South Carolina

SC Supreme Court clarifies realtor liability under Disclosure Act

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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

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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.

Dockside Condominium Evacuation in Charleston

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Photo courtesy of Homes.com

You will likely recall the tragic collapse of Champlain Towers South, a beachfront condominium near Miami, which resulted in the deaths of 98 people in June 2021. It now appears we may have had a near miss close to home.

Residents of The Dockside Condominiums, a 19-story tower on the Cooper River in downtown Charleston, faced unexpected upheaval when Charleston building officials ordered the evacuation of the building.  The officials deemed the structure, Charleston’s tallest building other than a church steeple, unsafe for occupation following the alarming findings of an engineering firm.

It began in 2022 with the renovation of a single unit in the building. During the course of that renovation, the unit owner’s engineers identified problems with the connection between the concrete columns and the floor slab of the unit. The problems seemed to be defects in the original construction of the building during the 1970s rather than the type of gradual deterioration that caused the Miami building’s collapse.  

The unit owner reported the findings to the Dockside Association, which in turn engaged an engineering firm to conduct a comprehensive assessment of the building. On February 25, the engineering firm reported to the Association that the building is “overstressed” and unsafe for continued occupancy. The report summary indicates that there is the potential for the concrete columns supporting the building to punch through floor slabs—a critical structural flaw. 

Charleston’s Chief Building Official, after reviewing the report, issued an mandatory evacuation order on February 27, requiring that all residents vacate the premises by 5 p.m. the next day. Residents were initially advised to take perishable items but leave all furniture behind. The sudden displacement left many residents of the 112 units scrambling for temporary housing without any certainty about the length of the displacement. 

As of now, it is unclear what is the next for the Dockside owners. Additional investigation has suggested that the possible collapse of the building will not bring down neighboring structures, but it is not clear whether Dockside can be repaired or what the potential timeline for necessary repairs might be. Building officials have set forth a framework authorizing Dockside residents to remove their remaining personal possession from their units, but only four units at a time may be entered and the units have to be located on opposite sides of the structure to minimize risk of collapse.

This situation underscores the critical importance of regular structural assessments for aging buildings, especially in coastal areas where environmental factors can accelerate structural deterioration. 

I am interested to see whether this evacuation raises the awareness of Associations as to the general issue and prompts immediate structural and safety reviews for similar structures. It will be interesting too to see what legal recourse the displaced residents may have — especially in the event that experts determine the building is unsalvageable. The issue raises concerns about the disclosure responsibilities of sellers, and how buyers’ counsel should inform their clients of risks while insulating themselves from professional liability. 

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

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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).

Charleston County finally agrees to implement an e-filing system

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For many years, Charleston County’s Register of Deeds Office has refused to join the growing list of South Carolina counties that offer electronic filing for land records. Dirt lawyers have scratched their heads wondering when this large county will implement a system that has proved in other counties to be efficient and economically advantageous.

Finally, Charleston ROD has announced that it has entered into a contract with a vendor to implement an electronic filing system. Initial projections are that the new system will be in place in late 2025.

Charleston has also announced that it will provide property owners the opportunity to sign up for fraud prevention services that will notify owner of any filings that may affect their properties. Similar services have been offered by national companies at a price. Other counties in South Carolina have offered similar services free of charge.

Register of Deeds Karen Hollings said in a press release that the electronic filing system will make the Register of Deeds office better organized and more efficient for the people of Charleston County.

Merry Christmas to all!

Court of Appeals holds right of first refusal unenforceable

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Heads up, dirt lawyers, this is another case dealing with drafting issues. Please read it carefully and apply its concepts the next time you are asked to draft a right of first refusal.

Crescent Homes SC, LLC v. CJN, LLC* involved a contract for CJN to develop 32 lots in a subdivision for sale to Crescent Homes. Crescent Homes would build single-family homes on these lots for sale to homebuyers. The contract referenced a “Future Phase on adjacent property owned by CJN and contained the following paragraph:

“Right of First Refusal: At the Initial Closing, (CJN) will grant to (Crescent) a right of first refusal with respect to the lots cross-hatched and shown on Exhibit ‘A-2’ as “Future Phase” and any additional lots that may from time to time be annexed or otherwise included in the Subdivision. A memorandum of such right of first refusal in a form reasonabl(y) acceptable to the Parties will be recorded in the public records of Greenville County at the Initial Closing.”

CJN did not start development of the future phase because of cost concerns. Crescent brought a lawsuit for breach of contract asserting CJN delayed the initial closing by, most significantly, failing to maintain the lots free from trash and debris. Crescent sought specific performance and other remedies.

