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.
This site and any information contained herein should not be construed as legal advice. Seek a competent attorney for advice on any legal matter.
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.
Many governing documents provide the association with the authority to review and either approve or deny the leases of community members. This authority can be helpful in that the association can ensure the lease document complies with the association’s governing documents, the association can have a record of the new tenant’s name and contact information, and the association can be sure that the number of units or homes leased does not exceed a set percentage if there is such a requirement in the governing documents.
However, with this authority comes great responsibility. Associations must use caution not to violate the Federal Fair Housing Act when reviewing leases. By enacting a reasonable policy for lease reviews and applying it evenhandedly to all leases, the association can avoid the pitfalls of discrimination complaints.
A tenant cannot be rejected on the basis of her race, color, religion, age, sex, ethnicity, national origin, family status, or handicap. If the tenant participates in the Section 8 Voucher Program, denying the lease could be a violation of the Fair Housing Act on the basis of disparate impact. Similarly, conducting criminal background checks for tenants may also be a disparate impact violation under the Fair Housing Act in some circumstances.
The best approach for community associations is to formulate and enact a reasonable leasing policy and stick with it. Making exceptions in some cases and not others can open the door to litigation. Leasing policies should focus on length of the lease and compliance with the governing documents rather than the background and identity of the tenant. However, having the tenant’s contact information and a copy of the lease on file will promote better communication within the community.
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.