Restrictive Covenant Prohibiting Rentals to College Students Upheld

The SPUR at Williams Brice Owners Association, Inc. v. Lalla, No. 2013-001479.

In this recent Court of Appeals ruling, the Court affirmed the lower court’s holding that a restrictive covenant prohibiting the lease of condominium units to students unrelated to the unit owners was valid.

The Association filed the original action as a covenant enforcement suit and declaratory judgment action seeking determination from the court whether the covenant was enforceable and whether the Lallas were in violation. The covenant at issue provided as follows:

The rental of any unit to any student currently enrolled in a two (2) or four (4) year college, institute, or university is strictly prohibited. Additionally, any tenant of any unit shall be prohibited from having any roommate that is enrolled in a two (2) year or four (4) year college, institute or university. Any tenant in violation of this Restriction shall have their lease automatically terminated and shall have thirty (30) days to vacate the Unit.

The Master Deed goes on to create an exception for the children or grandchildren of unit owners who are students and authorizes them to reside with one other student roommate.

The Lallas argued that the covenant should be overturned based on the following grounds: (1) it is unreasonable and unenforceable; (2) it violates the Equal Protection clauses of the South Carolina and United States Constitutions; (3) it violates the Federal Fair Housing Act and South Carolina Fair Housing Laws; (4) it should be nullified on the basis of changed economic conditions; and (5) the Association waived the right to enforce the covenant.

The Court of Appeals agreed with the trial court that the covenant should be upheld as enforceable as it is binding on the unit at issue and the Lallas failed to demonstrate the covenant discriminates against a protected or inherently suspect class. Neither the Federal Fair Housing Act nor the South Carolina Fair Housing Laws recognize students as a protected class. Both laws protect against discrimination on the basis of familial status, which means a person under 18 being domiciled with a parent or someone with legal custody or the designee of such parent or person having legal custody. The court held that this classification was “wholly unrelated” to the rental restriction at issue.

The court succinctly stated its holding as follows:

[W]e find no error in the circuit court’s ruling that when the [Lallas] became owners of a unit in [The SPUR], they voluntarily and intentionally bound themselves by the restrictive covenants barring the rental of any unit to college students who are unrelated to the unit’s owner. Accordingly, we affirm the circuit court’s ruling that the rental ban provision of the restrictive covenant is binding upon the Lallas.

Emphasis added.

This site and any information contained herein should not be construed as legal advice. Seek a competent attorney for advice on any legal matter.

Court will Uphold Liquidated Damages so long as Reasonable at the Time of Contracting

K-Con Building Sys., Inc. v. United States, 97 Fed. Cl. 14 (2011).

K-Con, a design-build contractor, entered into three separate contracts with the United States Coast Guard for the design and construction of pre-fabricated metal buildings in three cities. As it relates to the Elizabeth City contract, K-Con brought suit seeking to convert its termination for default into a termination for convenience and for recoupment of liquidated damages. K-Con moved for summary judgment on the grounds that the liquidated damages (“LDs”) assessed by the Government were arbitrary and inconsistent with the actual damages incurred.

Various delays over the course of the contract’s term, to include worldwide steel shortages, shipping delays and issues with defective specifications, resulted in K-Con’s inability to meet the extended contract completion date. The Government terminated K-Con for default and used the remaining funds under the contract in reprocurement.

K-Con argued at summary judgment that the LD rate of $551 per day was arbitrary because the other two contracts K-Con and the Government were involved in had different LD rates. K-Con also argued that the Government was not permitted to include personnel and administrative costs with the LDs.

Judge Sweeney held that the different rates used in the other contracts were irrelevant to the Elizabeth City contract rate. The court looks to the time of the contract’s execution to determine whether or not an LD provision is reasonable. The court will not enforce LD clauses intended as a penalty, but the purpose of these provisions is to “allocate the consequences of a breach before it occurs.” For this reason, the Court upheld the LDs in the Elizabeth City contract as reasonable because K-Con could not prove that at the time of contract execution the Government could not have reasonably expected to spend the LD amount as a result of the breaching party’s breach.

The Court also upheld the Government’s inclusion of administrative and personnel costs in the LDs. In so holding, the Court found that since a contractor can recover its overhead from the Government in LDs, the Government should likewise be able to recover the same when the contractor is in breach.

This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice. Seek a competent attorney for advice on any legal matter.

ADA Pool Regulation Upcoming Effective Date

January 31, 2013 is the effective date for existing swimming pool owners to bring their pools into compliance with ADA regulations, including providing accessible means of entry and exit. What does this mean to Community Associations? Associations have to consider the following:

1) Is the Association a “public accomodation” under Title III of the ADA? This definition would include, but is not limited to, condotels, associations with swim clubs, and those with events open to the public.

2) Is it “readily achievable” to remove physical barriers in existing pools? Can the Association afford a pool lift or sloped entry in the pool? Will a mounted pool lift fit in the available space surrounding the pool? What architectural renovations will be required to make it feasible?

3) Would it be “readily achievable” to purchase a pool lift in the near future? Associations should get cost estimates and start setting aside funds to move towards compliance if it is not currently feasible to purchase a lift or otherwise remove barriers.

In answering these questions, Associations should consider having a reputable company provide cost estimates for pool lifts that meet the ADA requirements and maintain this documentation as part of the Association’s records.

Please note that non-fixed (portable) lifts will not comply with the ADA requirements unless they were purchased prior to March 15, 2012. The ADA and Department of Justice (DOJ) are not proponents of non-fixed lifts because people with disabilities should not have to wait for a pool attendant to move and operate the lift. The lift should be readily available and operable by the disabled user.

This site and any information contained herein should not be construed as legal advice. Seek a competent attorney for advice on any legal matter.

 

Notice of Arbitration Must Appear on First Page of Master Deed to be Enforceable

In Richland Horizontal Prop. Regime Homeowners Ass’n, Inc. v. Sky Green Holdings, Inc., the Court of Appeals upheld the trial court’s ruling that an arbitration clause on a master deed was unenforceable. In this case, a developer created a horizontal property regime by master deed. The master deed included  a cover page and then a second page where the arbitration provision was found. The developer later created a supplemental master deed, also including an arbitration provision, to add a new unit to the existing regime and reduce the proportionate share of common area ownership held by the original unit owners. The original unit owners filed suit seeking a declaratory judgment that the supplemental master deed violated the original master deed. The developer moved to compel arbitration, which motion was denied.

The court held that the arbitration clause failed to comply with the Uniform Arbitration Act which provides in § 15-48-10(a): “Notice that a contract is subject to arbitration pursuant to this chapter shall be typed in underlined capital letters, or rubber stamped prominently, on the first page of the contract and unless such notice is displayed thereon the contract shall not be subject to arbitration.”

The developer argued that the cover page of the master deed should not be included because the second page contains the following statement: “This is the first page of the Master Deed for The Richland Horizontal Property Regime. In the event other pages including, but not limited to cover pages, indexes, or tables of contents are placed in front of this page, those pages shall not be deemed to be the first page. This page and only this page shall be deemed the first page of the Master Deed for all legal purposes.

The court strictly construed the language of the statute and held that the “first page of the contract” meant  “preceding all others.” Since the cover page preceded the other pages in the master deed and it did not contain an arbitration provision, the court held that arbitration was not required.

This site and any information contained herein is for informational purposes only and should not be construed as legal advice. Seek a competent attorney for advice on any legal matter.