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| Tom Chorlton opens one of his thousands of books at his Marsh Winds condo. (Photo/Leslie Burden) |
mtomsic@scbiznews.com
Published Sept. 10, 2012
In April 2003, Tom Chorlton loaded his furniture and books into the biggest truck he could find and moved east to Folly Beach.
His thousands of books overloaded the truck by 7,000 pounds, and movers stored them in Missouri, Chorlton’s prior home state.
He remembers wishing they would have left the furniture and just brought the books.
At the time, he was writing and researching a book about America’s government between 1774 and 1789, the period before President George Washington’s inauguration.
“I thought this is the perfect place to write a book about the Revolution,” Chorlton said of his condominium in Marsh Winds. “Every morning this was the 18th Century.”
He loved his new condo and was happy with his owners association assessments, which were $260 each month.
“I’ve never lived on a marsh, and it’s fascinating,” he said, adding some days dolphins swim to the base of his unit, which has a back porch that faces the marsh. “Who has dolphins literally in their backyard?”
In 2003, the developer controlled the owners association board and set the monthly fees. After the developer handed over control for the two-building, 33-unit complex, residents said they found a host of construction and financial issues, according to a lawsuit filed in Charleston County by Marsh Winds Owners Association and two homeowners against Bushy’s LLC, Foundation Specialists Inc. and several other developers, who built the condos in the early 2000s.
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Assessments skyrocketed, hitting more than $7,000 a month for three months in 2010 as the board tried to fix the issues listed in the lawsuit.
The Marsh Winds case hasn’t been decided, and neither the developers nor their attorneys would comment because the case is pending.
Setting the assessment
Legal and business experts said a transition from developer-run associations to resident-run associations can put residents in a bind if they find lacking reserves and monthly assessments that don’t cover costs. Associations can be forced to raise monthly assessments — sometimes by thousands of dollars — to correct problems, to litigate lawsuits and to bolster the association’s bank accounts.
“I would say it’s probably more likely than not that you’re going to have issues with (a) developer,” said Bill Bundy, a Mount Pleasant attorney who specializes in condominium and homeowners association litigation. Bundy is not involved in the Marsh Winds lawsuit.
Developers commonly keep assessments low while they control the association to make it easier to sell homes or condos, said Jim Laumann, president of HOA-USA. He said a lot of costs get subsidized behind the scenes.
“I can hear developers defending their case saying this is what I’m doing to make the neighborhood attractive,” he said.
But when those assessments rise, homeowners like Chorlton have little recourse to appeal board decisions and increased assessments since South Carolina law provides no independent oversight of associations. Chorlton pays as much as he can in dues each month but falls short of the total bill. Each month, the amount of money he owes the association grows.
Other homeowners associations have used foreclosures as a tool to recover some their costs when resides couldn’t pay their assessments. A Charleston Regional Business Journal analysis found about 400 foreclosures filed against homeowners for unpaid association assessments since 2000 in Charleston County, and 68% of homeowners received foreclosure summons for less than $5,000 in unpaid assessments.
Marsh Winds has filed one foreclosure against a condo owner, according to court records, and in 2010, the case ended at public auction, where the association purchased the property for $10,000.
Transition of power
When a developer starts building a neighborhood or condominium complex, he or she creates the covenants for the development and creates the association board, which is in charge of collecting assessments and enforcing the covenants. In the covenants, the developer agrees to appoint his or her own board members until a certain percentage of homes or condos are sold. At Marsh Winds, the developer had control of the board until 75% of the units were sold, which happened in 2004.
Laumann said most developers keep control until about two-thirds of the units are sold.
“Ideally, the developer, as he starts getting close to transition, may even give up one of his seats on the board and begin to involve a representative of the association to serve,” Laumann said. “That starts the communication going between the neighborhood and the developer-
controlled board.”
The developer then pulls its representatives from the board and allows the association and residents to elect their own representatives, which hands control and responsibility for the development from the developer to the homeowners.
