South Carolina Law

Short-term rentals questioned in South Carolina cities

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Vrbo and Airbnb are two go-to websites to find interesting short-term rentals in vacation locations. Sometimes a cabin or house seems much more appropriate and fun than a hotel room for a family get-away. Having a kitchen and room for dining is often a plus. And I love a hot tub with a view!

But I’ve seen a couple of news articles about South Carolina cities questioning whether these types of short-term rentals are appropriate in residential subdivisions, and I understand the concern.

WLTX posted an article on March 16 entitled, “Renters frustrated after South Carolina city pauses short-term rentals for 6 months.” The article reports that Rock Hill is halting new and renewal permits for short-term rentals for at least the next six months.

The article quotes a man who said he and his wife operate nine Airbnb locations and have been put out of business by the resolution. The article quotes the resolution: “the homes are mainly in their older neighborhoods and these transient tenants have a negative effect on the peace and perceived safety of those neighborhoods.”

An article posted on March 17 by South Carolina Public Radio entitled “Upstate cities ponder the fate of short-term rentals” discusses the Rock Hill moratorium as well as similar discussions by city officials in Spartanburg.

The city attorney in Spartanburg is quoted as saying that city’s “permissive” zoning ordinance does not address short-term rentals and that any use that is not specifically allowed is prohibited. He admitted, however, that there are “plenty” of short-term rentals—about 120 on Airbnb alone.

One councilman in Spartanburg was quoted as arguing in favor of creating rules to keep “bad actors” from causing trouble in neighborhoods.

Rules vary greatly in the cabins and houses we’ve rented, but a common theme seems to be that parties are not allowed. I’ve also seen limits on the number of cars that can be accommodated and, of course, the number of people permitted. Pets may or may not be allowed.

What do you think? Would you be comfortable with short-term rentals in your neighborhood? Could rules about groups, parties and parking make a difference?

We may see other cities in The Palmetto State considering whether to limit short-term rentals through zoning or permitting. It’s an interesting question!

SC courts will overturn tax sales on the flimsiest of technicalities

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But apparently not when the claimant has no interest in the property

South Carolina courts don’t respect tax sales!

For that reason, tax sales have always been problematic for title examiners and real estate closing attorneys. Any concern about service of process or naming proper parties can result in the return the property to the owner of record. Historically, we would simply not close in the face of a tax sale in the chain of title.

In recent years, title insurance companies and real estate lawyers have attempted to take a more liberal approach. A rule of thumb might be that a tax sale that is at least ten years old where one person or entity has held title for a ten-year period since the tax sale may not result in an aborted closing. The title may not be marketable, but it may be insurable.

A recent Court of Appeals case* made me laugh. (Remember I am an easily amused title nerd.) The plaintiff, Scott, was “renting to own” the property in question under a 1998 oral agreement with her uncle, McAlister. Scott took possession of the property after making an initial down payment of $4,000 and agreeing to pay the remaining $31,000 purchase price in monthly installments of $300. That’s her story, at least. McAlister testified that Scott agreed to obtain a loan to make a second payment of $31,000.

After Scott failed to make the $31,000 payment, McAlister told Scott that her monthly payments would be considered rent only, and the parties agreed to reduce the monthly payment to $200. In 2007, McAlister began eviction proceedings, but the circuit court vacated the order of ejectment when Scott asserted that she occupied the property under a land purchase agreement. McAlister moved and changed the mailing address for tax purposes. The taxes for 2011 were never paid, and the property was sold in a tax sale in 2012.

Scott claimed she was unaware of the mailing address change, the delinquent taxes, the tax sale or the opportunity to redeem the property until the purchaser’s surveyor showed up! In 2015, Scott filed a complaint alleging that tax sale technicalities were not followed because notices were never posted on the property. The tax collector claimed her office posted the property notice on the property in August of 2012.

The circuit court granted summary judgment after it determined Scott lacked standing and that the tax authorities owed her no duties because she was not the record taxpayer, property owner or grantee. The Court of Appeals cited cases for the proposition that a tax execution is issued against the defaulting taxpayer, not against the property. The summary judgment decision was upheld on the theory that while due process is owed to a property owner, it is not owed to a person who whose only interest is based on an oral agreement.

I love it when our appeals courts answer real estate questions correctly. Overturning this tax sale would have resulted in serious consequences for title examiners and closing attorneys!

