‘Just part of a machine:’ Palmetto Bluff flip-flops on club membership and short-term rental rules

An email offering up tens of thousands of dollars sounds like a scam, but it’s what Palmetto Bluff Club members received in their inboxes Wednesday evening without warning.

The developer will waive mandatory membership requirement for all current and future residents, saving members big if they opt out, slightly lowering the bar for ownership, and putting a band-aid on issues brought up in an ongoing civil action lawsuit against the developers rooted in club ownership.

Unlike most private communities in Beaufort County, Palmetto Bluff is owned by a developer — South Street Partners — instead of its residents and club members. This makes many residents feel as though they have little authority on what goes on in their community.

If members resign on or before before July 31, the club will reimburse their joining fee, which runs in the tens of thousands. Members who resign on or before that date will also get a refund for any pre-paid club dues.

The letter, emailed Wednesday, also notified residents of a program that would make the community more renter-friendly. They will allow short-term renters to use club facilities for an extra nightly fee if the homeowner is a member. Previously short-term renters weren’t allowed to use club facilities.

“They didn’t have a member vote on it. People didn’t know what was coming. What people got was an email,” Attorney Ian Ford said. Ford represents the Palmetto Bluff community in a civil action lawsuit filed against the developers in April that alleges they “constructed a house of cards, buttressed by deceptive and illegal governing documents — intending to exit before the cards collapsed.”

“It’s a complex, sophisticated community,” said Ford, who has worked with South Carolina communities for a decade. “You can’t run it by email.”

The club said it will also waive its right to place a lien on members’ property for unpaid dues, fees and charges, including members who remain active club members.

Club membership provides access to non-golf amenities including racket courts, pools, workout facilities and restaurants. Golf Club and Boat Club members must maintain a general club member if they want to stay in their additional clubs.

Resident Carol Riddick built her Palmetto Bluff home in 2012. She said she doesn’t think many people will opt out of the club.

“You have a captive audience,” she said. “It’s not like you have a lot of options when you live in a remote community.”

It comes at a time where Palmetto Bluff inventory and prices are up, but sales are down, compared to this time last year according to Hilton Head Area Association of Realtor market reports. This is consistent with the Hilton Head area.

It also follows the sudden resignation of Jeff Dekruif as General Manager and the appointment of Kevin Rhatigan as Director of Operations less than a week before. Dekruif didn’t respond to an email asking for comment.

South Street Partners Vice President of Operations Rob Duckett declined immediate comment for this story.

“I just never experienced anything like this and it’s a little unnerving,” Riddick said. “Because it’s your home, but in some ways it doesn’t feel like it. It feels like just part of a machine.”

What does it mean for the lawsuit?

The changes address some of the core issues — mandatory membership and an attack on short term rentals — mentioned in the 83-page lawsuit more than a dozen community members filed in April. They filed it on behalf of the entire community around the time the owners stopped letting short-term renters use the club facilities.

“It’s the wrong answer to the right question,” Ford said. “The right answer is you should follow the documents and offer (the club) to the members to buy so they could make the decision to do that.”

Ford said that while the changes address some concerns “they’re trying to triage” what the lawsuit asserts is the root issue: the members didn’t get the chance purchase the club when it was sold to South Street Partners by another developer in early 2022.

South Street Partners acknowledge the lawsuit in the letter and say they believe they can require mandatory membership, even though they’re not choosing to enforce it now.

“We firmly believe the governing documents are both legal and sound, and mandatory membership in the Club to be a common practice,” it reads. “While we remain committed to defending our governing documents, which form the very backbone of our community, we do not want any resident to be a member of the Club if they do not wish to be a member.”

It means that South Street Partners could switch back to all their previous rules in another email.

“There is no binding agreement to what they sent out,” Riddick said. “In the email, they actually say that this can be changed at any time. It has no real legitimacy.”

There aren’t plans to drop the lawsuit, according to Ford. It was filed in Beaufort County in April; the defendants tried to push it to private arbitration; it was denied; then they immediately appealed the denial.

While the decision on the appeals is still up in air, Ford said they’re pushing to get the case to trial.

What are the fees?

The club’s required annual fees are two-pronged with a POA fee plus a mandatory base club fee. This year the annual base club dues are $6,695, raised about 36% from $4,895 last year. With added required state and county 7.5% admissions tax of $502, it is $7,197.

The 2023 POA annual assessment is $4,876, raised about 8% from $4,515 in 2022.

In the letter the club says it doesn’t anticipate that optional membership will result in increased club dues for those who choose to stay members.

New property owners also had to pay a $30,000 club joining fee in 2022, which increased to $40,000 this year.

These fees are on top of Palmetto Bluff’s $2.74 million median home price for 2023 year to date, according to Hilton Head Area Association of Realtors Market Reports. This is a 36.9% increase from this time last year, when the median home price was $2 million.

However, sales are down and inventory is up. In 2022, 33 homes had been sold by April. This year it’s 33% less at 22 homes. Inventory is up 200% from April last year, 48 homes were on the market compared to 16.