Real Estate Law

SC Supreme Court Decides Gulfstream Case

Standard

Commercial real estate lawyers know that disputes over parking lot use are common. The long-running legal battle between the owners of Gulfstream Café and Marlin Quay Marina, recently addressed by the Supreme Court, nearly escalated into a literal parking lot showdown given its contentious history.

In 2022, this blog discussed the continuing legal saga in two installments that some of you may wish to check out. A fight over attorney’s fees! Criminal contempt for the malicious parking of a golf cart! The drama!        

To catch readers up to speed: In 1982, Georgetown County approved the Marlin Quay Planned Development, which contained two distinct businesses: the Gulfstream Café and its 17 parking spots; and the Marlin Quay Marina, which consisted of 60 boat slips, a marina store, a restaurant, and 62 parking spaces. 

The businesses operated in seeming harmony for many years. In 1986, the Marina owner even granted Gulfstream a right of ingress/egress over and the non-exclusive use of Marina’s parking lot and parking spaces, which seemed very neighborly indeed.  This easement implied in part: “[i]t is anticipated by the parties that while they will each have joint and non-exclusive use of the area covered by this easement that the Grantor will primarily utilize the premises during the daytime and [Gulfstream] will primarily use these premises in the evening.”

Things went downhill in 2016 when the Marina was sold to a new owner with a different vision for its property. The new owner wished to demolish the existing buildings at the Marina and build a new restaurant and store in its place. Making matters worse for Gulfstream, the new owner also intended on operating the new restaurant in the evenings, created direct competition for customers and for parking spaces at night.

The County Council approved Marina’s request to modify the Planned Development according to this initial set of plans over the objection of Gulfstream. However, the Marina withdrew its petition after it became known that the Marina’s architect, a Georgetown County Council member, failed to recuse himself from the deliberations and vote[1]. 

After the County approved the re-submitted plans, Gulfstream filed suit against the Marina alleging that the proposed expansion of the restaurant violated the terms of its existing easement.  After a full trial, the Circuit Court ruled that the Marina must revise its plan so that it did not exceed the footprint of the existing building with respect to the parking lot if it chose to move forward.

The Marina revised its plans to comply with the Court’s order. It chose to build a bigger vertical space with a larger outside seating area waterside. Gulfstream again objected and maintained that the increased square footage would make the difficult parking situation worse. The County eventually approved the revised plans over Gulfstream’s objection finding that the new construction would be in better condition, bring the Marina into compliance with current building codes, and be a net benefit to tourism and the community over the existing structure. 

Not backing down, Gulfstream then filed suit against the County alleging that it had violated its own parking requirements under the zoning ordinance by approving the new plans. Gulfstream asserted that the County’s approval violated its right to substantive and procedural due process and amounted to a taking of its rights under the easement, all of which substantially diminished the value of its property.   

The case ultimately reached the South Carolina Supreme Court, which found in favor of the County.  The Court agreed that Gulfstream’s easement created a property right, but found that Gulfstream did not have an exclusive right to the use of the Marina’s parking spaces in the evening.  Further, Gulfstream had exactly as many parking spaces available to its customers after the approval of the new plans as it did before. The Court was unconvinced by Gulfstream’s arguments that the approval of the additional square footage of seating had overburdened its easement rights and determined that the County had not deprived Gulfstream of any property interest.

The Court found that the General Assembly had given Counties the option to approve “planned developments” so that they could be flexible in adopting innovative planning solutions for benefit of their local communities.[2] The County complied with all hearing requirements for approving the amendment to the planned development and Gulfstream had a full opportunity to present its opposition to the plan.   Therefore, the County had not violated any substantive or procedural due process right. 

The Court also ruled against Gulfstream on its claim that the County had engaged in a “taking”.  The County had not engaged in a “per se” taking because Gulfstream had not been deprived of all economically or productive use of its easement. Gulfstream still retained the same non-exclusive right it had always enjoyed concerning the  parking spaces in the Court’s view.

Further, the County had not engaged in a regulatory taking under the Penn Central test.[3] The County approved the plans in its estimate of the best interest of the community. The County had not appropriated the parking to its own use. County approval of the plans did not prevent Gulfstream from continuing to do business as before. The Court further rejected Gulfstream’s offered expert testimony that valued the property based on the assumption that Gulfstream did not have any use of the easement parking[4]. Finally, the Court reasoned that because Gulfstream did not have an exclusive right in the use of the parking spaces that the County’s ruling could not have upset any investment backed expectation in the use of the parking spots at night.   

