More than a dozen homeowners are suing Palmetto Bluff in Bluffton, S.C. The homeowners accuse the developers of collecting “illegally-imposed dues” and “unreasonably” targeting homeowners’ short-term rentals.
A group of homeowners is suing Palmetto Bluff in Bluffton, S.C., accusing its developers of “a deceptive and costly hoax” and a plan to flip the luxury community “at a high profit,” Bluffton Today reported. Charleston law firm Ford Wallace Thomson filed the civil lawsuit April 12 in Beaufort County on behalf of more than a dozen Palmetto Bluff property owners. The suit includes a litany of complaints against Palmetto Bluff officials.
The homeowners accuse the developers of collecting “illegally-imposed dues” and “unreasonably” targeting homeowners’ short-term rentals, Bluffton Today reported. The suit claims Palmetto Bluff allows “preferential treatment for its hotel guests” to use club facilities that “are paid for by the residential owners.” It also says the community’s ownership has “a business plan to flip Palmetto Bluff within eight years … after wringing from it as much profit as they can manufacture.”
Palmetto Bluff is Bluffton’s largest property, covering about 20,000 acres between the May, New and Cooper rivers, Bluffton Today reported. Crescent Communities bought the land for development in 2000 from the Union Camp pulp and paper company.
The community now has at least 800 homes, with about 400 more under construction, according to the lawsuit, with a master plan that includes about 4,000 total homes, Bluffton Today reported. It also is home to the Montage Palmetto Bluff resort, May River Golf Club, a nature conservancy, and a host of amenities including pools, restaurants, and the Wilson Lawn & Racquet Club.
Private equity firms South Street Partners and Henderson Park Capital Partners acquired Palmetto Bluff last year, Bluffton Today reported. The lawsuit says South Street owns 10% of the community and “is responsible for the day-to-day decisions and operations.” It claims an “internal document” indicates South Street plans “to exit Palmetto Bluff” by 2028.
The defendants named in the suit include South Street Partners, Palmetto Bluff Development LLC, Palmetto Bluff Club LLC, Palmetto Bluff Real Estate Company LLC, PLBH LLC, Montage Palmetto Bluff LLC, and Palmetto Bluff Preservation Trust and members of its Board of Stewards, Bluffton Today reported.
The suit claims Palmetto Bluff Development LLC “chose to parse itself out into several corporate entities, only some of which are mentioned” in the court filing, Bluffton Today reported. “Through these entities, which acted individually and in concert with one another, the [developer] orchestrated its fraudulent scheme.”
Palmetto Bluff Preservation Trust is the community’s homeowners association, Bluffton Today reported. The suit says its board is “currently entirely controlled by the [developer’s] own appointees.”
The suit also lists as defendants John Does 1-25, described as “unidentified corporations, entities, and/or individuals, whose identity will be discovered during discovery in this action, who caused or contributed to the alleged bad acts and damages, who may be substituted in or added in as parties as discovery progresses,” Bluffton Today reported.
Palmetto Bluff Development began marketing to homebuyers in 2003, the suit says, using “materials promising exceptional first-class amenities,” Bluffton Today reported. It argues the developer “crafted the idea that it would allocate the costs of those amenities to the homeowners … while selling the illusion that residents have a stake in the community.”
The suit says Palmetto Bluff Club LLC owns and operates the amenities, while property owners are “told from the outset” that club membership is mandatory and requires “a hefty ‘joining fee,’ and that they are obligated to pay thousands of dollars in dues and fees per year, lest their home be liened.” It says homeowners “purportedly do not have any ownership or control over” the club while it is managed as a for-profit entity, Bluffton Today reported.
Meanwhile, the suit contends, hotel guests have been given “priority use of” the club amenities, Bluffton Todayreported. It says Palmetto Bluff residents often “find that the amenities they have paid for are overwhelmed, oftentimes by hotel guests and hotel events; there is no room in the dining venues; there is no room by the pools; there is no room on the courts; there is no room in the fitness areas.”
The plaintiffs argue that the amenities also have been used in an effort to “eliminate” homeowners’ short-term rentals, Bluffton Today reported. Some people own homes in the community that are known as “Designated Rental Areas,” the suit says, where short-term rentals are permitted.
The suit says Palmetto Bluff charges “these owners unique, exorbitant extra fees, ostensibly in exchange for permission for their guests” to use the amenities, Bluffton Today reported. It argues the developer and club have “lenient attitudes toward longer rental terms” while they target “short-term rentals only because they compete with” the community’s five-star hotel.
“A significant part of South Street’s anticipated financial gain depends on maximizing the value of the resort hotel and the club amenities in order to sell to the next prospective investor—with little regard for fiduciary duty, the lawfulness of their actions, or detriment to the homeowners,” the suit argues, Bluffton Today reported.
Palmetto Bluff sent Bluffton Today the following statement when asked for comment on the lawsuit:
“The planned changes at Palmetto Bluff are designed to be in the best long-term interest of our residents. We understand that a small handful of our existing property owners, who have elected to use their homes as short-term rental properties, are dissatisfied with these planned modifications. They do not impact the Bluffton resident access to visit and enjoy Palmetto Bluff, rather only impact short-term renters and hotel guests’ access to the private club component of the community and are in keeping with the governing documents. South Street Partners has a long-term commitment to the Palmetto Bluff community, our members, our staff and the town of Bluffton.”
The suit says the plaintiffs have suffered damage to the values of their properties, damage to rental income, a loss of access to club amenities, have paid duplicative fees “purportedly for access to” amenities, and were induced into buying properties they “would not otherwise have purchased,” Bluffton Today reported. It argues that the mandatory club membership is “unlawful,” and the club and amenities should be conveyed to property owners as a common area. It requests payment of damages, including attorneys’ fees.
The suit also asks the court to order “that Palmetto Bluff’s governing documents are unlawful, unconscionable, in violation of the law and public policy of this State, and unenforceable,” Bluffton Today reported.