*Scott v. McAlister, South Carolina Court of Appeals Opinion 5897 (March 9, 2022)

First Ethics Advisory Opinion of 2022 discusses “Land Title Dispute” email

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Is a unilateral non-client communication entitled to confidentiality?

We have our first Ethics Advisory Opinion of 2022 and it touches on a real estate matter.  In EAO 22-01, a lawyer posed a question to the Ethics Advisory Committee about an unsolicited email from an individual with whom the lawyer had no prior relationship.

The subject line of the email read “Land Title Dispute”. The email requested the lawyer’s “legal insight on a real estate situation” and included a description of the underlying facts with an inquiry of the lawyer’s opinion about whether the sender had a “legitimate claim.”

The lawyer immediately recognized that the facts recited in the message related to a matter in which the lawyer and the lawyer’s client had adverse interests to those of the sender. The lawyer replied to the email informing the sender of the adverse interests and stating that the lawyer could not represent the sender. The email further stated, “Please let me know if and when you are represented by other counsel and I will (be) happy to communicate with them regarding this matter.” The lawyer then took the opportunity to inform the sender that the lawyer believed the sender’s “proposal to profit off of this mistake is both theft and fraud.”

The lawyer asks the Committee whether the lawyer has an ethical obligation to maintain confidentiality of the information in the email since it was provided in the course of seeking legal advice.

The Committee first stated that the sender was neither a current nor a former client of the lawyer. The answer to the question depended on whether the sender is a “prospective client” under Rule 1.18. This rule reads: “A person with whom a lawyer discusses the possibility of forming a client-lawyer relationship with respect to a matter is a prospective client only when there is a reasonable expectation that the lawyer is likely to form the relationship.” Comment 2 reads: “Not all persons who communicate information to a lawyer are entitled to protection under this Rule. A person who communicates information unilaterally to a lawyer without any reasonable expectation that the lawyer is willing to discuss the possibility of forming a client-lawyer relationship, therefore, is not a “prospective client” …

The Committee concluded that the lawyer had no ethical obligation to maintain confidentiality of the information in the email.

This is excellent news! We’ve all heard stories of an individual about to seek a divorce who holds meetings with all the divorce lawyers in town to limit the spouse’s choice of counsel. Thankfully, that tactic should not extend to an unsolicited email.

Charleston ROD litigation reaches temporary resolution

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This blog has previously discussed (here and here) the excellent lawsuit brought by The Finkel Law Firm against the Charleston County Register of Deeds seeking a writ of mandamus requiring the ROD (1) to immediately file all documents delivered to the ROD within one month of delivery; (2) to mark the documents as having been recorded on the date of delivery; and (3) to record all future documents in the order of the time delivery regardless of whether they were delivered in person or by the U.S. mail or parcel post.

The Court appointed Howard Yates, one of the most experienced real estate lawyers of the Charleston Bar, as Court Monitor. Mr. Yates issued a report dated January 31, 2022, the parties signed a Consent Order on February 10, and the Court issued a separate Order, also dated February 10. Please read all three documents here.

Mr. Yates has made numerous recommendations involving, among other matters, increasing office hours, increasing work hours for staff, and hiring employees from other ROD offices to reduce the backlog by working weekends.

The Court will maintain jurisdiction and will require frequent reports on progress. We can all applaud the efforts of The Finkel Law Firm and Howard Yates in bringing this matter to satisfactory conclusion, at least temporarily.

Court of Appeals answers novel JTROS question

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In the first Advance Sheet of 2022, our Court of Appeals answered a novel question concerning the severance of a joint tenancy with right of survivorship. The case* involved the estate of a father who owned property in Garden City with his son, one of his five children. Father and son had purchased the property together, each owning a fifty percent interest.  

The facts are simple. The property owners entered into a contract to sell the property in November of 2013, prior to the father’s death on December 20, 2013. The transaction closed on December 27, just seven days after the father’s death. The son, who was also the personal representative, treated the sale as if he was the sole owner and claimed the proceeds of the sale individually. His siblings argued that the contract severed the joint tenancy, entitling the estate to half of the proceeds.

The Probate Court and Circuit Court agreed with the siblings, relying on South Carolina Federal Savings Bank v. San-A-Bel Corporation**, which held that a purchaser under a contract has an equitable lien on the property. The Probate Court reasoned that the sales contract entered into prior to the Decedent’s death encumbered the property, entitling the purchaser possession of the property upon payment of the purchase price and entitling the estate to one-half of the proceeds. The Circuit Court found that the Probate Court had correctly interpreted the law.