Finally, the Court majority declined to hold that the councilman’s participation in the initial approval of the plans invalidated the subsequent approvals that took place after he recused himself. The majority found the subsequent approvals of the completely revised project by the Council, acting this time with the councilman’s recusal, were sufficient to overcome any impropriety in the first vote. 

The two dissenting Justices, though concurring in ultimate result, were much more skeptical of the councilman’s conduct and made it plain that the Justices believed County made unique concessions in its review of the Marina project.[5] The Court questioned whether the Council had properly re-examined the basis for approving the concessions after the recusal.   

In any event, the legal duel between the restaurants seems to be over for now. The next time you are in Garden City, you may just want to take a fact-finding mission to sample the cuisine. Just be sure to arrive early as you know that the parking may be an issue.

[1] The Court’s opinion tells us that Gulfstream separately filed an ethics complaint that resulted in an official sanction and fine being levied against the council member.

[2] See S.C. Code 6-29-740. 

[3] Penn Central Transport Corp. v City of New York, 438 U.S. 104 (1974).  Some attorneys may vaguely recall from the boring semester of Constitutional Law that under the Penn Central test, a court, in considering whether a state action amounts to a regulatory taking,  must consider 1) the character of the state’s action; 2) the economic impact of the regulation on the claimant; and 3) the extent the regulation interferes with an investment backed expectation. Partial credit to you though if the name seemed familiar! 

[4] The entire Court seemed to find the expert’s testimony as lacking in credibility. The Court characterizes his testimony as indicating that the new Marina restaurant had rendered the Gulfstream property as almost entirely without value.  The expert seems to have bitten off more than he could chew there. 

[5] The dissent seemed especially concerned that the councilman had asked for $72,000 from the Marina as additional compensation for his role in shepherding the matter through County Council.

Haunted Houses and Legal Horrors: The Ghostbusters Case That Shook Real Estate Law

Standard

As Halloween creeps in with its ghoulish charm, it’s the perfect time to revisit one of the eeriest and most entertaining legal decisions (and my personal favorite) in real estate history: Stambovsky v. Ackley, better known as the “Ghostbusters” case. This 1991 New York appellate decision, with it’s dad-humor level puns and references, didn’t just acknowledge the supernatural: it made it legally binding! And for those in real estate law and title insurance, it’s a chilling reminder that what lurks in the shadows might just haunt your contracts.

The story begins in Nyack, New York, where Helen Ackley owned a charming Victorian home with a not-so-charming reputation. Over the years, Ackley had publicly described the house as haunted, recounting ghostly encounters in Reader’s Digest, local newspapers, and the house was even included in walking haunted house tours. Ackley claimed the spirits were friendly—playful poltergeists who left gifts and woke her grandchildren with ghostly shakes.

Enter Jeffrey Stambovsky, a New York City resident who agreed to buy the home, but was unaware of its spectral fame. Upon hearing about its haunted reputation, he sought to rescind the contract, arguing that Ackley’s failure to disclose the home’s paranormal notoriety materially impacted its value.

The New York Supreme Court, Appellate Division, sided with Stambovsky in a decision that has since become legendary. With perhaps one of the greatest single lines in an opinion, the court held that:  “As a matter of law, the house is haunted.”  Ackley was estopped from denying the haunting because she had repeatedly and publicly affirmed it. The court emphasized that while New York generally follows caveat emptor (“let the buyer beware”), this case warranted an exception. The haunting was not something a buyer could “reasonably discover” through standard due diligence or inspection.

While this case is from New York and is a pretty extreme example, it does raise some important questions for transactions in other states as well, even if the facts may not be exactly on point:

1. Disclosure Duties Can Be Contextual

While most jurisdictions don’t require sellers to disclose ghostly activity, material facts that affect a property’s value or desirability, especially if they’re publicly known, may need to be disclosed. In this case, the haunting wasn’t just folklore; it was part of the home’s local identity.  For example, in SC, a seller does not have to disclose if someone has died in the property up front, but they do have to answer honestly if specifically asked the question.

2. Equitable Estoppel Has Teeth

Ackley’s own statements came back to haunt her. Because she had repeatedly affirmed the haunting, she couldn’t later deny it to avoid legal consequences. This principle can apply to other types of representations whether about property condition, zoning, or history. 

3. Buyer Beware Isn’t Absolute

Even in caveat emptor states, courts may intervene when fairness demands it. If a seller knows something that a buyer couldn’t reasonably discover, and that information materially affects the transaction, silence may not be golden, but grounds for rescission.

From a title insurance perspective, the Ghostbusters case raises intriguing questions. Can we remove the “parties in possession” exception if the property is also occupied by ghosts?  While I’m fairly certain ghosts wouldn’t have legal rights of possession, how would one go about evicting them in the first place?  Title insurance typically covers defects in title, not defects in reputation. Paranormal activity doesn’t cloud title, but it can cloud marketability.

