SCOTUS refuses to review SC Episcopal property dispute

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It has been close to a year that I wrote in this blog that I was thankful to be a real estate lawyer as I attempted to decipher the South Carolina Supreme Court’s 77-page opinion involving the Episcopal Church published on August 2, 2017*. I continue to be thankful that my mission is limited to the real estate issues in this difficult case because the United States Supreme Court refused to review that ruling on June 11. We are left with the difficult opinion issued in Columbia, and church officials and members from both sides of the dispute are left to sort out their on-going concerns in light of that ruling.

I don’t have to solve the mystery of the rights of gays in churches. I don’t have to ascertain whether the “liberal mainline” members or the “ultra-conservative breakaway” members make up the real Episcopal Church.  I don’t have to delve into the depths of neutral principles of law vs. ecclesiastical law. I don’t have to figure out who will own the name “Episcopal Diocese of South Carolina.”

The real estate issues are sufficiently thorny to occupy our collective real estate lawyer brains, but I am attempting here to boil those issues down to a manageable few words for all of us.

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News articles refer to the properties as being valued at hundreds of millions of dollars. The historic value of the properties, including St. Michael’s and St. Philip’s of Charleston, is also quite significant.  I assume a petition for rehearing will ensue as well as an appeal to the United States Supreme Court. Nothing is settled at this point. Let’s not try to insure these titles anytime soon.

The controversy began more than five years ago when 39 local parishes in eastern South Carolina left the Episcopal Church over, among other issues, the rights of gays in church. Since then, the two sides have been involved in a battle over the church’s name, leadership and real estate.

Interestingly, prior to the ruling by the South Carolina Supreme Court, the national church had offered a settlement to the breakaway parishes that would have allowed them to retain their properties if they gave up the name and leadership issues. That settlement offer was apparently summarily rejected.

South Carolina’s ruling upheld the Episcopal Church’s position that it is a hierarchal church rather than a congregational church in which the vote of church membership can determine the fate of real property. It also orders the breakaway group to return 29 properties to the national church. Seven parishes may maintain their independence.

The position of the properties turns on whether the local parishes agreed to be bound by the “Dennis Canon” which was enacted in 1979 and provided, in effect, that real property of a parish is held in trust for the national church and the local Diocese, subject to the power of the local parish over the property, so long as the parish remains a part of the national church and Diocese. No evidence was found in the records of the seven parishes that those parishes ever agreed to be bound by the Dennis Canon. The other 29 properties were the subject of documentation to the effect that the local churches intended to hold the property in trust for the denomination. The opinion did not uphold the Dennis Canon in and of itself. Explicit recognition of the Canon was required.

That, in short, was the result of the 77-page opinion on real estate lawyers. We will need watch for a potential settlement. In the meantime, we will sit tight and not involve ourselves in sales and mortgages of these properties.

Now that I’ve had a chance to think about it, I am always thankful to be a real estate lawyer!

*The Protestant Episcopal Church in the Diocese of South Carolina v. The Episcopal Church, South Carolina Supreme Court Opinion 27731, August 2, 2017.

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Dear History, please stop repeating yourself!

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Hurricane Irma is the third disaster in two years for South Carolina

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Hurricane Irma is the third disaster to pummel our beloved state since this blog was launched in 2014. After the 1,000 year flood in October of 2015, Hurricane Matthew struck in October of 2016. Rebuilding is not complete from either catastrophe.

On my way to work this morning, I passed the remains of several businesses that were destroyed when Gills Creek flooded in 2015. Thankfully, I heard recently that Richland County is about to purchase those properties to turn them into green spaces. Other areas in and around Columbia are still in the rebuilding process or have been completely abandoned. Many homeowners have made their homes bigger, stronger and certainly taller. Others have given up and moved away.

Enter Irma. A friend joked on Facebook that we’re lucky here in South Carolina Irma passed us by. You would never know it passed us by from the many feet of water we’re seeing in pictures of Charleston, Beaufort, Hilton Head, Georgetown, Garden City and surrounding areas. And the pictures and video coming from Florida and the Caribbean, not to mention the pictures and video coming from the Hurricane Harvey disaster in Texas and Louisiana, all show unspeakable damage.