Dirt lawyers understand the San-A-Bel case sets up a trap for the unwary lawyer who fails to deal with the equitable lien that case established, but we have never understood that case to affect JTROS severance. The Court of Appeals agrees with us. Since neither San-A-Bel nor the JTROS statutes address the question at hand, the Court decided to look at rulings from other states to address the novel issue of whether a contract of sale severs a joint tenancy.

The Court cited cases from the states of Washington and Florida (citations omitted) and decided to follow the Florida court which held that severance does not automatically occur upon the execution of a contract executed by all joint tenants unless there is an indication in the contract or from the circumstances that the parties intended to sever and terminate the joint tenancy.

The Court found that the contract at issue was silent on the severance issue and no extraneous circumstances indicated severance was intended by the parties, so the joint tenancy was not severed by the contract, and the son was entitled to the sales proceeds.  

Dirt lawyers tend to hold our collective breath when our Courts address a novel real estate issue. But I believe that, this time, we can agree that they got it right. Let me know if you disagree with me!

*In the Matter of the Estate of Moore, South Carolina Court of Appeals Opinion 5887, January 5, 2022.

**307 S.C. 76, 413 S.E.2d 852 (Ct. App. 1992).

Should law firms use mascots in advertising?

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Should limitations be imposed on the use of mascots?

One South Carolina law firm claims to have been unfairly targeted

Left Shark Law?

Several news sources (The Post and Courier, The State, AP News) have recently published stories involving a South Carolina law firm with a mascot problem.

According to the news reports, South Carolina attorney John Hawkins said he has been unfairly targeted by the Office of Disciplinary Counsel because of his law firm’s mascot, a hawk. You have probably seen the television ads showing the hawk and actors flapping their arms like hawks to promote the firm’s personal injury practice.

Hawkins has purportedly sued the ODC in Federal Court complaining that the ODC has reached a settlement with another legal entity that uses a tiger as a mascot for a national network of motorcycle accident attorneys styled “Law Tigers.”

Mr. Hawkins has complained in court filings that his mascot is a three-pound bird that eats mice, squirrels, and other small animals, while Law Tiger’s mascot is a 400-plus pound animal that mauls, attacks and eats people. Which mascot, he questions, unfairly represents the ability to “obtain results” in the personal injury arena?

The news reports indicate that two rival law firms and a former employee all filed complaints with the ODC about the hawk mascot in 2017. This year, the ODC filed formal disciplinary charges.

Hawkins’ lawsuit purportedly makes constitutional arguments against the ODC’s enforcement action. I’m not a litigator, but it seems to me that the place to make this argument is in the disciplinary action itself. It never occurred to me that the ODC could be sued in Federal Court.

What do you think, dirt lawyers? Will that suit be dismissed? Can advertising using mascots unfairly tout a law firm’s strength and ability? Are potential clients confused or unduly influenced by the use of mascots? It will be interesting to see how this story plays out.

Finkel Firm files suit against Charleston ROD for neglect of duties

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Real estate practitioners don’t often get excited about litigation, but this lawsuit should bring cheers from dirt lawyers in every part of the Palmetto State! The Finkel Law Firm, LLC, as plaintiff, filed suit on November 24 against Michael Miller, individually and in his official capacity as the Charleston County Register of Deeds. You can read the complaint in its entirety here.

The complaint points to Miller’s chronic and willful failure to timely record real estate documents within one month of delivery. The allegations state that Miller has allowed substantial delays since late 2019, and that these delays have increased significantly in 2021, sometimes amounting to as long as four months.

Further, the complaint states the Charleston ROD routinely files documents that are hand delivered immediately while allowing hundreds or even thousands of documents delivered to his office by mail or parcel delivery to be stored for later filing.

We all know that South Carolina is a race notice state. Delay in filing real estate documents will, of course, create liability for parties and their lawyers. The complaint makes this point clearly.

The law firm alleges that these failures have substantially interfered with its ability to meet its professional obligations to protect the interests of its clients and has exposed the firm to potential liability for correcting title problems resulting from the ROD’s dereliction of duty.