CJN entered into a contract with Douglas Clark making termination of the right of first refusal in the Crescent contract a contingency. When CJN provided a copy of the Clark offer to Crescent, Crescent responded by offering $700,000 to purchase the property and by filing a lis pendens. Crescent notified CJN that even though the right of first refusal was binding, Crescent was not required to exercise or waive it at that time because the initial closing had not yet occurred.

Crescent asserted that the right of first refusal had not been delivered and was not capable of being validly exercised at that time. Clark withdrew his offer for reasons unrelated to this controversy.

The initial closing took place and the parties began the process of developing the lots in the first phase of the subdivision.

CJN filed a lawsuit against Crescent seeking a declaratory judgment and alleging abuse of legal process. The suit alleged that that the right of first refusal was invalid and Crescent had filed four lis pendens for the ulterior purpose of preventing the sale of the future phase property to third parties. CJN also answered Crescent’s complaint asserting counterclaims of breach of contract and quantum meruit/unjust enrichment and seeking remedies of specific performance and monetary damages.

CJN filed a motion for partial summary judgment alleging the right of first refusal was void because it constituted a restraint on the alienation of the property.  The Master denied the motion, finding factual disputes and novel issues required further inquiry.

CJN continued to market the property and obtained at least one additional offer. Crescent filed a motion to consolidate the cases. CJN amended its complaint, adding causes of action for tortious interference with a contractual relationship and unfair and deceptive trade practices.

The Master bifurcated the proceeding and tried CJN’s cause of action for a declaration that the right of first refusal was unenforceable. Crescent moved to dismiss, arguing no justiciable controversy as the matter was not ripe because the previous offers had been withdrawn.

The Master denied that motion and found the right of first refusal to be unenforceable because it was an unreasonable restraint on the alienation of an interest in land, stating “based on the language used in (the paragraph), the court is unable to interpret and/or give meaning to the parties’ agreement without substantially and significantly creating terms and conditions that the parties themselves could have and should have included.”  This appeal followed.

The Court of Appeals held that the matter was justiciable once a bona fide offer had been made. Neither party provided cases regarding ripeness in which offers were made and subsequently withdrawn.

As to the enforceability of the right of first refusal, the Court stated that such a right does restrain an owner’s power of alienation, but the question becomes whether the right unreasonably restrains alienation.

The Court cited a prior case holding that a right of first refusal was unenforceable because it failed to identify the property it encumbered, failed to contain price provisions and failed to contain procedures governing the exercise of the right. The Court found those factors present in this case and affirmed the Master’s finding of unenforceability.

Dirt lawyers, a rule against perpetuities issues was also raised against the right of first refusal, but the Court held it did not have to reach that issue. That is drafting challenge that we will save for another day. The bottom line in this case is that drafting real estate documents requires a great deal of skill and continuing legal research. Be careful out there!

*South Carolina Court of Appeals Opinion 6093 (November 20, 2024)

We have a new real-estate related arbitration case

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Court of Appeals holds arbitration clause unconscionable

Photo from PalmettoBluff.com

315 Corley CW LLC v. Palmetto Bluff Development* involves an appeal from Beaufort County arising from the sale of real estate in the Palmetto Bluff Development to homeowners who ultimately became plaintiffs in this case.

Palmetto Bluff is a planned residential community. Purchasers, by accepting deeds, automatically become members in the Palmetto Bluff Club. Club membership is further memorialized by a Club Membership Agreement. The governing terms of the Club are set out in the Club Membership Plan. The Club is a for-profit entity which retains the power, according to the parties, to unilaterally change its fees and policies with no input from Club members.

In 2017, a clause was added to the Membership Agreement stating that disputes surrounding the Membership Agreement will be resolved by mandatory arbitration in accordance with the rules of the American Arbitration Association (AAA), applying the substantive law of South Carolina.

In 2020, several homeowners complained that the Club was planning to make changes that they understood would limit the ability of their short-term tenants to use the Club’s facilities. After failed mediation attempts, this lawsuit was brought in 2022. The plaintiff homeowners then demanded arbitration.

Later in 2022, the homeowners asked the circuit court to stay arbitration and sought summary judgment on the alleged invalidity of the arbitration clause. The defendants moved to compel arbitration. The lower court held that the arbitration clause was invalid because the agreement was unconscionable.

The Court of Appeals agreed that the agreement was unconscionable because the homeowners lacked a meaningful choice in entering the agreement and because the agreement can be unilaterally modified. 

The Court cited cases to the effect that whether one party lacks a meaningful choice in entering the arbitration agreement typically speaks to the fundamental fairness in the bargaining process. Courts consider the relative disparity in the parties’ bargaining power, the parties’ relative sophistication, whether the parties were represented by independent counsel, and whether the plaintiff is a substantial business concern. Contracts of adhesion, according to these cases, are standard form contracts offered on a take-it-or-leave-it basis with terms that are not negotiable. However, contracts of adhesion are not per se unconscionable. Instead, adhesion contracts are not unconscionable in and of themselves so long as the terms are even-handed.