Most policies include coverage for marketability of title in regards to title defects, which courts have interpreted to mean that a property must be free from legal or practical issues that would prevent a reasonable buyer from purchasing it. While ghosts don’t affect legal ownership, a well-publicized haunting might affect marketability, especially if it leads to litigation or public stigma. 

For a more realistic example, think Breaking Bad instead of Ghostbusters.  Some county sheriff departments will record a notice of clandestine laboratory when a meth lab is discovered on the property.  While a history of use for cooking meth doesn’t affect title, it can definitely affect someone’s willingness to buy the property.  This particular issue arose in a potential claim at a previous employment stop.  The company wasn’t sure it was a covered claim because notice of a prior criminal activity didn’t affect the title to the property.  The insured’s argument was that it was recorded in the records and, even though the properly had been fully remediated, the notice had already caused one contract to fall through and was affecting the insured’s ability to market and sell it.  Unfortunately, I moved to my current position and don’t know how that claim turned out.

While title insurance is mainly concerned with matters in the public records that affect title, sometimes the risk assessment does factor in other information.  Title agents/insurers should be aware of Public representations made by sellers; Local folklore or media coverage that could affect a property’s reputation; or Claims or disputes that might arise from non-physical defects.  Whether you’re a broker, attorney, or title insurer, the Ghostbusters case offers some hauntingly good advice:

  • Ask about unusual property history—especially if the home has been in the news for any reason, but especially if it has been included on recent ghost tours.
  • Advise sellers to disclose reputational issues that could affect buyer perception.
  • Review local laws on disclosure obligations, especially regarding stigmatized properties (e.g., those associated with death, crime, or paranormal activity).
  • Consider adding disclaimers in contracts for properties with unusual histories.

Finally, this case reminds us that real estate law isn’t just about bricks and deeds; it’s also about stories, reputations, and sometimes, ghosts. As Halloween approaches, let this case be a playful but powerful reminder: in real estate, what you don’t disclose might come back to haunt you.

Whether you’re selling a haunted mansion or a humble bungalow, remember: the law sees more than meets the eye, and sometimes, it sees ghosts.

Graceland Fraudster Does the Jailhouse Rock

Standard
Riley Keough, inset, with Graceland

Lisa Findley, a woman from the Ozarks with a known history of petty crime, was sentenced to 57 months in federal prison last month after pleading guilty to mail fraud. The charge stemmed from a bizarre scheme in which she attempted to secure a $3 million payoff using a fake loan backed by a fraudulent mortgage on Graceland, the former home of Elvis Presley.

Using at least four different alter egos, Findley attempted to convince lawyers for the estate of the late Lisa Marie Pressley1 and of her daughter, actress Riley Keough2, that a non-existent company called Naussany Investments & Private Lending, LLC, had loaned Lisa Marie $3,800,000 secured by the iconic home.

Findley supported the scheme by forging the signatures of Lisa Marie and a real Florida notary on fake loan documents. She even went so far as to threaten foreclosure. While attorneys for the Presley estate grew suspicious minds, Findley escalated her efforts by filing a creditor’s claim against the estate in California and separately recording a fraudulent Note and Deed of Trust in Tennessee land records. Despite making little progress, she pressed the matter by publishing a Notice of Foreclosure Sale in the Memphis Commercial Appeal.

While the Pressley attorneys rushed to obtain an injunction to keep the Jungle Room in the family’s domain, reporters and law enforcement began to close in on what proved to be an easy web to unweave. Perhaps feeling caught in a trap, Findlay’s alter egos abruptly disclaimed any connection to the loan and directed attention to a third alter ego.  After some token resistance, this alter ego confessed in an email written in Spanish – don’t ask me why – to that he was really a Nigerian scam artist and that the authorities should seek him in that fine African nation. 

This final effort to by Findlay was … not successful. Despite asking the judge to don’t be cruel, she will now spend a blue Christmas in a federal penitentiary for the next several winters.

In all seriousness, this scheme highlights both the growing prevalence of “imposter” frauds and the lengths and doggedness which fraudsters will pursue them. While this imposter chose very poorly in her attempted fraud target, the methods used should be a warning to all real estate professionals of what kind of methods they might run across in a scam. You could see how a less ambitious scheme could have been a little more credible and come closer to success.  

[1] Daughter of the King of Rock and Roll, and wife to the King of Pop, Michael Jackson! Plus, her mom was on Dallas! Pure royalty. 

[2] Keough was great in the Amazon mini-series ‘Daisy Jones and the Six.’  Definitely worth the watch if you have not seen it.

