This blog has discussed legislation limiting the purchase of real estate by some foreigners twice. Remember the Chinese surveillance balloon the United States shot down off the coast of the Palmetto State last February?
That incident and other rising tensions between our government and China over several issues (the war in Ukraine, recognition of Taiwan, to name only two) have resulted in politicians proposing to broaden state law bans on foreign ownership of real estate.
Professor Whitman of the DIRT listserv has provided a New Year’s update on the legislation across the country. He said one of the most significant developments of 2023 in the real estate arena was the noticeable increase in restrictions on foreign acquisitions of US property.
Chicago Title published an Underwriting Memorandum on April 5 entitled “Foreign Ownership of Property in South Carolina” to advise agents of the pending legislation in our state.
For your information, here is a link to Professor Whitman’s email. He gives credit for some of the list to Womble Bond Dixon. And I, as always, recommend and give credit to the listserv. Professor Whitman and his colleagues attempt to keep all of us up to speed on real estate law and trends across the country.
If you encounter potential foreign purchasers in your transactions, consult your friendly and intelligent underwriting counsel.
In Ani Creation, Inc. v. City of Myrtle Beach, * the South Carolina Supreme Court upheld an ordinance that imposed a zoning overlay district intended to bolster the “family friendly” nature of Myrtle Beach’s historic downtown area. The ordinance targeted smoke shops and tobacco stores and the merchandizing of tobacco paraphernalia, products containing CBD, and sexually oriented material.
The opinion begins, “The City of Myrtle Beach (the city) is a town economically driven and funded by tourism.” The facts indicate that the city received frequent criticism from tourists and residents that the proliferation of smoke shops and tobacco stores repelled families from the area. The city passed a comprehensive plan that aimed at increasing tourism and concluded that all businesses needed to encourage and support a “family beach image”. The city passed an ordinance which created a zoning overlay district known as the Ocean Boulevard Entertainment Overlay District that encompassed the historic downtown area.
The prohibited uses in the district were declared immediately nonconforming when the ordinance was passed on August 14, 2018, but an amortization period was allowed which gave affected businesses until December 31, 2019, to cease the nonconforming portions of their businesses.
The zoning administrator issued citations to the nonconforming businesses. Nine of the 25 affected stories appealed to the Board of Zoning Appeals which found (1) it did not have jurisdiction to declare the ordinance unconstitutional; (2) it could not grant a use variance because it would allow the continuation of a use not otherwise allowed in the district; and (3) the businesses were engaged in one or more of the prohibited uses. On appeal, the circuit court affirmed the Board’s opinion, finding the appellants’ 25 grounds for challenging the ordinance meritless. The businesses appealed directly to the South Carolina Supreme Court.
The appellants raised a “host” of constitutional and procedural challenges, all of which fell on deaf ears at the Supreme Court. The Court held that the ordinance was a valid exercise of the city’s police powers. According to the Court, municipal governing bodies clothed with authority to determine residential and industrial districts are better qualified by their knowledge of the situation to act upon such matters than are the courts, and they will not be interfered with in the exercise of their police power to accomplish their desired end unless there is a pain violation of the constitutional rights of the citizens.
A comment on the Dirt Listserv said, “S. Carolina is OK with cancel culture after all.” A store selling sexually oriented materials was removed from Garners Ferry Road in Columbia (about three miles from my house) using similar legal arguments. I was delighted to see that store torn down before I had to explain it to my grandchildren! But I do understand the “cancel culture” argument. What do you think?
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 NewOrleans, 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?
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.
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