Residents should take several steps during the board transition, Laumann said. They should request all financial information, check all facilities and ensure they are inspected properly and get all keys, codes and other information to access the facilities.
“There’s a whole lot of things that really ought to happen, not least of which is electing a new board,” Laumann said. “The residents should read those covenants carefully before they buy, and the community should look very carefully at all those issues before they go through transition and let the developer off the hook.”
Chorlton bought his condo in 2003 for $174,900, and homeowners took over from the developers in 2004.
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| (Photo/Leslie Burden) “That’s just a matter of time. My only regret is having bought a condo.” — Tom Chorlton |
The defects allowed water into the buildings, causing rot and other deterioration, the lawsuit claimed. A forensic inspector found “numerous violations of industry standards and the applicable building code,” according to court documents. Bushy’s, Foundation Specialists and other developers denied Marsh Winds’ accusations, and the lawsuit is still pending. The case blossomed, eventually including more than 20 defendants through cross-claims and other filings. Attorneys for the parties were either unavailable for comment or declined comment, citing the ongoing litigation. The owners association and community manager also declined comment, citing the lawsuit.
Meanwhile, Marsh Winds started fixing some of the issues found by the forensic inspector, Chorlton said. In 2010, he moved from his condo while workers tore down his building’s exterior wall and re-built it.
The association’s costs started adding up, Chorlton said, and the board raised assessments. In January 2010, homeowners owed $1,200 in assessments, according to court filings in a separate Marsh Winds case. May 2010’s assessment totaled $7,800, driven by a $6,800 critical repairs assessment, which continued for the next three months.
In 2011, proposed legislation would have capped assessment increases to less than 20% year-over-year unless homeowners approve the increase, but the bill died in committee without receiving any hearings. It’s unclear whether Marsh Winds residents voted for the increase in assessments.
Bundy, the attorney, said he generally advises his clients to fix the problem as soon as they can if they can afford it, and he prefers going into court with a bill instead of an estimate.
Chorlton said 2010 was the bucket of ice water in the face.
“I cashed in everything, and I borrowed money,” he said, adding he sold his Apple stock, which he had bought in the mid-1990s, for $207 a share. The stock would end up climbing above $600. “I just couldn’t hold on. I had to have ready cash.”
As he talked, a Bondi blue iMac he purchased in 1997 sat on his desk. Chorlton calls it Alexander the Great, and he’s been an Apple fan since 1984, when Apple introduced itself with an iconic commercial during that year’s Super Bowl.
The assessments dipped back to $670 by the end of 2010, but the board voted to raise assessments again in 2012. Chorlton and other owners owed $1,200 in assessments each month during the first half of 2012, driven by a $500 monthly special assessment.
Chorlton said he’s much happier with the current board than with previous boards. “We’re just stuck in a very regrettable situation,” he said.
Also, a rift has formed between the owners who live there full time and those that don’t. The association is divided between homeowners and investors, and the owners who live elsewhere can cover the higher assessments by renting their units.
“We can’t make this a cash cow like they can,” Chorlton said, adding the owners who live there year-round are trapped. “There’s people who are rich enough to ride this out, and there’s people like me who are drowning.”
‘A matter of time’
In his study, Chorlton, a political science professor at the College of Charleston, is surrounded by bookshelves, which line the walls. Most are presidential biographies, and one shelf holds a rarity, a complete collection of the Journals of the Continental Congress 1774-1789.
Chorlton sits by his desk in the space that was the 18th century each morning he worked on his book, The First American Republic 1774-1789, which lies nearby.
Chorlton has more than 3,500 books, and they fill his study and his bathroom. The bedroom was the master, but Chorlton needed the workspace. Mixed into the books is a filing cabinet that holds all of his owners association documents. Chorlton pays what he can each month — 60% of his earnings goes toward his assessments and mortgage — but he can’t cover all of the assessments.
He said he has a bankruptcy attorney.
“That’s just a matter of time,” he said. “My only regret is having bought a condo.”
Reach Matt Tomsic at 843-849-3144.