[3] Foreclosures can proceed non-judicially in Tennessee, which means creditors may in many circumstances sell property without court oversight.  

No horsing around with HOA disputes

Standard

Real estate practitioners will not be surprised to hear that neighbors in a well-to-do development with a significant set of covenants and shared easements will sometimes disagree (and even litigate) about how those easements ought to apply to their properties. Our Court of Appeals recently had occasion to hear an appeal related to covenants and easements in an equestrian subdivision in Aiken County, in the case of Richard Viviano v. Fulton Jeffers and Braeloch I Association, Inc., Appellate Case No. 2024-000147, Ct. App., Opinion No. 6120, Filed August 20, 2025.

The underlying dispute in the case concerned an established equestrian community near Aiken named Braeloch. Braeloch has extensive pedestrian and riding trails, and when the subdivision was originally planned, one trail extended all the way around the outer boundaries of the subdivision. The recorded covenants included easements encumbering all the lots around the subdivision’s exterior boundary to account for this trail. The trail easement was also shown on the recorded subdivision plat. Later (in 2002) an additional lot was added (Lot 51) and eventually became the center of a dispute involving Lot 51’s owner, the homeowners association, and the owners of two adjacent existing lots. The neighboring lot owners and Lot 51’s owner disagreed about how the riding trail should be adjusted or relocated in light of Lot 51’s addition. Mr. Viviano was one of those neighboring lot owners. The Court of Appeals opinion implies that personalities clashed, and that the neighboring lot owners questioned the motivation and personal friendships of the HOA officers in making decisions about Lot 51 and the trail. Unfortunately, the parties could not agree at this point, and litigation was filed.      

The main issue presented to the Court of Appeals here, which may be less interesting to real estate practitioners, concerned whether a settlement agreement that the parties signed at the conclusion of mediation would be enforceable. (Spoiler alert: The Court of Appeals said, Yes, it is enforceable.) At the trial court level, the parties had mediated the case and reached a written agreement. The agreement was broad and addressed all the issues in dispute between the parties: relocation of the riding path easement, who would pay to make improvements to the path, compensation to the impacted lot owners, that the parties would sign a mutual non-disparagement agreement, etc. It required formal approval by the full HOA of a few items that the HOA representatives agreed to in mediation; the HOA formally voted and approved those after the fact.

As a worthwhile aside, the mediator (retired Judge Thomas Cooper, Jr.) made a lovely allusion to Aristotle (or the movie “Legally Blonde,” depending on your point of view) when he noted in his mediation report that the attorneys and parties had wisely “recogni[zed] . . . that emotion has to give way to reason to resolve difficult disputes.” We can all benefit from remembering that “law is reason, free from passion.”  

Later, several months after mediation, Mr. Viviano seemed to have regretted the agreement and changed his mind. A couple of the details that he asked the court to consider in support of his motion might be of more interest to dirt lawyers.

Viviano’s argument was basically that the 2002 petition to amend the covenants and easements to add Lot 51 was not valid because it did not have the support of the required number of lot owners. Viviano also argued that there was a “smoking gun” email from the owners’ association acknowledging that they did not have enough signatures on the petition to add Lot 51, and he claimed that this email had been deliberately concealed from him. (He argued that he would not have signed the settlement if he had known about it.) The Court of Appeals found this argument meritless. Without getting into the details of whether or not the Lot 51 admission had been completed correctly, the court pointed out that the Lot 51 admission documents were filed in the Aiken County public records, and therefore available to anyone to review. Viviano’s own complaint in the underlying suit had made an allegation of fact that Lot 51 had been admitted with two thirds vote of the HOA members. The court also noted that Viviano had access to the HOA email acknowledging insufficient signatures on the petition, as it had been produced in discovery more than 2 years prior to mediation, so it was not “concealed” from him. The Court of Appeals also cited established caselaw reinforcing the principle that, once the parties have reached a written settlement agreement, the courts are not inclined to entertain arguments by one party who regrets having agreed to the settlement.   

For those real estate practitioners who represent HOAs, this case might be a good opportunity to remind your association clients about the importance of having counsel assist in the process of amending CCRs. Having an attorney guide an association through the complicated formalities of submitting petitions, calling meetings, sending notices, and being sure to obtain the required number of signatures/votes to amend could avoid costly litigation in the long run! For practitioners who review title and handle real estate closings (and prepare title commitments and policies!), this is also a good reminder to be on the lookout for recorded amendments to covenants, and to carefully review those to determine how they affect the title.          