Our company’s home office is located in Jacksonville where surrounding streets are under water. Employees with power are trying to work remotely. Others are out of commission.

A wise man in our building here in Columbia said to me this morning that these disasters bring out the best and the worst in folks. There are looters, but there are many more heroes who have rescued their neighbors in boats. There are neighborhoods without power who are gathering in their streets for impromptu block parties. Chainsaws are chopping downed trees. Supplies and helping hands are being donated. Celebrities and charities are raising millions. I’d like to believe that we’re seeing much more good than bad in people.

Our hearts are breaking for those who have lost so much. Rebuilding will take time, resources and patience. Many have lost everything and are without insurance coverage. Millions are without power and water. Many are in shock.

Dirt lawyers are in an exceptional position to support clients who may not be familiar with the assistance available to them. We have all learned a lot in the last few years. I challenge each of us to continue to educate ourselves and to be available to offer the valuable advice our neighbors and others will need in the days ahead. Local, state and federal governments seem better prepared this time around and seem to be working better to coordinate efforts. Here is a link to the South Carolina Bar’s Key Assistance Numbers. South Carolinians are strong and resilient, and we are stronger and more resilient now than we were for the last disaster.

Let’s once again rise to the occasion, real estate lawyers, and provide the best advice available for our clients and friends who will need it as they sort out, clean up and rebuild.

Despicable Acts: Absentee property owners can be targets of fraud

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Despicable acts

And real estate lawyers may be the best minions to prevent these crimes!

Imagine this scenario: Lucy Wilde’s family owns a farm in rural Orangeburg County, South Carolina. Since the sudden death of Lucy’s husband, Felonius Gru in 2007, no one has farmed the property. The fields are sitting fallow awaiting the opening of the estate and the division of the property among and Felonius’ heirs, including Lucy. The relatives have all fled small-town living to join the Anti-Villain League, so no one is available to literally mind the farm, and no one is in a hurry to settle the estate.

Enter Balthazar Bratt, a fraudster from Miami who sees the vacant property, searches the public records and learns the property is owned by the late Felonius Gru. Bratt also learns the property is ripe for development because it is located near the prime corridor between Charleston and Columbia, and very near Interstate access.

How can Bratt take advantage of this scenario while the Anti-Villain League employed family members are not paying attention? Absentee owners of real property are often the targets of criminals who pose as true owners offering the property for sale or as collateral for a new loan. These fraudsters may sell or refinance the property and abscond with the sale proceeds or strip any equity in the property with a new loan. The true owner has no idea the property is the subject of a real estate transaction.

In our fictional account, if Bratt was able to ascertain through the public records that Felonius Gru was deceased, a good title examiner should be able to use the same sleuthing methods.  If rural Orangeburg County is not your stomping grounds, as we say in the South, you might hire a title examiner who does have experience in the locale. In small towns in South Carolina, people know each other!

Another tip to fight criminals like Bratt is to compare the mailing address provided by the seller or borrower to the tax bill. While this step may not help in an estate situation, it may very well reveal an absentee owner located in a different address than the one provided by the fraudster.  If the address is different from the address provided to you or the lender, send a letter to the address shown on the tax bill. Your letter might simply suggest that you are happy to be of service to the buyer in the transaction and that if the seller is unaware of the situation, he should have his attorney contact you. That letter should get the attention of an absentee and clueless property owner.

Another tip is to compare signatures of the seller or borrower against documents in the public records. While we are not expected to be handwriting experts, we can spot obvious forgeries. I remember a war story from long ago where one person signed in seven spots in a deed, for the five owners and the two witnesses. The alert closing attorney called an immediate halt to the potentially disastrous real estate transaction!

A well-known and well-used technique that often works is to obtain and carefully review picture identifications for everyone who signs documents in your office. Also, do not accept an assignment of proceeds. Make sure proceeds are paid to the seller or borrower of record only.

And finally, give yourself and your staff members permission to carefully and slowly consider every aspect of your closings. Staff members should be encouraged to be cautious and suspicious and to discuss their concerns with each other or with an attorney in the office.  If the closing attorney needs a sounding board, she should call her friendly title insurance company lawyer.  I can’t count the number of times someone has called me, explained a situation, and before I could even respond, said, “oh, that’s a problem, isn’t it?”