The complaint seeks a writ of mandamus ordering the ROD:

  • To immediately file all real estate documents that have been delivered and have not been filed within one month of delivery;
  • To mark the recorded real estate documents as being recorded on the same date that they were delivered; and
  • To record all real estate documents in the order of the times at which they were brought to the ROD, regardless of whether they are personally delivered or are delivered by U.S. mail or parcel post.

The complaint asks the court to maintain jurisdiction for a reasonable time to monitor the continued operations of the ROD.

Every real estate practitioner in South Carolina should thank their friends at the Finkel Firm for taking this action. And every ROD in the State should take notice!

Did Columbia destroy an archeological structure?

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Court of Appeals holds the City is not responsible

On November 10, the South Carolina Court of Appeals affirmed a summary judgment order in favor of the City of Columbia concerning the alleged destruction of an archeological and historical bridge abutment during a sewer rehabilitation project*.

The Brinkmans, Colemans, Fosters and Collins (property owners) own real estate on Castle Road on the banks of the Broad River in Richland County. The City of Columbia owns and operates sewer lines that run beneath portions of the property and has a permanent, 15-foot easement across the property for the purpose of maintaining the sewer lines. In 2014, the City began a sewer rehabilitation project which required access to the sewer lines.

According to the property owners, two bridge abutments stood on their property located outside the easement. The owners claim these abutments, which were made of carved rock, were built in the 1700s and were the “oldest existing structures in the Midlands.”

One of the owners testified that he shouted to the City’s contractors and said there was a valued monument on the property. Unfortunately, while the City and the contractors were clearing the land, they destroyed the stones that allegedly comprised the bridge abutments. The City acquiesced to the owner’s request that all work cease, and the property owners brought the subject lawsuit alleging various causes of action, including the destruction of archaeological resources in violation of §16-11-780 of the South Carolina Code.

This statute states that it is unlawful for a person to willfully, knowingly, or maliciously enter upon the lands of another and disturb or excavate a prehistoric or historic site for the purpose of discovering, uncovering, moving, removing or attempting to remove an archaeological resource.

The property owner’s expert testified that he believed the structures were historic abutments from the 1700s or early 1800s and likely to be the “Compty bridge abutment.” He explained that additional excavation and review of other properties across the river would have been the appropriate “next step”.

The property owners submitted an application in 2008 to the National Register of Historic Places, but the Department responded that a great deal more research and archeological investigation was needed before a determination of eligibility could be made.

The record contains a screenshot from the website “ArchSite. The property owner’s expert testified that ArchSite is a multi-agency website that allows access to the archaeological resources database. He explained that when ArchSite receives information about historic sites, it verifies the information and posts it to the website. The image in the record shows a rendering of part of the Broad River and Castle Road, and it includes the notation “Historic Areas: Broad River Ferry and Bridge Site.”

The trial court found no governing preservation or conservation authority had recognized the structures as either archaeological resources or historical structures. In granting the City’s motion for summary judgment, the court found that the City was not liable under the statute.

The Court of Appeals agreed, holding that no evidence exists that the City cleared the land “for the purpose of” discovering, uncovering, moving, removing or attempting to remove an archaeological resource. Clearly, the City was attempting to clear the easement area to access the sewer lines. In addition, the owners provided no evidence that the City had any knowledge of the historic nature of the site.

The owner who shouted at the contractors could not testify that the contractors heard him and did not know whether this incident took place before or after the destruction of the stones. In addition, the Court held that the owners failed to show the City was obligated to consult ArchSite. The Court also questioned whether the entry on ArchSite contained sufficient information to conclude the property is historic because the entry indicates the site is “not eligible or requires evaluation.”

Finally, the Court held that regardless of whether any preservation or conservation authorities designed the structures as archaeological resources, the property owners failed to demonstrate the City had either actual or constructive knowledge of the existence of such resources.

*Brinkman v. Weston & Sampson Engineers, Inc., South Carolina Court of Appeals Opinion No. 5870, November 10, 2021

Borrower sues mortgage lender for violation of attorney preference statute

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Court of Appeals holds lender’s foreclosure action is not a compulsory counterclaim

South Carolina’s Court of Appeals ruled on a noteworthy foreclosure case* in August.

The facts are interesting. In 1998, the borrowers signed a fixed-rate note in the amount of $60,400 at a 9.99% interest rate secured by a mortgage on property in Gaston. The note contained a balloon provision requiring payment in full on July 1, 2013.

