Dale Whitman

Fifth Circuit addresses short-term rental challenge

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This blog has previously discussed challenges by various cities, including cities in South Carolina, to short-term rentals in residential areas.

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.

Arguments against such rentals often focus on noise and parking problems in otherwise quiet residential subdivisions.

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.

The Fifth Circuit Court of Appeals recently addressed such a challenge in Hignell-Stark v. City of New Orleans, 46 F. 4th 317 (August 22, 2022). Thanks to Professor Dale Whitman of the University of Missouri at Kansas City Law School via the Dirt Listserv for information on this case.

An ordinance in the City of New Orleans required an owner to be a resident of the city to obtain a license to become a landlord allowing short-term rentals. When the plaintiffs challenged this ordinance using a “takings” theory, the Fifth Circuit held that theory to be inapplicable because permission to make short-term rentals of a residential unit is not a property interest. It is instead, according to the Court, a privilege.

The plaintiffs also argued that the ordinance was an undue burden on interstate commerce, and the Court agreed, stating that an ordinance that discriminates against interstate commerce is per se invalid unless there are no available alternative methods for enforcing the city’s legitimate policy goals. The ordinance in question was a blanket prohibition against out-of-state property owners’ participation in the short-term rental market. The Court pointed out that the ordinance doesn’t just make it more difficult for non-residents to compete in the market for short-term rentals in residential neighborhoods; it forbids them from participating altogether.

The Court pointed to alternative methods for achieving the city’s legitimate goals of preventing nuisances, promoting affordable housing, and protecting neighborhoods’ residential character. More aggressive enforcement of nuisance laws, increased penalties for nuisance violations, increased taxes on short-term rentals, requiring an operator remain on the property during night hours, and capping the number of short-term rentals licenses in particular zoning district might be alternatives.

The ordinance was held unconstitutional and void because the city’s objectives could be addressed in other ways that did not burden interstate commerce.

What do you think? Would you be comfortable with short-term rentals in your neighborhood?

Myrtle Beach condominium project evacuated

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Several news sources have reported that Renaissance Tower condominium project in Myrtle Beach was evacuated on October 7 because the building was deemed unsafe. The concern is apparently the structural foundation of the 22-story building which is located just north of Ocean Lakes Campground.

The Sun News reported on October 14 that Horry County Code Enforcement posted a sign outside the resort that the building is unsafe, and occupancy has been prohibited. The paper also reported that residents received an evacuation letter from the management company stating that the steel frame within the foundation is in substantially worse condition than previously believed. The damage was apparently discovered during a repair project that had just begun.

This blog has discussed unsafe condominium projects earlier, most recently in June.  

I have recommended previously that all South Carolina dirt lawyers subscribe to the DIRT listserv run by Professor Dale Whitman of the University of Missouri at Kansas City Law School. Two updates from that service in June relate to problem high-rise projects.

First, a 50-unit condominium building in Waukesha, Wisconsin, Horizon West, has been ordered to be demolished by the Waukesha City Council. Professor Whitman reports that the building’s steel structure has been compromised by water infiltration, much like the collapsed Surfside project near Miami, and is considered a risk for collapsing.

The residents don’t have the funds to pay for the demolition, and the insurance company is taking the position that the building should be repaired, not demolished. The cost of the demolition has skyrocketed because of the presence of asbestos.

The units were valued at $90,000 to $140,000 according to Zillow, prior to the discovery of the defects. During the current high-priced housing market, it is not likely that the property owners will be able to replace their housing even if they receive their full replacement costs from insurance. It is a very sad situation, but, of course, not as sad as an actual collapse resulting in the loss of lives.

Second, Florida’s legislature has passed a law that requires regular building inspections and requires homeowners’ associations to maintain reserves. The act was unanimously passed by both houses, and Governor DeSantis signed the bill into law on May 26th.

