S.C. Court Upholds HOA Restrictions on Rental of Units to College Students

South Carolina Appellate Court decision (November 18, 20115).

This case involved a dispute between a homeowners association (“Association”) and the owners of a condominium unit (“Owners”) over the enforceability of a restrictive covenant within the Association’s governing documents that prohibited the rental of units to any student that was currently enrolled in a two or four-year college.

Owners purchased the condominium unit in question in 2007, in anticipation of their daughter living there with two roommates while attending college at the University of South Carolina. The plan included the receipt of rental payments from the two roommates. Owners’ daughter apparently did not attend college at the University of South Carolina so, in 2008, Owners commenced efforts to sell the unit. Unfortunately, at that point in time the country was suffering from the real estate melt-down and Owners were not able to sell the unit. In 2010, Owners notified the Association that they were going to rent the unit to college students and they began to do so in violation of the restrictive covenant in the Association’s governing documents. In July of 2010, Association notified all owners that the Association intended to enforce the restrictive covenant prohibiting rentals to college students but the notice gave owners until May 31, 2011, to terminate all leases that were in violation of the covenant. In October of 2011, Association filed an action against Owners which sought interpretation and enforcement of the restrictive covenant against Owners. Owners defended the case by claiming that the restrictive covenant was unenforceable due to “changed circumstances.” Owners further argued that the restriction was unreasonable and discriminated against college students. The trial court ruled in favor of the Association and the Owners appealed.

The appellate court noted that in South Carolina, properly constructed restrictions on the use of property are strictly construed, with all doubts being resolved in favor of the free use of property. Noting that the restrictive covenant in question was properly stated in Association’s governing documents when Owners purchased the unit, the appellate court ruled that when Owners purchased the unit, they voluntarily and intentionally bound themselves by the restrictive covenant and they were therefore bound by the terms of the restrictive covenant. The appellate court further found: (i) Owners had not preserved their argument that the restrictive covenant was unreasonable; (ii) the covenant did not violate the Equal Protection Clause of the South Carolina Constitution; (iii) the rental restriction was not related to any class of people that were protected by state and federal housing laws; (iv) Owners’ financial losses due to the decline in value of the unit did not justify prohibiting the enforcement of the restrictive covenant. Accordingly, the appellate court affirmed the entire decision of the lower court.

See case decision: Spur_at_Williams_Brice_Owner