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.

FHA Condo Certification: Recent Changes Benefit Associations

HUD released new condo certification policies effective September 13, 2012. These revised regulations benefit associations by loosening some of the more stringent requirements for condo certifications under FHA.

Notable changes include:

1) FHA will now consider projects with up to 50% commercial space on a case-by-case basis and with substantial documentation.

2) Investor/entity owned units changed from a maximum of 10% to 50%, as long as 50% of the units have been conveyed, or are under bona fide contract to be conveyed to owner-occupants

3) Delinquent Assessments- No more than 15% of total units can be in arrears more than 60 days. The former regulation looked at the total delinquencies at 30 days.

4) Fidelity Bond changes for management companies- now either the association can name the management company as an agent or insured on its bond, the management company can have its own policy or the association’s policy can have a covered employee endorsement to cover management company personnel.

5) Slight changes were made to the Project Certification document requirements.

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