Under the new law, inspections are required when a condominium building reaches 30 years of age and every ten years thereafter. For buildings within three miles of the coast, the first inspection is required at 25 years of age.

In addition, mandatory structural integrity reserve studies are required every ten years under the new law, and reserves are required to be maintained based on the studies. The power of the HOA to waive reserves was removed, effective December 31, 2024.

This legislation is encouraging and should be considered in South Carolina, particularly because of the existence of our numerous high-rise coastal condominium projects. The Renaissance project is an example.

The only downside I see about such legislation is that it will make condominium living more expensive and may price some retirees and lower-income individuals out of the market entirely. But, logically, the cost of maintenance should be factored into every residential property purchase. The ability of an owners’ association to waive reserves and thereby kick the maintenance can down the road is a dangerous proposition.

Updates on dangerous high-rise condo projects

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I have recommended previously that all South Carolina dirt lawyers subscribe to the DIRT listserv run by Professor Dale Whitman of the University of Missouri at Kansas City Law School. I emphasize that recommendation today and have two updates from that service to share with you. Both updates relate to the collapsed Surfside project in south Florida.

First, a 50-unit condominium building in Waukesha, Wisconsin, Horizon West, has been ordered to be demolished by the Waukesha City Council. Professor Whitman reports that the building’s steel structure has been compromised by water infiltration, much like the Surfside project, and is considered a risk for collapsing.

The residents don’t have the funds to pay for the demolition, and the insurance company is taking the position that the building should be repaired, not demolished. The cost of the demolition has skyrocketed because of the presence of asbestos.

The units were valued at $90,000 to $140,000 according to Zillow, prior to the discovery of the defects. During the current high-priced housing market, it is not likely that the property owners will be able to replace their housing even if they receive their full replacement costs from insurance. It is a very sad situation, but, of course, not as sad as an actual collapse resulting in the loss of lives.

Second, Florida’s legislature has passed a law that requires regular building inspections and requires homeowners’ associations to maintain reserves. The act was unanimously passed by both houses, and Governor DeSantis signed the bill into law on May 26th.

Under the new law, inspections are required when a condominium building reaches 30 years of age and every ten years thereafter. For buildings within three miles of the coast, the first inspection is required at 25 years of age.

In addition, mandatory structural integrity reserve studies are required every ten years under the new law, and reserves are required to be maintained based on the studies. The power of the HOA to waive reserves was removed, effective December 31, 2024.

This legislation is encouraging and should be considered in South Carolina, particularly because of the existence of our numerous high-rise coastal condominium projects.

The only downside I see about such legislation is that it will make condominium living more expensive and may price some retirees and lower-income individuals out of the market entirely. But, logically, the cost of maintenance should be factored into every residential property purchase. The ability of an owners’ association to waive reserves and thereby kick the maintenance can down the road is a dangerous proposition.

** Please note that the new inspection and reserve Florida legislation applies only to condominium and cooperative buildings of 3 stories and higher above ground. See more details from Florida attorney, Michael Gefland.

HUD to enforce sexual orientation and gender identity anti-discrimination rule

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This blog has referred to the Dirt Listserv* previously, and I point in that direction again today for those among us who may represent clients in the business of renting or selling housing. On July 12, Professor Dale Whitman published a post entitled “Fair Housing Act will be applied to prohibit LGBTQ discrimination.”

The post mentions a Supreme Court case and a Department of Housing and Urban Development Press Release.

The case** held that Title VII of the Civil Rights Act of 1964 protects employees against discrimination because they are gay or transgender. The plaintiff, Gerald Bostock, worked as a child-welfare advocate for Clayton County, Georgia and was fired for conduct “unbecoming” a county employee when he started playing in a gay softball league. (Two cases from other circuits were consolidated with this case. One involved a person who was fired from his job as a skydiving instructor within days of mentioning to his employer that he is gay. The other involved a funeral home employee who was fired after disclosing to her employer her transgender status and intent to live and work as a woman.)