The Court of Appeals held that the contract at issue is unconscionable because there is no conceivable potential for bargaining power on the part of those whom the provisions purport to bind. There was an absence of meaningful choice. The Court also held that the agreement was oppressive and one-sided because it limited the award of treble damages, regardless of whether they are construed as compensatory or punitive.

I recommend that South Carolina dirt lawyers read this case in detail and apply its guidelines in drafting documents for developer and builder clients.

*South Carolina Court of Appeals Opinion 6074 (Filed July 24, 2024, Refiled November 13, 2024)

SC Supreme Court disbars real estate lawyer for “robbing Peter to pay Paul”

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…and using title insurance as his tool

In the Matter of Bush* resulted in a disbarment of a dirt lawyer who used a common “robbing Peter to pay Paul” scheme to steal from clients. The case involved three disciplinary complaints.

The first complaint revolved around the failure to wire $334,000 to a lender to pay off a mortgage in a real estate closing. The lawyer eventually admitted he used the money to replace funds he misappropriated from another closing.

The second complaint arose when the lawyer issued a closing protection letter and a title insurance commitment despite the fact that his title insurance company had suspended him as an agent and his title insurance agency license had expired. The lawyer received funds for this closing but, again, failed to satisfy the prior mortgage. The lawyer eventually admitted he used the funds to pay off the underlying mortgage for the closing described in the first complaint.

After the lawyer was placed in interim suspension by the Supreme Court, he responded to a third client whose mortgage had not been satisfied that, “I am going to plow back in to this and let me talk with some colleagues about a way to get a better resolution quickly.”  The lawyer did not tell the third client that he had failed to satisfy her mortgage. Instead, he provided false information to the client regarding the status of the debt. The lawyer finally admitted that he had stolen the funds.

It’s amazing that a few bad apples continue to employ these deceptive techniques that eventually come to light. It is impossible to hide this type of scheme forever because the economy always ebbs and flows. Even a small economic downturn can result in the failure of the next closing to materialize. Without the funds from the next closing, the mortgage from the prior closing is never paid, and the house of cards falls quickly. In this case, the lawyer’s former title insurance company received a claim from one of the lenders who was not paid. A title insurance complaint will also cause the house of cards to fall quickly.

Lawyers, please read this case carefully as a model of what not to do! Be careful out there!

*South Carolina Supreme Court Opinion 28241 (November 6, 2024).

Judge approves real estate commissions settlement

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Late in 2023, this blog discussed multiple class action lawsuits across the United States attempting to hold brokerage companies responsible for conspiring to keep residential real estate commissions artificially high. We have a development.

A Federal judge in Missouri said on October 31 that he will approve a $110 million settlement with nine brokerage companies. In May, a similar $208 million settlement was approved. And two more orders are expected in November, when the same judge weighs a pair of settlements against the National Association of Realtors and HomeService of America.

This blog also discussed last November that a similar class action was brought in South Carolina. Dirt lawyers, I would love to know what you are seeing in your markets. Are commissions now being negotiated to avoid the potential liability? I’d love to hear what’s going on out there.

SC Real Estate Commission begins enforcement of new “wholesaling” law

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Chicago Title sent out a memorandum to its agents on September 27 that I want to bring to the attention of those who read this blog.

South Carolina’s Real Estate Commission has begun to send out enforcement letters to investors the Commission believes are participating in illegal “wholesaling.” One of those redacted letters is attached.

On May 21, Governor McMaster signed into law former bill HB 4754, which requires a real estate broker’s license for those engaging in wholesaling. The new law defines the term “wholesaling” as “having a contractual interest in purchasing residential real estate from a property owner, then marketing the property for sale to a different buyer prior to taking legal ownership of the property.” The definition further states that “wholesaling does not refer to the assigning or offering to assign a contractual right to purchase the real estate.”

The question has become whether an investor can avoid the technicalities of the statute by marketing an assignment of a contract rather than directly marketing the underlying real estate. Investors appear to be taking the position that this activity is not prohibited, but the Real Estate Commission appears to disagree.

Investors are apparently being reported to the Real Estate Commission for potential violations of the new statute, and the Real Estate Commission is purportedly sending out letters to enforce the statute.

It is likely that our courts will become involved in resolving this question.

Anyone who has been involved in attempting to pass legislation will understand that drafting, redrafting, and amending bills often leads to tricky language. My guess is that most dirt lawyers could have drafted a clearer statute, but the bargaining and back-and-forth nature of drafting legislation has likely resulted in the complicated language we have.

Stay tuned as the Real Estate Commission and our courts deal with this issue.