Property management companies and the unauthorized practice of law

Author: Chad Dial

The Supreme Court of South Carolina has recently clarified what actions constitute the unauthorized practice of law in the context of property and homeowner’s association (HOA) management. In this case, the Supreme Court determined that a management company engaged in the unauthorized practice of law by representing associations in magistrate’s court, filing judgments in circuit court, preparing and recording liens and advertising for these services.

In this instance the HOA management company brought actions in magistrate’s court for the collection of unpaid assessment’s owed to the associations they represented without hiring an attorney. The magistrate’s court found in favor of the association and entered a judgment against the delinquent homeowner. Thereafter, the magistrate’s court mailed the judgment to the HOA management company along with instructions to file the judgment in circuit court, which the company did in order for the judgment to be shown in the public record.

During this same process the HOA management company drafted and filed liens against the delinquent homeowner’s property in the county where the property was located. The purpose of filing a lien is so that the delinquent homeowner cannot sell the home without the outstanding assessment being paid at or before the closing could take place.

The Supreme Court ruled that these actions by the HOA management company, as well as advertising that they can be performed constitutes the unauthorized practice of law in South Carolina. This ruling can be applied to other forms of real estate management as well. Accordingly, it is best practice for property managers to consult with an attorney prior to taking any legal action against a homeowner or tenant in default.