Month: February 2024

SC Supreme Court approves nonlawyer representation in eviction defense program

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The S.C. State Conference of the NAACP, the S.C. Advocate Program (“Housing Program”) and three prospective nonlawyer volunteers for the Housing Program petitioned our Supreme Court seeking authorization to allow nonlawyer volunteers to provide free, limited assistance to tenants facing eviction in magistrate courts.*

The petition sought a declaratory judgment in the Court’s original jurisdiction that their proposed activities will not constitute the unauthorized practice of law. Dirt lawyers will recognize the Court’s struggle with the UPL issue because it took 18 pages to reach an affirmative answer. More than three pages were devoted to the history of the UPL issue in South Carolina. Many of us can recite that history from memory.

The petitioners argued that the unmet legal needs of tenants facing eviction is an emergency situation justifying immediate action and that 99% of defendants in eviction cases are not represented by lawyers in the proceedings.

Tenants involved in the program will be advised that the volunteers are nonlawyers. The volunteers are required to limit the information they provide to tenants, and they may only:

  • Confirm that the tenant has a pending eviction;
  • Advise the tenant that they should request a hearing and, based on the text of the eviction notice and checking relevant court records, explain how and when to do so; and
  • Provide the tenant with narrow additional advice about the hearing by flagging common defenses, primarily pertaining to notice, that the tenant might be able to raise.

The volunteers will be instructed to avoid conflicts of interest, abide by confidentiality rules, and refrain from revealing any information about the tenant’s situation except to Housing Program staff. The volunteers must refer tenants to legal service providers when issues are beyond the scope of the program, such as when the tenant has a counterclaim, if the tenant does not have a written lease, if the tenant receives a housing voucher or lives in public housing, or when the tenant seeks information in excess of that permitted under the program.

The petition recited that lawyers have reviewed the program and will work closely with the volunteers, evaluating and assisting them.

The petitioners agreed to share data and information about the successes and failures of the program with the Court to allow the Court to weigh the efficacy of the program to determine whether sufficient safeguards are in place to protect the public.

The Court found that the program appears to provide for sufficient training, safeguards, and lawyer supervision so that the volunteers working within the strict limits set forth in the program’s training manual will not engage in the unauthorized practice of law.

The Court approved the program on a provisional, pilot basis for a term of three years, unless extended or terminated by the Court. Petitioners are required to submit annual reports including the date and metrics discussed in the order as well as a written summary of the activities of the program.

*Appellate Case No. 2023-0016089 (February 8, 2024)

FinCEN’s proposed reporting rule targets residential real estate cash closings

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On February 7, the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) issued a Notice of Proposed Rulemaking for the stated purpose of combatting money laundering in residential real estate transactions. You can review the proposed rule and a related fact sheet here.

The proposed rule would require certain professionals, including attorneys, involved in real estate closings to report information to FinCEN about cash transfers of residential real estate to legal entities and trusts. The agency’s press release indicates the proposal is tailored to target transfers that are high-risk for money laundering. No reporting would be required for transfers to individuals.

The information to be reported would include:

  • Beneficial ownership information for the legal entity or trust receiving the property;
  • Information about individuals representing the transferee legal entity or transferee trust;
  • Information about the business filing the report;
  • Information about the real property being sold or transferred;
  • Information about the seller; and
  • Information about any payments made.

A Geographic Targeting Order program has been in place for several years requiring this type of reporting in certain high-priced locations. The new rule would replace the Geographic Targeting Order with nationwide reporting.

FinCEN recognizes that the beneficial ownership information required under this proposed rule is also collected under the new Corporate Transparency Act, but states that the information will serve two different purposes.

The proposed rule would require reporting on single-family houses, townhouses, condominiums and buildings designed for occupancy by one to four families. It would also require reporting on transfers on unimproved land that is zoned or permitted for occupancy by one to four families.

Transfers would be reportable regardless of price. Gifts and other transactions where no consideration is exchanged are reportable. Exempted transactions include easements, transfers resulting from the death of the property owner, transfers resulting from divorce, and transfers made to a bankruptcy estate.

The agency encourages written comments in response to the proposed rule for 60 days. Closing lawyers, I encourage you to read the information at the links above and to make comments.    