FNF challenges FinCEN Rule and ALTA concurs

Standard

In our previous blog entry, Jennifer Stone did a great job of summarizing FinCEN’s new Anti-Money Laundering Rule that is scheduled to go into effect as of December 1, 2025. In short, the Rule will generally require South Carolina real estate attorneys to make reports to FinCEN concerning every residential (1-4 Family property) transaction where 1) the grantee is an entity or trust and 2) there is no financing provided by a lender that is subject to federal anti-money laundering reporting obligations. 

The closing attorney will be on the hook (under threat of civil and criminal liability) to collect extensive information from the parties to the transaction, including the names and addresses of every person or entity who has a beneficial interest in or control over the grantee entity. Generally speaking, the collection of information is well outside the scope of the usual real estate closing and places the burden on attorneys and title companies to collect information from third parties who may not be willing to share that information.

However, there is still the possibility that the Rule will not go into effect as scheduled in December. This past May, Fidelity National Financial, Inc. (“FNF”), the parent corporation of Chicago Title, filed suit in federal court challenging the Rule and thereby taking the lead role in speaking up on behalf of attorneys and title agents in advocating for more measured, less burdensome requirements and reporting.

In the lawsuit, FNF has requested an injunction suspending FinCEN’s enforcement of the Rule. A hearing is currently scheduled to be heard on September 30, 2025.

FNF also filed a Motion for Summary Judgment to which the American Land Title Association (ALTA) recently expressed its support by filing an amicus brief. ALTA, of course, is the most prominent trade association of title insurance companies and title agents in the United States.

While FinCEN asserts that the cost to the title industry (including closing attorneys) of meeting the reporting requirements could reach as high as $600 million annually, ALTA’s brief argues that FinCEN has significantly underestimated the training and collection time necessary to comply and that the true cost to the industry will be significantly higher. ALTA argues that the this significant burden cannot possibly be outweighed by the corresponding benefit to law enforcement. ALTA points out that FinCEN drastically reduced the scope of the reporting of Beneficial Ownership Information (BOI) under the Corporate Transparency Act (which we wrote about here) in part because the new administration believed that reporting on American formed entities was of limited value to law enforcement.

ALTA further argues that the reporting burden under the Rule will disproportionately fall on small businesses that are “ill equipped” to absorb the additional costs and regulatory burden of reporting in an industry with already thin margins. I think many South Carolina residential real attorneys with already thinly stretched teams would agree wholeheartedly with ALTA in that statement. 

Certainly, there are quite a few miles to go with this lawsuit before a final verdict is rendered concerning the new Rule. We will continue to keep an eye on the progress of this case, but for now South Carolina attorneys must continue to develop procedures for complying with this Rule when it goes lives on December 1. 

SC Supreme Court clarifies realtor liability under Disclosure Act

Standard

Call me a little strange, but I am always interested to read about real estate contract disputes. An odd fact of my career is that my trial history is bookended by Magistrate Court-level trials involving real estate contract disputes. The first was a seriously thrilling fight (to a baby lawyer) over $1500 in earnest money on a flat fee that certainly did not reflect the legal hours expended. My final was in defense of a client’s failure to disclose “mold” around a leaky water heater. For the record, I am undefeated in Magistrate’s Court, despite it being the only Court a judge has ever demanded I produce my bar card. I was wearing a suit and had a briefcase and everything!   

The Supreme Court recently issued an opinion that may be interesting to real estate attorneys and litigators concerning the liability of real estate agents. The Court’s opinion in Isaacs v Onions held that there is no right of private action against a seller’s real estate agent under the South Carolina Residential Property Condition Disclosure Act for the seller’s failure to disclose a property defect. The Court also made a finding that the buyer could not have reasonably relied upon general statements made by the seller’s agent concerning the findings of a prior CL-100. 

The facts of the case were as follows: The Onionses (“Sellers”) listed their home in Litchfield Plantation with the Selling Agent (“Agent”), and filled out a Residential Property Condition Disclosure denying any “present wood problems caused by termites, insects, wood destroying organisms, dry rot[,] or fungus.” The property was listed and promptly came under contract. During the course of the due diligence, the first contract buyers obtained an inspection report revealing the absence of a vapor barrier in the crawl space in some areas and noted damp soil conditions. That report recommended further inspection.

In response to the buyers’ inspection, the Oniones retained a pest control company to inspect the crawlspace.  The company issued a report finding elevated moisture readings, wood destroying fungi, and some moisture damage. They recommended installation of vapor barrier, a dehumidifier, and coverage of the outside vents, and treatment for mold, for an estimate of $4,595.00. Instead, the Sellers retained a handyman to address the vapor barrier, replace insulation, remove debris, and install a crawl space fan for $706.00. The first buyers had separately commissioned a CL-100 which showed lesser moisture readings, no active wood destroying fungi, but recommended a fan.

