“Carolina Crossroads” may sound like a vacation spot

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But it’s “Malfunction Junction”, which is about to get a much-needed rebuild

malfunction junction

Image courtesy of The State

I’ve lived in Columbia since college with the exception of four years in Winnsboro, where my husband and I landed to split the distance between our jobs. The people in Winnsboro were delightful, but we were chastised routinely because our travel and work routines kept us away from home. The town and church ladies were especially bothered that they couldn’t drop in during the week.

A tornado that temporarily separated our growing family caused us to reevaluate our choices and to move jobs and home to one location. After much debate, Columbia won because it wasn’t easy for a female lawyer to find a small-town job in the 1980s. Let me rephrase that. A female lawyer could find a job in a small town if she didn’t need much pay or respect. But that’s a whole “nother” story, as we say in the South. Suffice it to say the city won.

Although schools and housing prices were much more promising in the Irmo area north of Columbia, we decided we didn’t have the patience to handle the commute that ran through the intersection of I-20 and I-26, commonly called “Malfunction Junction”. So I have never battled that disaster area routinely. But any Friday afternoon escape from “Famously Hot” Columbia to the cool of the North Carolina mountains required bravely timing the travel and negotiating the traffic.

I’ve seen friends and co-workers schedule their travel times to downtown Columbia to avoid hitting that area during rush hour. And I’ve seen them justify the commute because of beautiful lakefront homes and great schools. I get it! I just never had the patience for it! I’ve heard tales of the 12-mile commute taking an hour or more. That would require a big investment in audio books for me!

The Department of Transportation plans to alleviate my friends’ pain, but it’s going to take awhile. If you Google “Carolina Crossroads”, the name the DOT has given the project, you will be able to read about the ten-year plan to fix the problem. Yes, I said ten years. Here is a time-line projection.

Why will it take so long?  First, the properties must be acquired. The DOT says it plans to spend $240 million to acquire real estate including gas stations, homes, apartment buildings and a Motel 6. Dirt lawyers, if you handle condemnations as a part of your practice, this may be a time for you to shine!

The new interchange will add lanes to ease merging issues and will connect I-20, I-26 and I-126. The goal is to reduce the number of accidents and the amount of time commuters spend negotiating the area. Apparently 134,000 cars travel through the interchange every day. The $1.5 billion project is being split into five phases.

The first phase includes Colonial Life Boulevard. The second includes Broad River Road. The third will involve the main interchange of the interstate highways and will include St. Andrews Road and Bush River Road.  The fourth phase will include Harbison Boulevard, and the fifth and final phase will involve widening I-26 west of St. Andrews Road.

The DOT says one of the problems with the long-range project is that contractors are reluctant to bid on the massive project. That’s one reason the project was divided into phases. We began to hear rumblings that the project was coming as early as 2015, but the federal government didn’t sign off until spring of 2019.

I can’t wait to hear the stories about how construction will affect the commute. And our vacations may have to avoid the mountains for the next ten years!  But we’re all looking forward to the project’s completion!

“Curbed” article outlines the experience of iSellers

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computer house digital sales smaller

iSeller may not be a “thing”, but iBuyer definitely is. I invite you to read the February 7 article by Jeff Andrews on curbed.com. This article outlines the experience of sellers who deal with Zillow, Opendoor and similar iBuyers. By extension, this article provides insight to real estate lawyers who want to remain in the real estate closing game after iBuyers make their way to South Carolina.

“iBuyer” is short for “instant buyer.” iBuyers buy houses for prices determined by their respective algorithms in the markets where they operate. The article contains a map showing those locations. South Carolina is not among those locations, but Atlanta, Charlotte, Raleigh-Durham, Jacksonville, Birmingham and Nashville are. How far behind can we be?

Selling a home through an iBuyer can be much simpler than the market we currently occupy. The homeowner opens the iBuyer’s website, enters their address and some basic information about the house. Within a few days, the iBuyer will make an offer.

The seller doesn’t have to clean the house, stage the house, store excess furniture, board pets, leave home for open houses, or any of the other indignities suffered under our current system. It’s a much easier process.

What’s the catch? The seller may be leaving money on the table. The offer will be less than the amount the homeowner could receive if all the games are properly played on the open market.

According to this article, if the offer is acceptable to the seller, he or she will schedule a time for a representative from the iBuyer to visit and asses the home. If maintenance issues are spotted, the seller may choose to complete the repairs or to allow the iBuyer to complete them at the seller’s expense.  At that point, a final offer will be made.

The seller is allowed to select a closing date, typically within 60-90 days. The closing date is typically flexible and within the seller’s control. There is no worrying about the contingency of the buyer to sell their house or obtain financing.

While the real estate agents in normal closings might charge a total of 6 or 7 percent for commission, the iBuyer might charge a transaction fee of 7.5 percent. According to this article, the iBuyer makes most of its money in these transaction fees. The houses are subsequently sold on the open market, so there will be a profit, but the iBuyer is not a home flipper. Substantial repairs are not made, and substantial profits are not made.