Updates on Florida condominium legislation

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This blog has previously discussed Florida’s legislation that requires regular building inspections for condominium projects of three stores and higher and requires homeowners’ associations to maintain reserves. The act was unanimously passed by both houses, and Governor DeSantis signed the bill into law on June 9, 2023.

Under the new law, inspections are required when a condominium building reaches 30 years of age and every ten years thereafter. For buildings within three miles of the coast, the first inspection is required at 25 years of age.

In addition, mandatory structural integrity reserve studies are required every ten years under the new law, and reserves are required to be maintained based on the studies. The reserves must be fully funded. The power of the HOA to waive reserves will be removed, effective December 31, 2024.

New Jersey has passed similar legislation. These laws apparently attempt to exchange some short-term pain in maintaining reserves for long-term stability.

These laws will require higher assessments in most cases, and that will likely mean lower prices for sellers. Buyers will have to become more discerning as to the long-term financial implications. I’ve also seen the argument made that with the great number of condominium projects in Florida, there may be too few professionals available to accomplish the inspections and repair estimates.

The main downside of such legislation is that it will make condominium living more expensive and may price some retirees and lower-income individuals out of the market entirely. Insurance costs are also increasing.

But, logically, the cost of maintenance should be factored into every residential property purchase. The ability of an owners’ association to waive reserves and thereby kick the maintenance can down the road is a dangerous proposition.

Perhaps older condominium projects will be terminated, and developers will seek to take advantage of financial distress by seeking to develop new condominium projects. New construction will certainly be favored under the new laws.

Should we pass similar legislation in South Carolina? Let me know what you think.

Court of Appeals decides interesting conservation easement case

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The South Carolina Court of Appeals issued an opinion* on January 17 that interpreted a conservation easement as it affected two heirs of the original grantor.

In 2004, Benjamin Franklin Knott executed a will granting each of his daughters, Susan and Betsy, approximately one-half of a 371-acre parcel near Huger in Berkeley County. The property was subject to a conservation easement Mr. Knott had previously granted to Wetlands America Trust, Inc., a non-profit organization affiliated with Ducks Unlimited, Inc.

Conservation easements are creatures of statute in South Carolina and elsewhere. Such easements are defined as nonpossessory interests for the purposes of protecting natural, scenic, and open-space areas, ensuring the availability of property for agricultural, forest, recreation, educational or open-space use, protecting natural resources, maintaining air or water quality, and preserving historical, architectural, archeological or cultural aspects of real property. The grantor of a conservation easement receives a tax benefit.

Mr. Knott died in 2009, and his daughters received deeds of distribution to their respective parcels. The only direct road frontage was Cainhoy Road, adjacent to Betsy’s parcel. There was originally indirect access to Susan’s parcel from Charity Church Road via an easement retained when Susan sold an adjacent parcel, but Susan terminated her easement in 2015.

Three years later, Susan asked Betsy if she could use Betsy’s parcel to access Susan’s parcel. According to Susan, Betsy rejected this request. Susan brought this declaratory judgment action arguing that she had an express access easement under the terms of the conservation easement. The Circuit Court granted a partial summary judgment to Susan. Betsy appealed.

The Circuit Court had concluded that under the terms of the conservation easement, Susan, as owner of approximately half of the property, had the right to use the roads crossing over Betsy’s property to access Susan’s property for all activities permitted under the conservation easement.

Among other rights reserved in the conservation easement was the right to maintain and replace existing roads and to construct new roads.

The Court of Appeals agreed with Betsy that the reservations in the conservation easement did not create rights for Susan to access her property via roads on Betsy’s property. The easement rights granted to the Ducks Unlimited entity did not translate to easement rights in favor of Susan as against Betsy. The Court reasoned that if Susan has the rights to use the roads on Betsy’s property, it logically follows that she must have all the other owner’s rights reserved for the grantor as to Betsy’s parcel.

The Court of Appeals concluded that Susan has no rights in Betsy’s property, and the conservation easement’s language does not convey any new rights to any person who is not the owner of the property over which the conversation easement lies.

The Court of Appeals reversed the partial summary judgment and remanded the case for further action by the Circuit Court.

*Floyd v. Dross, South Carolina Court of Appeals Opinion 6044 (January 17, 2024)