The first contract ultimately fell through, the property was re-listed, and the Isaacs became interest in the property ultimately entering into a contract to purchase it. Early in the transaction, Agent provided copies of the Property Condition Disclosure Form, the prior inspection reports, disclosed the scope of repairs.  Agent sent an email to the Isaacs sharing that the first buyers “CL-100 was done yesterday and from what I understood it was good, but I can obtain the report if/when necessary as the sellers paid for it.”  

The Isaacs declined to request a copy of the prior CL-100 as they intended to commission their own CL-100. The Isaac’s CL-100 revealed significantly diminished moisture levels and no evidence of any issues.  The Isaacs proceeded to closing.

Two days after closing, the crawl space flooded after heavy rains.  A week later inspection reports revealed standing water, very high moisture readings, and active fungi. The Isaacs filed suit against the Sellers, Agent, and their CL-100 inspector. They specifically alleged fraud and misrepresentation against Agent, as well as violations with regard to misinformation on the Property Condition Disclosure Form.

The Court found that while the South Carolina Residential Property Condition Disclosure Act creates a private right of action against the sellers for violations, it does not create a private right of action against real estate agents. The Court pointed out that there would be other causes of action available to the buyer in that situation.

The Court also noted that the Isaacs had been provided reports that provided ample evidence of a possible issue in the crawl space and that the real estate agent’s statement that she had heard that the CL-100 was “good” could not have been something that the Isaacs reasonably relied upon in their decision to purchase the home. In fact, the Isaacs testified that they did not request the prior CL-100 because they intended to obtain their own. 

The Court’s ruling seems to resolve (for now) that real estate agents are not subject to suit under the Act and that vaguely encouraging comments from selling agents are not to be relied upon by buyers, particularly when there is evidence of potential issues with the property. Perhaps the Isaacs faired better against the Sellers in this action on better facts.

It’s the little things

Standard

Most real estate practitioners can relate to the experience of getting that call or email from a real estate agent, saying that a nice little deal is coming our way. The buyer and seller have already signed a contract and set a closing date. There may be some “little issues” that will need to be worked out before closing, but that should not be a problem. Right?

Often, a lawyer has been involved in preparing the contract or advising the parties before that call comes in. As often as not, those “little issues” turn out to be significant, and some can even derail a closing and pit the seller and purchaser against each other. The South Carolina Court of Appeals recently issued its opinion in the case of Anderson v. Pearson, Appellate Case 2023-001897 (Ct. App., 2025) discussing a case where there were, in fact, some big issues. We are left to wonder how different the outcome might have been if an attorney had been consulted in drafting the contract and advising the parties as to its terms.

The basic facts of the case are that Pearson (together with some family members) owned acreage in Spartanburg County, on Lake Cooley. This consisted of one parcel which Anderson agreed to buy (and which the parties chose to refer to as the “twenty-acre parcel”), as well as another nine-acre parcel next to it. Anderson (who owned property adjacent to Pearson’s) and Pearson, communicating through a broker, negotiated and agreed to some basic contract terms including a purchase price and closing date. Other details, such as whether the property was to be defined in a new survey, and whose responsibility it would be to get a survey, were not included in the contract. The contract was, however, clear on the inclusion of a “time is of the essence”, merger, and non-reliance clauses. The contract included the (not very helpful) comment that “[b]rokers recommend Buyer have Property surveyed . .  .”

After depositing her earnest money, the record indicates that Anderson continued to communicate with Pearson via the broker, and that Pearson indicated multiple times that he was obtaining a survey of the 20 acres in order to address the placement of an access route that would be needed to get to and from the nine-acre parcel which he was not selling. Communications went back and forth for some time, with Pearson never providing a copy of the survey, and Anderson continuing to ask for updates. Pearson applied for mortgage financing through AgSouth, but the record indicates that she had not provided all the items (such as a title commitment or a survey) that AgSouth would require to make the loan.  Eventually, the contract closing date came and went. The broker told Anderson that Pearson was not returning her calls or texts. Eventually, several weeks later, Pearson told the broker “We are building on the property ourself. We no longer want to sell.”  Turns out the Pearsons had actually gotten a survey but chose not to share it with Anderson. And the Pearsons had determined that they could sell the property to a developer for more than twice what Anderson had agreed to pay.

Some months later, Anderson filed suit for specific performance. At summary judgment, the Master in Equity conducted a trial and entered a judgment granting Anderson’s request for specific performance. Anderson offered evidence at trial concerning communications about the survey, which were not reflected in the written contract. A significant ruling by the Master in reaching her decision was that Pearson should be equitably estopped from asserting the Statute of Frauds to exclude Anderson’s evidence of those communications. Pearson appealed, raising several issues on appeal.

