South Carolina Supreme Court holds Association Management Company Engaged in the Unauthorized Practice of Law

In its recent Opinion No. 27707, Rogers Townsend & Thomas, P.C. v. Peck, et al., Appellate Case No.: 2011-199626, the South Carolina Supreme Court found that Community Management Group (“CMG”), a management company for homeowners associations and condominium associations, engaged in the unauthorized practice of law when it (1) represented its association clients in Magistrate’s Court; (2) filed judgments in Circuit Court; (3) prepared and recorded liens to recover unpaid assessments and other charges; and (4) advertised that it could perform the services the Supreme Court now deems the practice of law.

CMG argued that the administrative order In re Unauthorized Practice of Law Rules Proposed by South Carolina Bar, 309 S.C. 304, 422 S.E.2nd 123 (1992), allowed a non-lawyer officer, agent, or employee to represent a business, and that it, as an agent of its association clients, could therefore represent them.  The Supreme Court disagreed and clarified In re Unauthorized Practice, finding that non-lawyer third-party entities or individuals, such as CMG, are not “agents” because they have no nexus or connection to the business arising out of its corporate structure.

CMG further argued that suing in Magistrate’s Court on behalf of associations to collect unpaid assessments was not the unauthorized practice of law because it did not require specialized legal skill or knowledge.  The Court disagreed.  Likewise, the Court found that filing judgments from Magistrate’s Court in Circuit Court constituted the unauthorized practice of law, as did preparing and recording liens and other legal instruments.  The Court chose not to rule on whether (1) interpreting covenants for homeowners; (2) addressing disputes between homeowners and associations; and (3) advising the associations on remedies to collect unpaid assessments constituted the unauthorized practice of law because petitioner did not include specific facts or details about CMG performing those services.

This Opinion offers some clarity on what can be a blurred line between performing legal and non-legal services on behalf of community associations.  As management companies continually offer and perform expanded services to community associations, they must remain diligent in considering the implications of their conduct.  Similarly, community associations and their lawyers must ensure legal tasks are appropriately assigned to, and performed by, lawyers.  The convenience or financial benefit of allowing a non-lawyer to address these tasks is outweighed by the risks it may be completed improperly, the Court could deem it the unauthorized practice of law, and it could lead to a criminal charge . The unauthorized practice of law in South Carolina is a felony requiring a fine of up to $5,000 or imprisonment for up to 5 years, or both, once the Supreme Court has deemed the charged activity is the practice of law.

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