah Island Community Association (KICA) sees this language as onerous. If KICA cannot collect CTRs from those who become KICA’s new members, then all members would pay for major repairs as they are needed. This would probably result in special assessments being levied for all members to deal with repairs that are currently funded by transfer fees in CTR. For example, if KICA needed to pay for $3 million in infrastructure repairs one year, each KICA member would pay approximately an additional $750 that year in additional assessments. Current KICA infrastructure assets are approximately $39 million.

We believe it is critical that all KICA members understand the position taken by SCAR, since this matter affects each member directly. And, if a member owns property in several associations with a CTR program, that member would pay several times annually.

KICA's CTR program was voted into the covenants in 1994 by a member approval vote of 91%. This provision keeps KICA infrastructure in good repair, allows the association the ability to then spend annual assessments on services and programs benefitting members and or allows association assessments to remain as low as they are today.

As mentioned, SCAR’s language can be found in section 27-52-50(B) of the proposed bill.

Respectfully, KICA disagrees with the realtors' proposed changes to the bill for several reasons:

1.    Until the deed is conveyed and the CTR is paid, the prospective buyer is not a member of the association.

2.    Every purchaser of property within the community has to pay CTR whether they buy a lot or a home: so, at some point, everyone affected has had to pay CTR.  KICA covenants apply CTRs to all purchasers (with limited exemptions, specified in the covenants, for example where a transfer for cash between unrelated parties is not really occurring). CTR is non-discriminatory in its application.

3.    Every purchaser is assessed a "uniform" percentage fee of CTR based on that property's value, thus it's not discriminatory as to amount.

4.    The Association of Realtors “fixed fee" analysis is incorrect since the total fee does not have to be "fixed" in order for the assessment percentage or ratio to be "uniform."   Whether a person buys a $1 million dollar condo or $10 million dollar home, the percentage of CTR that person pays is uniform although the total amount varies based on the sales price.

SCAR’s position inappropriately encourages state government interference with people’s right to contract granted under the US Constitution.

KICA strongly opposes SB-30; in fact, at its May meeting, your KICA Board of Directors unanimously opposed SB-30 for several reasons including the above information. (Other reasons include breach of members’ privacy by making public your contact information, interference with association’s ability to enforce covenant violations and double payments required for those who also own in subassociations/regimes) Further, your community association will seek a meeting with members of the SC Senate Judiciary Subcommittee for SB-30 to explain why CTRs are important to help associations deal with future extraordinary expenses of replacing infrastructure and that CTRs are uniformly applied to all incoming members “even though all members do not pay the same amount” and are fairly based on members’ property's values.

In summary, we believe the association's Covenants placing a relatively-low uniform transfer fee on new purchases on Kiawah is a fair and reasonable way to collect monies for CTR. For that reason, KICA strongly opposes legislation that will remove a time-tested method for our community to pay for the extraordinary repairs and replacements it needs without burdening all members annually.

Please continue to watch this site for updates on SB-30.

-May 6 Update-

Hello Members:

The Senate Judiciary Subcommittee met today to discuss changes to S30. Several items of interest were brought up or clarified by the senators:

A subcommittee member said that community associations have no right to charge a contribution to reserves fee. This was surprising in that Kiawah and numerous associations in South Carolina do have CTRs: KICA’s CTR is 0.5% per sale and resale and the funds go to pay for future repair and replacement of infrastructure like roads and drainage. This subcommittee member indicated that he approves the language in S30 regarding all members pay the same assessment, since CTRs should be done away with and all members should be charged the same. Assuming that Kiawah is doing approx $2.5 to $3 milion per year in repairs and replacements, then this means the assessment to members would be increased over $600 to pay for annual reserves projects.
Another subcommittee member was concerned that HOAs had no bill of rights to protect home owners. Indeed current wording in S30 has no bill of rights provisions. [He did not know that CAI has had a bill of rights and responsibilities for about five years and that KICA also approved a bill of rights and responsibilities about four years ago.]
The language about removing a director makes it easier to remove than to elect this person. Also, since most associations in the state are incorporated, the current NonProfit Corporation Act has a provision that conflicts with removing directors.
Regarding disclosing to the prospective buyer that they are purchasing in a community association, the subcommittee is not sure who should disclose that info, the seller, closing attorney or realtor.
Overall concerns expressed were that: 1) there is no understanding of how the bill will interface with existing governing documents or state law, 2) is there a need for more regulation of associations (the group decided that there was), 3) how does a member’s noncompliance to established rules and gov documents affect the other members (sense was that associations had a right to establish rules).
A subcommittee member indicated that this bill cannot be passed this year.
Another subcommittee member indicated that this was the last meeting of the subcommittee this year, so issue is tabled until early 2010.

The KICA Board of Directors continues to closely watch S30 and the assocation will not report on this further unless informal meetings are held this fall in advance of the early 2010 roll-out. Should you have questions you are welcomed to contact KICA Chief Operating Officer Joe Bunting at joe.bunting@kica.us . Another good resource for members is the state’s CAI (Community Associations Institute) website at www.cai-sc.net. Click on “Legislation” for updated information.

Sincerely,

Joe Bunting
Chief Operating Officer
Kiawah Island Community Association, Inc.

-April 30 Update-

Dear Members:

As information only, SB-30 has been moved from the SC senate's judiciary committee back to the judiciary subcommittee so it is unlikely that the draft bill will make its way to vote before summer session ends. As such, we thank KICA members who took the time to contact Senator McConnell and their other senators.

As of this date, the senate subcommittee STILL will not release a copy of the proposed legislation, so that KICA members can read it for themselves and make a determination.

Still, because of our attendance in SC at the subcommittee hearings and from discussions with senate staffers, we are disturbed by revisions that the senators continue to make with the draft and believe it will be resurrected in late fall or early 2010. Most disturbing now is current language which was inserted by realtors which overrides a community association's ability to collect assessments for common property. As an example, should you live at the end of a long community-owned road, the realtors expect that you should pay more in community assessments than the person who lives at the beginning of that common road. Unfortunately the realtors do not explain how such a difference would be calculated, which creates a nightmare for associations to figure out on their own. More disturbing, it overrides the community association's governing documents regarding how associations are to be levied, which is a contract each member agrees to when they purchase their property in an association.

We will keep you posted as things develop. But as of this writing, while SB-30 is still alive we do not need you to contact the state legislature.

Sincerely,

Joe Bunting
Chief Operating Officer
Kiawah Island Community Association, Inc.