October means Halloween — and more real estate horror stories from the South Carolina coast. In this one, a Surfside condominium was perfectly set up, legally sound, and by all appearances in good shape. But when one of the owners went to sell, a chilling surprise stopped everything cold.
A Solid Start: A Two-Unit Condo Set Up the Right Way
This story starts with a developer who did things right. They built a two-unit residence and established it as a condominium. They recorded a master deed, set up a nonprofit homeowners association (HOA), created bylaws, and properly deeded the land as common area. Each of the two unit interiors was deeded to individual owners. Everything was done the way it should be.
But over the next two decades, something went wrong — not on paper, but in practice.
The HOA Was Ignored — and So Was Insurance
Somewhere along the way, the owners stopped operating as a condo association. No dues were collected, no meetings held, and most critically, no joint insurance was maintained. Instead, each owner just treated their unit like a stand-alone property. One carried an HO6 policy, which only covered the inside of their unit.
The problem became clear when one owner decided to sell and their buyer needed a mortgage. The lender asked the obvious question: where is the structural insurance?
No Insurance, No Loan — and No Cooperation
Because there was no insurance on the building’s structure, the lender wouldn’t approve the loan. The buyer wanted the property badly and agreed to pay for the full structural insurance — even though they were only buying one of the two units.
Now, they own half the building and are stuck paying the full bill for the insurance that should be shared through the HOA. When they asked the neighbor to contribute, the neighbor refused. After all, they don’t have a mortgage and don’t need insurance — from their perspective.
Options With No Easy Outcome
The new owner is now faced with three uncomfortable choices:
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Buy out the neighbor and take full control of the building.
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Enforce the HOA bylaws, which would allow the HOA to sue the neighbor for unpaid dues and potentially foreclose.
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Dissolve the HOA and attempt to subdivide the property like a townhouse, allowing each unit to be insured independently.
Each path has complications — and none of this would have happened if the HOA had simply been managed and funded properly all along.
The Lesson: Always Investigate the HOA’s Status and Finances
Before buying into a condominium or any HOA community, especially near the beach where shared buildings are common, ask the right questions:
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Is the HOA still active?
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Who maintains the insurance?
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Can you see the current budget and reserves?
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How many owners are behind on dues?
Because buying into an HOA means buying into a shared responsibility — and if no one else is doing their part, you may end up doing it alone.
Need Help With HOA Property Issues?
Whether you’re buying into a condo or facing HOA-related headaches, our attorneys can help you protect your investment and avoid legal surprises.