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Sometimes just explaining the situation out loud to another person makes the problems crystal clear!

Be careful out there!

Goodbye old friend

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And hello 2017!

I bought a car on the first business day of 2017.

For most folks, buying a car is not a big deal, but I am definitely not a car person!  I drove my mother’s last car for almost eleven years after her death in 2006 and was embarrassed to shed a few tears at the dealership when I sentimentally traded it in on January 2. That car has 200,000 miles on its odometer! It’s still in great running condition, and I hope it finds a good home with someone, maybe a teenager, who needs safe and inexpensive transportation. Before my mother’s car, I drove a car I bought from a deceased friend’s estate. Are you detecting a pattern in my vehicular history?  Until this week, no car dealership had made a dime on me in the past 15 years!

My colleague and friend, Tom Dunlop, on the other hand, is definitely a car person. He currently drives a bright red late model Mercedes which he will upgrade this spring for the mere reason that two years have passed. His dealership loves him! In addition to trading every two years, Tom takes donuts to the staff when his car is serviced. What a nice guy! We’ve enjoyed that shiny red Mercedes as our lunch vehicle and can’t wait to see what Tom decides will be our new fancy ride in the spring.

new-year-new-startWhy is this car talk relevant to dirt law in 2017? It’s relevant because our success in the housing industry this year may depend on whether Americans and specifically South Carolinians are really home ownership people.

There are some reasons for concern. Interest rates are climbing. The mortgage interest rate deduction is under attack in Congress. The future of the CFPB may be precarious under the new administration and because of pending litigation challenging its constitutionality.  Some financial advisers are recommending renting as a better economic alternative for many Americans. Some retirees are being advised to sell the large homes where they raised their families in exchange for nifty, low-maintenance town homes, condominiums and even rental apartments.

But unlike my personal lack of thirst for new cars, I believe many Americans and many South Carolinians have an enduring thirst for new and upgraded residences. And I believe their thirst is most often quenched only by purchasing those residences. We have been taught that home ownership is an excellent investment vehicle coupled with a tax advantage. This advice goes back several generations. This wisdom is so ingrained that the counsel to retirees to rent shocked me! I had to read it from several sources to believe it was serious and sound advice for some folks.

And, thankfully, the economy is continuing to improve. Zillow is reporting that the U.S. housing market has regained all the value it lost during the housing crisis. South Carolina is particularly poised for success. Charleston is one of the fastest growing markets in the country. Hilton Head is digging out and rebuilding from Hurricane Matthew. The Rock Hill/Fort Mill area is growing toward Charlotte rapidly. It is impossible to ride around Myrtle Beach, Greenville and even Columbia without dodging construction activity. My own office’s numbers have improved during 2016, and I budgeted up for 2017. I suspect most South Carolina dirt lawyers are looking for a better year in 2017 than in 2016 assuming they can maintain their momentum and sustain the excellent staffing that momentum requires.

I am optimistic!  Here’s hoping Americans and South Carolinians continue to be home ownership people. And here’s hoping 2017 is a healthy, happy and prosperous year for you!

Court of Appeals Refuses to ‘Horse Around’ with Zoning Appeals Decision.

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Will some Charleston carriage horses be evicted?

Condominium projects take on all shapes and sizes in beautiful, historic, downtown Charleston, where the population of tourists and residents increases daily.

An old historic house may maintain its white-columned exterior while housing four or six residential condominium units. The stately carriage house out back may be a separate unit. An office building may look like any other brick-façade four-story building from the exterior, but the interior may contain a courtyard complete with fountains, and each office may be an owned separately as a condominium unit. A residential lot may be subject to a restriction covenant that prohibits subdividing, but a creative developer may use a Horizontal Property Regime to create multiple units anyway.

But in a case decided on June 29, the Court of Appeals drew the line at a horse stable condo project that would have been created to resolve a zoning issue.*

horse carriageThe Charleston Board of Zoning Appeals had denied the application of Arkay for a special use exception to operate a carriage horse stable at 45 Pinckney Street in the historic City Market District. The property was located within 93.5 feet of a residential district, and the special exception required a separation of 100 feet.