So the dichotomy for the seller seems to be convenience vs. price. If the amount the seller loses in price is worth it because of the convenience, then the seller is a prime candidate to do business with an iBuyer.

We’ll pay attention as this phenomenon grows, and we’ll definitely report when it hits South Carolina!

State challenges Hobcaw Barony’s claim to North Inlet

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Hobcaw Barony

Photo courtesy of The Post and Courier

This blog recently discussed an interesting lawsuit brewing in Georgetown County involving the property of Hobcaw Barony and adjacent North Inlet. The owner of Hobcaw, the Belle W. Baruch Foundation, is claiming title to 8,000 acres of marsh at North Inlet, a vast marshland that has always been used by the public for recreational purposes. The lawsuit claims title to the property by virtue of a Kings Grant.

Local gossip indicates the Foundation simply intends to clean up title issues and does not intend to preclude the public from enjoying the property. But the complaint reads like a normal quiet title action of marshland property and the locals are nervous. An easement has been suggested to resolve the conflict, but this suggestion has been rebuffed by the Foundation.

The State of South Carolina has now filed responsive pleadings asking for an order declaring that the property is dedicated to public use. The State’s response to the Foundation’s complaint alleges that the Foundation lacks the power to exclude the general public from the property because the public has a right to the use of navigable waters.

The State claims the public is entitled to the marshland through continued use of the property for fishing, shrimping, crabbing and similar activities for generations.

I’ll keep you posted as this issue is litigated.

Padding legal bills leads to suspension of South Carolina lawyer

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red card - suit

The South Carolina Supreme Court meted out discipline to a lawyer in terms of a definite three-year suspension on January 22.* Three straightforward reasons for the suspension are highlighted by the very short opinion:

  1. The lawyer fell behind on his billable hours and falsified his time;
  2. The lawyer was not always truthful with clients regarding their cases in an attempt to cover for his uncompleted work; and
  3. The lawyer falsified expense reports. Specifically, he altered hotel and airline bills to receive reimbursement for trips that were not made and client dinners that did not occur.

The opinion details that the lawyer padded his time by more than 35 hours and his expense reports by more than $5,000.

I don’t know about you, but I find these sums shockingly small. I don’t mean the lawyer should not have been disciplined. The punishment clearly fits the crime in my mind. Rather, it seems to me that putting a license to practice at law at risk for such minor sums is a colossal act of inanity.

The time and effort each of us puts into obtaining the privilege to practice law should encourage all of us to follow the rules. Some of the rules are not intuitive. Some of them are indisputably difficult to understand and remember. But the rules this lawyer broke are the simplest of all and breaking them can be described by one word: dishonesty.

I remember the first time I handled a closing for more than $20 million way back in the 1980s. I joked that I knew then that I would never dip into my trust account. In retrospect, that was a terrible joke. None of us should ever think for a moment that we can “borrow” from our trust accounts, no matter how small or how large the number.

But facing a three-year suspension for $5,000 and 35 billable hours is inconceivable.

Be smart and safe out there, lawyer friends!

 

*In the Matter of Sloan, South Carolina Supreme Court Opinion 27936 (January 22, 2020)

HOA seeks to oust orphan from age-restricted neighborhood

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HOA grandparents grandson

Image from KOLD.com (News 13), Tucson, Arizona

 

A fifteen year-old California lad lost both of his parents last year. Collin Claybaugh’s mother, Bonnie, died in the hospital from a long-term illness. And his father, Clay, took his own life two weeks later.

What do good able-bodied grandparents do in this situation besides grieve the loss of their children? They take in their grandson, of course. That’s what Randy and Melodie Passmore did. The Passmores are both in their 70’s and live on a small pension plus social security. They own their home in The Gardens at Willow Creek, a 55-plus community in Prescott, Arizona.

The age restriction apparently has a limited exception for residents who are 19 years of age and older. But a 15-year old boy is definitely not allowed by the rules.

The Passmores received a letter from the homeowners’ association advising them that Collin must move out. The letter said that the board must balance the interests of all parties involved, not just the Passmores. The HOA board said they are concerned that if they fail to enforce the age restriction, they could endanger the ability for the development to remain an age-restricted community.

The Passmores’ only alternative is to sell their home and move, which they believe will be difficult considering their age and financial position. They do not have funds to mount a legal battle.

My husband and I would love to downsize at this point in our lives, and we would be interested in living in a community where the exterior and grounds are maintained by someone else. But this story convinces me to stay clear of age-restricted communities.

How do you think this story would play out from a legal standpoint in South Carolina?

Recent HOA foreclosure case leads to new rule in Beaufort County

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Master imposes rule based on Chief Justice Beatty’s concurring opinion

foreclosure notice

This blog recently discussed the remarkable homeowners’ association foreclosure case, Winrose Homeowners’ Association, Inc. v. Hale, South Carolina Supreme Court Opinion 27934 (December 18, 2019.) You can read the earlier blog here.

