As condominiums in
South Carolina are creatures of statute, it is essential that the SC Horizontal Property Act (SCHPA) requirements are met so that the ownership rights of the unit owners are not impaired or defeated.  The SCHPA was enacted in 1962 and has basically remained a “first generation” Act.  However, since its inception the concept of what constitutes a condominium has gone though many new incarnations to include “dockominiums” and “open air condos.”

Has the SCHPA kept up with these new incarnations?  Apparently so.  A dockominium is the water-based version of a condominium where one owns a boat slip on the water.  Under Section 27-31-20(a) an apartment includes “property intended for any type of independent use (whether it be for residential, recreational, storage or business)…whether for the storage of an automobile, moorage of a boat or other lawful use….”  Further, Section 27-31-20(a) defines property as land “whether or not submerged…in existence or to be constructed….”

While the Act does not directly define  “open air” or “unimproved land” as an apartment in Section 27-31-20(a), it does describe an apartment as “in a building or if not in a building in a separately delineated space whether open or enclosed….”  The concept of an “open air” or “air box” condominium has become more in vogue as these types of condos allow for construction of the structure within the cube of air to be done at some future time – you sell the unit and “fill” the cube later.  There is no case so far testing whether this type of condo fits within the Act but there are Master Deeds in Charleston that include these – as well as one we know of in Charleston that did not come to fruition due to concerns that it did not fall within the Act.

As for the “phased” aspects of condominiums, this can be tricky and if you come across a Master Deed for a phased condominium in a search, it should be checked carefully to make sure it conforms to the SCHPA.  Section 27-31-100(g) requires, that in the event the developer proposes to develop the property in phases, the master deed shall contain certain additional information, to include, the maximum number of units in each future phase, the date the developer will elect whether he will proceed with each phase, and a general description of future common elements to be annexed to the property described in the master deed. Harrington v. Blackston, 459 S.E.2d 309 (1995), rehearing denied, vacated 473 S.E.2d 47.  Harrington further states that if the developer reserves the right to amend the master deed to implement subsequent stages of development, it would follow that he can use that right to also amend as to the future phases.
Id.

Accordingly, the plot plan required to be attached to the master deed “showing the horizontal and vertical location of any building which is proposed…” could be amended as long as the Master Deed reserves that right.  In 1999, Section 27-31-20(b) was amended to read “‘[b]uilding’ means an existing or proposed structure or structures…” and 27-31-30 goes further to say that “[p]roperty may be submitted to a horizontal property regime prior to construction or the completion of any building or apartment, improvements, or structures on the property….” 

The SCHPA does not specifically deal with many of the emerging issues we face in condominium development.  This lack of specificity can be both a blessing and a curse, as it provides flexibility for developers to create units that satisfy their requirements but also leaves many questions unanswered as to whether they are ultimately permissible.  Until there is more guidance from the Courts and Legislature, prudence dictates a careful review of the Master Deed to ensure it conforms to the specifics of the Act before recording and before issuing an ALTA 4.

PRACTICE TIPS

• Make sure that the percentage of ownership always adds up to 100% - this can be particularly tricky when dealing with a phased development – it must be done up front in the Master Deed.
  

• When defining terms in the Master Deed, don’t just bootstrap to the Act’s definitions – provide a “carve out” that says “as modified herein” or “unless otherwise defined in Master Deed”
  

• Include a specific amendment clause in the Master Deed.
  

• When dealing with a phased development, make the amenities part of Phase I so that failure of subsequent phases does not impair rights of unit owners in common areas.
  

• Don’t list out each common area separately, as one might be inadvertently omitted.
  

• To prevent damages from “present encroachments or future unintentional encroachments” by the shifting of units into the common elements as indemnified in the ALTA 4 endorsement, always set forth a provision in the Master Deed permitting these encroachments.
  

• Designate the structure types in each phase to be within the cube of air / unit – structure must fit within the unit
  

• If it is a phased development, identify the various phases, give information as to the plans and development scheme in each phase and use a formula to determine the percentage of ownership in each of the subsequent phases.
  

• If Master Deed states that liens/assessments have “full priority” then provision #4 of ALTA 4 cannot be issued, as it provides indemnity against loss or damage sustained by reason of priority over an insured mortgage