To separate the “stabling activity” from the residential district, Arkay proposed an HPR to divide the building into two units. The rear portion of the building would house Unit A which would consist of six stalls in which the horses would be fed, groomed and stored. The front portion of the building would house Unit B which would consist of two offices and would be subject to an appurtenant easement for the benefit of Unit A for ingress and egress to Pinckney Street. Unit B would also be subject to a restrictive covenant prohibiting the use of that space as a stable.

Units A and B would be separated in the middle of the building by a common area consisting of two tack rooms, two restrooms, an area for customer waiting, and an area for customer loading and unloading. Because its horse stalls would be located 119 feet from the nearest residential zone, Arkay contended the stabling activity complied with the zoning ordinances separation requirement.

Arkay’s argument was based on the premise that the zoning ordinance’s use of the word “stable” described a use and not a physical structure. In rejecting this argument, the Board noted that only one building occupies 45 Pinckney Street, and the proposed HPR did not alter that circumstance. On appeal, the Circuit Court held that the separation requirement applied to the use, not the physical structure.

The Court of Appeals agreed with the Board, stating that the ordinance did not describe “uses” for the property but rather established prerequisites on how a stable must be configured and how it must operate to receive a special use exception. Because the building that would keep the horses encompasses the entire lot, the Court found that it is a stable for the purposes of the ordinance. Even though the horses would be kept in the rear of the building—and would be separated from the street by areas for customers, tack rooms, restrooms and offices—this does not change the building’s status as a stable, according to the Court.

Maybe the Supreme Court will see it another way, because who doesn’t love a horse-drawn carriage ride in historic Charleston?

 

*Arkay, LLC. v. City of Charleston, South Carolina Court of Appeals Opinion 5419, June 29, 2016.

Trulia’s Blog Paints a Rosy Picture of Housing in SC for 2016

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Charleston is identified as the second hottest market in the country! Columbia is seventh!

_SC FlagIt’s budget time for me and for many real estate professionals. We are reading everything we can uncover on economic forecasts, and for me, the focus is real estate in South Carolina. Today, an interesting blog entitled “Housing in 2016—hesitant households, costly coasts, and the bargain belt” popped up in my newsfeed in Facebook. The blog, dated December 3, was written by Ralph McLaughlin of Trulia, the online residential real estate site for buyers, sellers, renters and real estate professionals.

As a part of its annual forecast for housing, Trulia commissioned Harris Poll to conduct a survey in November of about 2,000 Americans concerning their hopes and fears on housing. The survey indicated that the American Dream of home ownership is alive and well and continues its resurgence since the economic downturn.  The blog states that the percentage of Americans who dream of owning a home is up 1 point to 75% and up 2 points among millennials to 80%. But 22% of Americans believe it will be harder to get a mortgage in 2016.

Hesitant households in the title of the article is a reference to the obstacles consumers perceive to buying a home:  down payments, credit history, qualifying for a mortgage and increasing home prices are the top four.

Costly coasts are the expensive metro markets in the West and Northeast. Trulia is expecting those markets to cool because affordability has decreased, homes are staying on the market longer, and saving for a down payment is taking decades. In addition, consumers in those markets are pessimistic about housing.

The good news for us in The Palmetto State is that we are located in the so-called bargain belt, the highly affordable markets in the Midwest and South, where the survey shows consumers are upbeat about housing and where Trulia is expecting growth housing.

Trulia also identifies ten markets with the strongest potential for growth in 2016, and two of them are ours:

  1. Grand Rapids, Wyoming
  2. Charleston, South Carolina
  3. Austin, Texas
  4. Baton Rouge, Louisiana
  5. San Antonio, Texas
  6. Colorado Springs, Colorado
  7. Columbia, South Carolina
  8. Riverside-San Bernardino, California
  9. Las Vegas, Nevada
  10. Tacoma, Washington

Everyone paying attention is aware that the Federal Reserve has expressed a commitment to raising interest rates either by the end of the year or early in 2016, and we have seen the stock market respond each time Janet Yellen speaks on this topic. But if this projection and others that indicate the market in South Carolina will be strong in 2016 are correct, we should expect a strong 2016. Perhaps by the end of the first quarter, we will begin to feel the worst of the TRID transition is behind us, and we will be ready to embrace the growth we are anticipating.  Let’s all look forward to the ride!