The Court of Appeals reversed the Master’s order, focusing on the Master’s application of the Statute of Frauds and equitable estoppel. Ultimately, the Court of Appeals found that Anderson’s reliance on Pearson’s communications was not reasonable. The Court of Appeals believed that Anderson should have realized that Pearson was delaying, and gotten her own survey. Additionally, the Court of Appeals expressed its view that Anderson did not change her position in reliance on Pearson’s communications about the survey, and since detrimental reliance is an element of equitable estoppel, the Court of Appeals held the Master erred in finding that equitable estoppel should apply to Pearson in his assertion of the Statute of Frauds.

As additional grounds, the Court of Appeals opined that since the contract did not require Pearson to provide a survey, the merger and non-reliance clauses weighed in Pearson’s favor on that point. The Court of Appeals proposed that the Master should have applied the parol evidence rule to Anderson’s offer of communications outside the contract itself. Further, the “time of the essence” clause, in the Court of Appeals’ view, meant that since the contract had expired by its own terms, and Anderson had not demonstrated that she had been able to timely perform her obligations under the contract (i.e. she did not show that she had the cash ready to pay the purchase price) specific performance was not available as a remedy. 

This case may be a good example to mention to real estate agents and brokers (as well as clients) to demonstrate the value of a clearly drafted contract and of legal advice from a seasoned real estate attorney as to contract terms.

Corporate Transparency Act Whack-a-Mole

Standard

I have written many words about the Beneficial Ownership Information (BOI) reporting requirement of the Corporate Transparency Act (CTA) over the last couple of years and much of my writing has been rendered obsolete by events. So, it came as no surprise on March 21, 2025, when the world changed again, but even I wouldn’t have thought they’d have done the CTA like they done.    

If you want to get to the meat of the latest development, you can skip ahead to the end of this lengthy entry, but for those of you that need a refresher or those that just want to watch me work through my feelings a bit, the next few paragraphs are for you. 

Readers of this blog probably know by now that Congress passed the CTA some years ago for the stated purpose of assisting law enforcement agencies in preventing bad guys (foreign and domestic) from laundering money and hiding assets in the United States using shell companies. In its wisdom, Congress decreed that almost any entity registered with a Secretary of State’s office must file a report detailing the significant stakeholders in the entity and where they might be found.

Under the Biden Administration, the Financial Crimes Enforcement Network (FinCEN), a division of the U.S. Department of the Treasury, came up with a framework of rules, processes, and penalties covering the duty of entities to report BOI. New companies would have 30 days to report the required BOI information to FinCEN; all existing entities would have to make their report by January 1, 2025. 

However, the whole thing did not go off as smoothly as planned for FinCEN.  Across the country (but most especially in Texas) plaintiffs filed lawsuits challenging the reporting requirement as unconstitutional or at least very inconvenient and burdensome. Before FinCEN could even think about imposing its first fine, a Texas federal court entered an injunction enjoining FinCEN from enforcing the BOI reporting requirement while the parties litigated the constitutionality of the Rule.  Game Off!  

The Government appealed this ruling to the Federal Court of Appeals for the Fifth Circuit, which initially removed the injunction. Game On! 

But, just a few days later, the same Court of Appeals, reinstated the injunction.  Game Off!  

The Government (by this time the Trump Administration) remained dogged in its defense of the reporting requirements and appealed the matter to our highest court. There, the United States Supreme Court ultimately sided with the Government and rescinded the injunction in the first Texas case. Game On!  However, by this time a second Texas federal district court had entered its own nationwide injunction against enforcement of the Act. Game Off!  

More time passed, additional words were written, and additional hearings were held, but eventually this other Texas federal district court decided that despite the impassioned argument of the Plaintiffs it did not have authority to ignore the persuasive authority of the Supreme Court’s previous ruling in a nearly identical case. Subsequently, the Texas court (I would like to imagine) somewhat sulkily rescinded its injunction. Game On! Likely a joyous party continued into the wee hours in the FinCEN offices the day it announced that BOI reporting was back, and that the deadline for reporting would for certain be March 21, 2025.  

However, this is the year 2025, and this the Corporate Transparency Act we are talking about, so it was not so simple for the good folks at FinCEN. On February 21, 2025, FinCEN issued a press release indicating that despite the Government’s vigorous effort to defend the Rule all the way the Supreme Court, that it did not plan to enforce the Rule. The press release indicated that FinCEN planned to issue an Interim Rule before the March deadline, but the FinCEN website still promised fines and penalties for anyone failing to comply. Game Off?