The case focused on the inadequacy of the foreclosure sales price and the business model of a third party to leverage a nominal debt to secure an exorbitant return from homeowners who fear eviction. I believe the case will require HOA foreclosure attorneys to rethink their approach going forward.

In his concurring opinion, Chief Justice Beatty said he would go a step further than the majority opinion and adopt the equity method of determining an adequate sales price for residential property in a foreclosure. The equity method compares the winning bid price to the equity in the property. The alternative debt method compares the total debt on the property to its fair market value.

The majority opinion stated that our courts have not established a bright-line rule for what percentage “shocks the conscience”, but a search of our South Carolina’s jurisprudence reveals that our courts have consistently held a price below ten percent definitely does. In this case, the debt method would have resulted in a ratio of 53.9 percent, while the equity method would have resulted in a ratio of 4.9%.

The new rule of the Beaufort County Master-in-Equity Marvin Dukes focuses on a totally separate issue in the case. The homeowners, who were in default, did not receive a notice of the date and time of the foreclosure sale. Judge Dukes’ office disseminated a message to foreclosure attorneys requiring new wording in foreclosure orders.

The new required wording entitled “Special Default Foreclosure Order and Sale Notice Service Instructions” reads as follows:

That, in addition to all notices to the property owner(s) which are required by the  SCRCP or other law, in a case involving property owner’s SCRPC 55 default, or any other case or circumstances where property owner(s) would not ordinarily receive a copy of the Order of Foreclosure and/or Notice of Sale, the party seeking foreclosure (Foreclosing Party) shall, within 5 (five) days of the execution of this Order cause this Order and Notice of Sale (if available) to be served by US Mail upon said property owner(s).

An affidavit of such service shall be filed with the Clerk of Court expeditiously.

In cases where the Notice of Sale is executed later in time than the Order, service shall be accomplished separately, and shall be sent no later than 5 (five) days from receipt by the Foreclosing Party.”

I suspect additional guidance will be coming from our courts about whether the Winrose case will have broad application in foreclosure cases or be limited to its facts. I’m confident foreclosure attorneys feel they need more information.

Representing a subcontractor and a homeowner against the contractor. Is it ethical?

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gavel handshake

Please take a look at South Carolina Bar Ethics Advisory Opinion 19-05 here. This blog rarely touches litigation, primarily because the litigation knowledge of this blogger would fit easily on the head of a pin. But this EAO does affect real estate, and I can envision dirt lawyers getting themselves into this ethical conundrum, so here goes.

The facts are simple:  The attorney represents a subcontractor against a contractor regarding payment for work performed on a new home. The time for filing a mechanics’ lien has run, and the contractor has been paid in full. The homeowners want to retain the attorney to represent them to sue the contractor for breach of contract and negligently performed construction work. The homeowners’ claims do not appear to involve the work of the subcontractor.

The attorney is concerned that the contractor may not have sufficient assets to satisfy judgments of both parties.

So, the question becomes whether the attorney may ethically represent both parties.

The Ethics Advisory Committee provides the framework for consideration, but leaves the difficult analysis to the attorney.

The short answer is: The attorney may represent both parties provided the attorney analyses the prospective representation under Rule 1.7, SCRPC, and then considers whether the “material limitation” conflicts section in section (a)(2) may apply.

The attorney must also evaluate the risk of future availability of assets and should engage in a course of ongoing assessment for conflicts, particularly those that may arise if the claims are reduced to judgments and the clients dispute their recovery amounts relative to each other.

Rule 1.7 provides:

  • Except as provided in paragraph (b), a lawyer shall not represent a client if the representation involves a current conflict of interest. A current conflict of interest exists if:
  • The representation of one client will be directly adverse to another client; or (2) there is significant risk that the representation of one or more clients will be materially limited by the lawyer’s responsibilities to another client, a former client or a third party or by a personal interest of the lawyer.
  • Notwithstanding the existence of a concurrent conflict of interest under paragraph (a), a lawyer may represent a client if:
  • the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client;
  • the representation is not prohibited by law;
  • the representation does not involve the assertion of a claim by one client against another client represented by the lawyer in the same litigation or other proceeding before a tribunal; and
  • each affected client gives informed consent, confirmed in writing.

 

 

(I added the emphasis.)

The material limitation of (a)(2) is the primary concern. Given the attorney’s concern about the sufficiency of the assets of the contractor to satisfy judgments, the attorney must evaluate whether that potential risk may materially limit his ability to represent either party.

The Committee eliminated (b)(2) and (b)(3) from consideration based on comments to the rule.

The analysis boils down to (b)(1) and (b)(4): the attorney’s assessment of whether he can provide competent and diligent representation to both parties and whether they consent to the representation after being informed of the benefits and risks of joint representation, particularly of the possibility of inadequate assets and the possibility of needing new counsel should they dispute recovery between themselves.

What do you think? Would you do it?