The press release was issued by HUD and can be read here. HUD announced that it will administer and enforce the Fair Housing Act to prohibit discrimination on the basis of sexual orientation and gender identity.  

The release said that a number of studies indicate same-sex couples and transgender persons experience demonstrably less favorable treatment than their counterparts when seeking housing. But HUD was previously constrained in its efforts to address this housing discrimination because of a legal uncertainty about whether this discrimination is within HUD’s reach. HUD has now reached a legal conclusion based partially on the Bostock case. HUD indicates that it is simply saying that discrimination the Supreme Court held to be illegal in the workplace is also illegal in the housing market.

Complaints may be filed by contacting HUD’s Fair Housing and Equal Opportunity Office at (800) 669-9777 or hud.gov/fairhousing.

Clients involved in housing should be advised of this development.

* Real Estate Lawyers Listserv: Dirt@LISTSERV.UMKC.EDU

** Bostock v. Clayton County, 590 U.S. ___ (2020)

Do we face lurking condo repair problems like those in Surfside, Florida?

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This is a difficult subject, and I’ve waited to address it for time to pass since the tragic June 24 collapse of the 136-unit Champlain Towers South condo project in Surfside, Florida.

South Carolina has many aging condominium projects, particularly along our coast. And we have an earthquake fault line to consider. Do our local homeowners’ association boards face expensive repair and reserve dangers similar to those in Florida?

Dale Whitman, the esteemed retired professor from the University of Missouri School of Law who moderates the national Dirt Real Estate Lawyers Listserv (Dirt@listserv.umkc.edu) has commented on Florida’s concerns in this regard. (If you’re not already following this listserv, I highly recommend it for all South Carolina dirt lawyers.)

Professor Whitman pointed to two informative and insightful news stories on the collapse, one from NBC News and the other from the Miami Herald.

The legal news following the collapse is that the Florida Bar has appointed a committee to review existing Florida legislation and to make recommendations for changes. Apparently, Florida law requiring reserve studies is weak and can be waived by a majority of the unit owners. To my knowledge, South Carolina has no such legislation.

It was estimated that nearly $17 million would have been needed to make the necessary repairs to the building that collapsed, but that available reserves amounted to only $770,000. Massive special assessments (more than $300,000 per unit) would have been needed. Collection was ongoing at the time of the collapse. But many unit owners simply did not have access to funds in that amount.

Professor Whitman wrote in the listserve on July 8:

“A much more robust program of reserves would have been needed to avoid this problem. But how much?  The need for a large expenditure to shore up the building’s structure is inherently unpredictable; it isn’t like a roof with a 20-year life, for example. But some sort of prediction is nonetheless necessary. Pick a number: say, a goal of achieving a reserve of 20% of the building’s original capital cost over the first 20 years of the building’s life, with continuing growth at the same rate thereafter. That would mean that the original assessments would be considerably higher than they would be with a more modest, conventional reserve program. It would add to the residents’ monthly cost and would make ‘affordable housing’ harder to achieve. But isn’t that better than a catastrophic collapse?”

He also speculated that periodic structural inspections by qualified engineers may be necessary. The building that collapsed apparently had such an inspection in 2018. That inspection revealed structural problems that could have been repaired for $9 million.

A couple of Florida Counties require aging high-rises to go through inspections after they reach 40 years of age. Failing the inspections can result in the loss of certificates of occupancy. But there is no similar state-wide requirement in Florida or South Carolina.

Much more stringent building inspection and condominium law requirements may be needed in South Carolina. I believe our HOA legislative scheme provides only the bare bones necessary to create and maintain a horizontal property regime. And I am not aware of any state-wide legislation that requires periodic inspections of high-rise buildings.

We should watch to see what Florida does and consider making similar changes. These issues are difficult to legislate and enforce but preventing comparable tragedies in South Carolina must be worth the effort.