On March 21st, FinCEN issued an Interim Rule that dramatically changed the scope and application of the Rule. First, the Interim Rule specifically exempts United States entities from BOI reporting requirements.  Second, the Interim Rule provides that foreign entities registered to do business in the United States need not report any information about its beneficial owners that are United States individuals. Third, the reporting deadline for foreign entities to file BOI reports was extended to 30 days from the effective date of the Interim Rule.

The Interim Rule certainly reduces the theoretical usefulness of BOI reporting to law enforcement as FinCEN’s database will now only contain information about foreign entities that register in the United States and their foreign beneficial owners. Criminals inclined to set up shell companies to hide their illicit assets probably would be well advised to use entities formed in the United States if that isn’t what they were doing before. Perhaps, the Interim Rule is arguably not what Congress intended, but there is a lot of that going around.

Practically, the reduction in the scope of the Rule will diminish the relevance of the CTA to real estate lawyers. Those attorneys that represent foreign entities doing business in the United States will need to be prepared to advise clients of the reporting requirements that go along with registering their foreign entity in the U.S., but those attorneys representing entities formed in the United States can likely breathe a long sigh of relief.  At least for the moment.

For your holiday reading pleasure … here’s another drafting nightmare case, dirt lawyers

Standard

South Carolina’s Supreme Court has invalidated an arbitration agreement in a residential home purchase contract because of a sentence found to run afoul of public policy*. The homebuyers are free to pursue their lawsuit against the home builder.

Amanda and Jay Huskins bought a house from Mungo Homes. The arbitration section in the purchase contract included this sentence:

“Each and every demand for arbitration shall be made within ninety (90) days after the claim, dispute or other matter in question has arisen, except that any claim, dispute or matter in question not asserted within said time periods shall be deem waived and forever barred.”

The Court held that it is undisputed that this clause shortened the statute of limitations for any claim to the ninety-day period. Mungo conceded that this provision ran afoul of South Carolina Code §15-3-140 (2005), which forbids and renders void contract clauses attempting to shorten the legal statute of limitations.

The Huskins brought this lawsuit against Mungo, raising various claims related to the sale. Mungo asked the Circuit Court to dismiss the complaint and compel arbitration. The Huskins countered that the arbitration clause was unconscionable and unenforceable and the lower court granted the motion to compel arbitration. The Court of Appeals held the clause was unconscionable and unenforceable but ruled the clause could be severed from the rest of the arbitration agreement and affirmed the order compelling arbitration.

The Supreme Court stated that the better view is that the clause is unenforceable because it is void and illegal as a matter of public policy. The Court further noted that the contract contained no severability provision and that Mungo’s “manipulative skirting of South Carolina public policy goes to the core of the arbitration agreement and weighs heavily against severance.”

The Court mused that it has been steadfast in protecting home buyers from unscrupulous and overreaching terms, and stated that applying severance here would erode laudable public policy. The Court, therefore, declined to sever the unconscionable provision for public policy reasons. The entire arbitration provision was held to be unenforceable. The case was remanded to the Circuit Court for further action.

Drafting contracts for corporate clients can be tricky, dirt lawyers. Read this case and similar cases carefully!

*Huskins v. Mungo Homes, LLC, South Carolina Supreme Court Opinion 28245 (December 11, 2024).

Following injunction, FinCEN announces compliance with CTA is voluntary

Standard

On December 3, the United District Court for the Eastern Division of Texas granted a nationwide preliminary injunction that prohibits the federal government from enforcing The Corporate Transparency Act.

In response, the United States Treasury Financial Crimes Enforcement Network (FinCEN) announced on December 9 that while the injunction is in place, compliance with the CTA is only voluntary.

The Corporate Transparency Act, which went into effect January 1, 2024, requires many companies to report beneficial ownership information to FinCEN. Beneficial ownership information is defined as identifying information about the individuals who directly or indirectly own or control a company. The deadline for entities created before January 1, 2024 was January 1, 2025

Lawyers have been scrambling to grasp the intricacies of the new law and to assist their corporate clients, including homeowners’ associations, in compliance.

Six plaintiffs filed the lawsuit in May challenging the constitutionality of the law. The decision is based on the Commerce Clause, and the statute is based on national security and aimed at enforcing laws against money laundering.

This case will surely go to the Supreme Court, and we will have to wait to see how that Court reacts. It is possible that the rationale for the legislation holds for some but not all entities. Homeowners’ associations seem to be likely candidates to dodge this particular bullet.

In the meantime, your clients are not required to comply with the new law.