Sea Pines

Hilton Head Dredging and the Question of Public Benefit

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Now that Rory McElroy’s repeat victory at the Masters is in the books[1], the golfing world will turn its attention to scenic Hilton Head Island. It is there that the Harbour Town Golf Links at Sea Pines Resort will host the 58th edition of the RBC Heritage golf tournament later this week. For a long time, the Heritage was the only permanent PGA event in South Carolina[2] and quite a few South Carolina residents and golf fanatics from across the world make the trek down to Sea Pines to take in the action each year.  

That makes today’s blog a particularly appropriate time to discuss the ongoing legal battle over public funding for the dredging of the waterways around Sea Pines Resort, which made news again this month. If you have ever worked or vacationed around Hilton Head Island, you are probably aware that boating culture is a significant part of overall appeal of the Island and it also figures nicely into the presentation of the televised golf tournament.

The controversy is somewhat simple. The physics of the waterways around the Harbour Town Yacht Basin and nearby Braddock Cove Creek are such that periodic dredging of the waters is necessary to allow navigation of the waters in all tides.  

For a time, the cost of the dredging was born by the South Island Dredging Association (SIDA), a coalition of various Sea Pines owners’ associations, private slip owners, and marinas located in or near the local waterways. However, recent rounds of dredgings have become controversial both for the impact on the surrounding Calibogue Sound and the Town of Hilton Head’s decision in the last few rounds to start allocating public funds towards the project.

In 2022, resident Ryan McAvoy filed suit seeking to enjoin the Town from contributing $600,000 in public funds towards the next round of dredging. McAvoy claims that the Town’s allocation of the funds to the project violated the South Carolina Constitution because it allocated public funds primarily for the benefit of private gated communities, private owners of homes and boating slips, and private marinas from which the public is barred.

While there is no doubt that that the waterways in question are contiguous to the private communities contained within Sea Pines and contain private marinas that are restricted from public use, the Town of Hilton Head argues the waterways in question are navigable waters of the United States that are themselves open to the public and that the Town and its residents benefit from the use of the improved waterways and from the resulting tourism generated from the boating community being able to use the waters to access public areas.

In 2024, a Circuit Court judge granted the Town’s motion to dismiss McAvoy’s lawsuit on the ground that the waters to be dredged are public waterways. However, the breaking news from last week is that the Court of Appeals reversed the decision and ordered a new trial finding that the Circuit Court had mistakenly focused its decision on whether the waterways were public vs private. Instead, the trial court should have determined whether there is a public benefit to the Town’s action. The Court of Appeals found sufficient evidence in the record supporting McAvoy’s argument that the dredging primarily accrued to the benefit of private interests for the matter to continue towards a full trial. 

This recent case is just the latest example of the controversy that can come from using public funds in support of what some in the community may see as providing limited or tangential benefit to the public at large. The balance between determining private vs public benefit can often be tricky to quantify. Similar arguments (and lawsuits) have erupted in the past over the public benefit of beach renourishment, government funding of infrastructure for private businesses, and is not so far removed from past controversies concerning government use of the power of eminent domain to further private redevelopment. Whenever the public perceives that the beneficiary of government action is a private entity or a group of private parties, you can bet that there will be drama and oftentimes litigation.

While we will have to wait and see the ultimate outcome for the boaters of Hilton Head, real estate professionals and developers alike must consider the possible implications of public opposition whenever it brings in the government for assistance in these kinds of projects.

[1] My children’s rooting interests died with Scottie Scheffler’s parade of “near miss” pars that fell just a swing stroke short. It has been an up and down month of sports fandom for our household. 

[2] My colleague David Hicks reminds me that the third annual Myrtle Beach Classic will tee off in May.

Airbnb in Sea Pines?

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Court of Appeals says “yes” under some circumstances

I wouldn’t have predicted it, based on the history of exclusive Sea Pines Plantation in Hilton Head, its extensive set of restrictive covenants and the aggressive efforts to enforce those restrictive covenants over the years. But our Court of Appeals approved an owner’s rental through Airbnb of a portion of a residence in a December 6, 2017 case*.

Mr. and Mrs. Wall bought their residence at 48 Planters Wood Drive in 1998. The second story of the home consists of a guest suite that is accessible only by an outside staircase. In 2012, the Walls began renting a room through Airbnb, an online rental broker. The Airbnb listing was titled “Hilton Head Organic B&B, Sea Pines”. The Walls cooked breakfast for their renters.

AirBnB

Community Services Associates, Inc. (CSA), the property owners’ association in power to enforce Sea Pines’ restrictive covenants, expressed concern about the Airbnb listing, and the Walls changed the listing to the “Whole House” category and began renting out the entire first floor of their home while living in the second-story guest suite. They also dropped the “Hilton Head Organic B&B, Sea Pines” title and stopped cooking breakfast for their renters.

CSA filed suit seeking temporary and permanent injunctions against the Walls because of their alleged operation of a “bed and breakfast” in their home and the rental of less than the entire residence.

Here are the operative provisions of the restrictions:

  1. All lots in said Residential Areas shall be used for residential purposes exclusively, No structure, except as hereinafter provided, shall be erected, altered, placed or permitted to remain on any lot other than one (1) detached single dwelling not to exceed two (2) stories in height and one small one-story building that may include a detached private garage and/or servant’s quarters, provided the use of such dwelling or accessory building does not overcrowd the site and provided further that such building is not used for any activity normally conducted as a business. Such assessor building may not be constructed prior to the main building.

  2. A guest suite or like facility without a kitchen may be included as part of the main dwelling or accessory building, but such suite may not be rented or leased except as part of the entire premises, including the main dwelling, and provided, however, that such guest suite would not result in over-crowding of the site.

CSA took the position that the restrictions authorized the short-term rental of the entire residence but not part of the residence, that the Walls were operating an offending bed and breakfast, and that the guest suite included a second kitchen.

At a hearing before the master-in-equity, Mr. Wall testified that the couple kept an induction plate, a toaster oven, and a mini-refrigerator in the guest suite, and they occasionally prepared their food and washed their dishes in the suite.

The master denied the motion for injunctive relief and dismissed CSA’s complaint.

The Court of Appeals affirmed, stating that the dorm-style portable appliances used by the Walls did not create a kitchen. The Court held that the express terms of paragraph 6 require a residence with a guest suite to be rented in its entirety when the guest suite is rented out, but paragraphs 5 and 6 do not, by their express terms or by plain and unmistakable implication, require a residence with a guest suite to be rented in its entirety in every circumstance.

At best, according to the Court, paragraphs 5 and 6 are capable of two reasonable interpretations: (1) a residence with a guest suite must be rented in its entirety in every circumstance, or (2) the owners of a single family dwelling with a guest suite may stay in the guest suite themselves while renting out the remaining space. Because the latter interpretation least restrict the use of the property, the Court adopted that interpretation.

Understanding a little about the culture of Sea Pines, I will be surprised if we don’t hear more about this Airbnb issue in the future.