On June 27, 2013, days before the note matured, the borrowers brought an action against the lender alleging a violation of South Carolina Code §37-10-102, the Attorney Preference Statute. The complaint alleged that no attorney supervised the closing, that the loan was unconscionable, and that the borrowers were entitled to damages, attorney’s fees and penalties as provided in the Consumer Protection Code. In addition, the complaint asserted a claim under the Unfair Trade Practices Act. All the allegations were premised on the same alleged violation of the Attorney Preference Statute.

The borrowers immediately defaulted on the note, and the lender filed an answer asserting no counterclaims. At trial, the jury found for the lender. About a year later, the borrowers sent a letter by certified mail to the lender requesting that it satisfy the mortgage. The letter included a $40 check to pay the recording fee for the mortgage satisfaction. The lender refused to satisfy the mortgage and returned the check.

The lender brought the present action for foreclosure in October of 2016. The borrowers asserted defenses of res judicata, laches, unclean hands, waiver, and setoff, but admitted no payments had been made on the loan after July 1, 2013. The borrowers then sought a declaratory judgment that the lender held no mortgage on the property, or, alternatively, that the mortgage was unenforceable. They alleged that the lender was liable for failing to satisfy the mortgage and for noncompliance with the Attorney Preference Statute. The lender denied the allegations and argued that the claims under the Attorney Preference Statute were time-barred.

Both parties sought partial summary judgments before the master-in-equity. The master granter the borrower’s motion and denied the lender’s motion. He ruled that the mortgage was satisfied and instructed the lender to file a satisfaction.

On appeal, the lender argued the master erred by finding its foreclosure action was a compulsory counterclaim in the 2013 action. The Court of Appeals agreed, holding that the two claims arose out of separate transactions. The Attorney Preference claim arose from the closing, while the foreclosure arose from the borrower’s default, according to the Court. The Court reversed the master’s award of partial summary judgment to the borrower and remanded the case for further proceedings. Because of its decision on this issue, the Court determined that it did not need to address the remaining issues.

*Deutsche Bank National Trust Company v. Estate of Houck, South Carolina Court of Appeals Opinion 5844, August 11, 2021.

EAO 21-01 says it’s ethical to pay $249 to be on lender’s closing attorney list

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The first Ethics Advisory Opinion of the year is noteworthy for South Carolina real estate practitioners.

Here is a brief summary of the facts:  In a residential refinance, the lender’s loan estimate package provided the name of a specific South Carolina licensed attorney that the bank “identified” as one who could close the loan. The package expressly said the borrower could “shop for (the borrower’s) own providers” for legal and other services.

The borrower informed the bank that a different lawyer had been selected, but the bank’s second set of loan estimate documents again identified a different lawyer and again said the borrower could chose its own provider.

When the borrower asked why another lawyer’s name was identified, the bank responded that the borrower’s chosen lawyer could sign with a third-party company that the bank had contracted with to produce loan forms for an annual fee of $249 to be included on the list.

The borrower’s lawyer did not enroll in the program but did close the loan.

The question to the Ethics Advisory Committee was whether a lawyer may participate in a service provider network for an annual fee of $249 to be listed as an “identified” service provider without violating S.C. Rule of Professional Conduct 7.2(c)?

Rule 7.2 (c) generally provides that a lawyer shall not give anything of value to a person for recommending the lawyer’s services. One exception to the rule is that a lawyer may pay the reasonable costs of advertisements or communications permitted by the Rule.

The Committee pointed to Comment 7 which states that a communication contains a recommendation if it endorses or vouches for a lawyer’s credentials, abilities, competence, character, or other professional qualities. The bank’s form in this case only provides contact information for participating lawyers and indicates the lawyers on the list have been identified. And the borrower is told in each instance that he or she can choose a different lawyer.

The Committee said these limited statements hardly match up the verbs and nouns used to describe a “recommendation” in the comment because the language in the forms says nothing substantive about the credentials, abilities, competence, character, or professional quality of the listed lawyers.

The Opinion further stated that participation in the network appears to be open to any real estate attorney and that the fee appears to be reasonable considering the enrollment, onboarding, and maintenance charges for including attorneys in the network.

The short answer to the question was “yes”, a lawyer may pay the fee and participate in the network of legal service providers and be “identified” as a possible service provider.

It is interesting that the facts included this statement: “The package and disclosures are assumed to be compliant with federal and state requirements for loan applications and attorney-preference notices.” The Committee answered the very specific question put to it and clearly has no authority to address federal law.