Recent South Carolina Ruling Deems HOA Foreclosure to “Shock the Conscience”

Recent South Carolina Ruling Deems HOA Foreclosure to “Shock the Conscience”

Unbeknownst to many homeowners—even those who live within the purview of a homeowner’s association, or “HOA”—a South Carolina homeowner’s association has the legal right to foreclose on its members’ properties in order to collect unpaid fees and assessments.

An HOA’s right to foreclose on an individual’s home has recently been limited, however. In a December 2019 ruling from the South Carolina Supreme Court, an HOA foreclosure in Richland County was deemed to be unconscionable, leading the state’s Supreme Court to reverse the decision and remand the case to the Master-in-Equity to be argued and decided again. The Boger Law Firm is honored to have represented the homeowners’ of this action alongside South Carolina attorney Kathleen Barnes.

South Carolina HOA Lien Leads to Foreclosure

Over two decades ago, Devery and Tina Hale purchased their home in Irmo, South Carolina. The couple had been making timely mortgage payments ever since their purchase, and had accrued over $60,000 equity in the property as a result.

In 2011, the couple fell behind on their homeowner’s association dues, accruing a bill of $250. As a result, the HOA filed a lien on the Hales’ property. The Hales’ troubles did not end there; the homeowner’s association subsequently filed an action for foreclosure, seeking the sale of the Hales’ property to satisfy the outstanding HOA balance of $566.41. The Hales inadvertently failed to respond to the Complaint, and counsel for the HOA subsequently filed an affidavit of default. Following this action, the Hales received no further notice with regard to the lawsuit. While the lawsuit was pending, the HOA sent the Hales a bill for $250.00 for the past-due regime fees. The Hales paid this bill promptly, and even received a notice from the law firm representing the HOA that the lien had been satisfied. What the Hales did not know, however, was that although the HOA satisfied the lien, it did not withdraw the lawsuit.

Shortly after the satisfaction of the judgment, the Richland County Master-in-Equity entered a Judgment of Foreclosure and Sale against the Hales, entitling the HOA to a little under $3,000 in damages–$2,000 of which was attributed to attorney’s fees for the law firm representing the HOA. The Hales were never served with the Master-in-Equity’s order, and were thus unaware that their home was to be sold at public auction.

A Couple’s Battle to Save their Home from HOA Foreclosure

Devery and Tina Hale’s home of twenty-one years—a home valued at $128,000—was purchased at public auction by Regime Solutions, LLC in 2014 for just $3,036.

Having received no notice of the Master-in-Equity’s order allowing the property to be sold, the news of losing their home came as a shock to the Hales. According to an affidavit submitted by Tina Hale, “[i]n November, we received a letter from the law firm of [the HOA] telling us that the Lien had been Satisfied . . . . I thought that everything was OK after that. The next thing I know, someone is knocking on my door telling me that they bought my home and that me and my family were being evicted.”

Once the Hales were aware that their home had been purchased from the foreclosure sale, the family offered Regime Solutions $9,000 to re-purchase their home. In return, Regime Solutions offered to sell the Hales’ property back to them for the sum of $35,000. The Hales filed a motion to vacate the sale shortly after, arguing that Regime Solutions’ winning bid was grossly inadequate in comparison to the value of the home.

South Carolina Supreme Court Overturns Sale of Hales’ Home

In December of 2019, the South Carolina Supreme Court issued an opinion reversing the decision of the Master-in-Equity and remanding the case to be re-heard. In its opinion, the Supreme Court stated that Regime Solutions purchased the Hales’ property for less than 5% of the property’s value, and went on to say that “Regime’s winning bid was so grossly inadequate as to shock the conscience of the court” and that Regime Solutions “bought [the property] for a pittance.”

The Court further stated that it was “especially troubled by Regime’s participation in a foreclosure proceeding to accommodate its business model of leveraging a nominal debt to secure an exorbitant return from homeowners who fear the process of eviction,” and referenced Regime Solutions’ $35,000 counter-offer to the Hales “as evidence of Regime’s manipulation of a foreclosure proceeding to engage in strong-arm tactics.

In his concurring opinion, South Carolina Supreme Court Chief Justice Donald Beatty stated that “[t]o allow the hard-earned equity to be confiscated by a bidder’s minimal investment is unconscionable.”

To read the full opinion from the South Carolina Supreme Court, click here.

Facing an HOA Foreclosure? Call Today

The Boger Law Firm is honored to have been able to assist the Hales in saving their home from HOA foreclosure. If you are a South Carolina homeowner and find yourself in the middle of an HOA foreclosure, the team of attorneys at the Boger Law Firm are standing by to help you with your case. To speak with a member of our legal team about HOA foreclosures today, fill out an online contact form or call (803) 252-2880 today.

Common Defenses in a Foreclosure Action

If you are facing foreclosure in South Carolina, you are likely afraid, overwhelmed, and uncertain about what the future holds. Defending against a foreclosure action is possible in certain circumstances, but can take a great deal of time and emotional energy. If you are in the middle of a foreclosure action, it’s important to have an understanding of the most common defenses to a foreclosure action.

Failure to Mitigate Damages

A mortgage between a lender and a borrower is a form of contract which binds both parties to the mortgage’s terms. Under contract law, a lender maintains a duty to try to mitigate damages if a borrower defaults on his or her loan payments. If a lender fails to take reasonable steps to mitigate its damages, such as working with a borrower to enter into a loan modification, the borrower may be able to assert a defense that the lender failed to make any attempt to mitigate its damages before pursuing a foreclosure action.

Unclean Hands

The doctrine unclean hands is an equitable defense which dates back hundreds of years. The principle of the doctrine is that a person who is requesting relief from a court should not be entitled to such relief if he or she has acted unfairly himself. Essentially, the doctrine asserts that a Plaintiff should be barred from obtaining the recovery sought because the Plaintiff itself acted improperly.

In a foreclosure action, the doctrine of unclean hands can be asserted as a defense to the action if the lender, loan servicer, or other entity suing the borrower has acted unreasonably or unfairly itself. Examples of circumstances which could lead to a defense of unclean hands include suing for foreclosure based upon fraudulent or forged document and misrepresenting a debt to a borrower.

Breach of Duty of Good Faith and Fair Dealing

As stated above, a mortgage is a binding contract between a borrower and a lender. Each contract carries with it an implied duty of good faith and fair dealing in which both parties agree to act in good faith with each other. If a lender acts in a way that is deliberately unfair to the borrower or “cheats” the borrower, the borrower may be able to raise a defense asserting that the lender or Plaintiff breached its duty of good faith and fair dealing.

What does a Defense do for My Case?

It’s important to understand that with regard to a foreclosure action, asserting a legal defense will not often end the lawsuit. A defense can, however, show a court that the Plaintiff acted improperly before or during the foreclosure action was initiated. This showing of wrongdoing can make a Plaintiff more amenable to working with you to save your home.

Facing Foreclosure? We’re Here to Help

If you are a South Carolinian who has been served with a foreclosure action, it’s critical to seek the help of an experienced foreclosure defense attorney as soon as possible, as you only have thirty days from the day that you are served to file an answer to the foreclosure action’s complaint. The team of attorneys at the Boger Law Firm are dedicated to helping those who are facing foreclosure defend against the action. To speak with a member of our legal team about your case, fill out an online case evaluation form or call (803) 252-2880 today.