781 S.E.2d 115
S.C. Ct. App.2015Background
- The SPUR is a condominium (horizontal property regime) created by a 2006 Master Deed that contains Article XIV prohibiting rental of any unit to students currently enrolled in a two- or four-year college (with an exception for owners’ children/grandchildren).
- Sunil and Sharon Lalla bought Unit 101 in 2007, knew of the Master Deed, and later rented the unit to college students beginning in 2010 after failing to sell it following a market downturn.
- The SPUR Owners Association (managed by Landmark) notified owners in 2010–2011 it would enforce the student-rental prohibition and sought compliance by deadlines and tenant application screening.
- The Association filed a declaratory-judgment action in October 2011 to enforce the Master Deed and obtained an injunction enjoining the Lallas from renting to unrelated college students.
- The Lallas counterclaimed seeking a declaration that the covenant was void due to unreasonableness, discrimination (equal protection and fair-housing), changed economic conditions, and waiver by the Association.
- The circuit court ruled for the Association; the Court of Appeals affirmed.
Issues
| Issue | Plaintiff's Argument (Lallas) | Defendant's Argument (Association) | Held |
|---|---|---|---|
| Enforceability of restrictive covenant | Covenant is unreasonable and should not bind them | Covenant is a valid contractual restriction in Master Deed and bylaws; buyers are bound | Covenant is binding and enforceable; Lallas were subject to it when they purchased |
| Equal Protection challenge | Prohibition unlawfully discriminates against college students (class-based) | Classification is not suspect; rational-basis review applies to protect safety, comfort, and investment | Classification is not suspect; passes rational-basis review as rationally related to legitimate goals |
| Fair Housing Act / State fair-housing claim | Restriction denies housing access to a class and conflicts with housing laws | Restriction does not target protected classes (race, familial status, etc.) | No fair-housing violation; restriction unrelated to protected characteristics |
| Changed economic circumstances / frustration | Market decline made covenant oppressive and valueless; should be voided | Change in market conditions does not defeat a restriction whose purpose remains achievable; owners had notice when purchasing | Economic downturn is not a basis to discharge the covenant; covenant survives |
| Waiver by Association | Association previously allowed other nonrelated students, so it waived enforcement | Association acted to enforce after complaints; no intentional relinquishment of right | No waiver shown; Association timely enforced restriction |
Key Cases Cited
- Judy v. Martin, 381 S.C. 455 (standard of review for declaratory judgment actions)
- Sea Pines Plantation Co. v. Wells, 294 S.C. 266 (restrictive covenants disfavored but enforceable if clear)
- Buffington v. T.O.E. Enters., 383 S.C. 388 (equities and notice when evaluating change-of-conditions defense)
- Shelley v. Kraemer, 334 U.S. 1 (judicial enforcement of private covenants implicates state action under Equal Protection)
- Nordlinger v. Hahn, 505 U.S. 1 (rational-basis equal protection analysis explanation)
- Beazer v. N.Y.C. Transit Auth., 440 U.S. 568 (classifications may be under-/overinclusive yet still satisfy rational-basis review)