The South Carolina Supreme Court struck a mandatory club arbitration clause and kept the arbitrability question for itself
The South Carolina Supreme Court struck a mandatory club arbitration clause and kept the arbitrability question for itself
2026-09-19 · South Carolina · Courts
The highest South Carolina decision of the year touching a common-interest community arose from a short-term rental fight, and it ended with the club's mandatory arbitration clause struck down. Opinion No. 28339 was filed June 10, 2026, affirming as modified, per curiam.1
The dispute
Property owners at Palmetto Bluff listed their homes on short-term rental platforms. The Club responded by cutting off amenity access for their rental guests. The owners sued; Palmetto Bluff moved to compel arbitration under the Membership Agreement that every purchaser must sign.
Three holdings
The Federal Arbitration Act applies. The transactions implicate interstate commerce.
But arbitrability stayed with the court. There was no "clear and unmistakable" delegation of the arbitrability question to the arbitrator. Incorporating the AAA Rules is "some evidence" of delegation, but the Agreement's first-page notice — "THIS MEMBERSHIP AGREEMENT IS SUBJECT TO ARBITRATION PURSUANT TO SOUTH CAROLINA CODE SECTION 15-48-10, ET. SEQ." — together with its South Carolina choice-of-law clause showed an intent to apply South Carolina procedural law, under which the court decides arbitrability.
The Court expressly declined to follow the eleven federal circuits, the Fourth among them, that treat incorporation of the AAA Rules as sufficient by itself, distinguishing Blanton v. Domino's Pizza.
The clause was unconscionable. It required an arbitration demand within 60 days of the close of mediation — a contractual shortening of the statute of limitations, void under Section 15-3-140, following Huskins v. Mungo Homes, 444 S.C. 592 (2024). Sixty days is "not functionally different" from the ninety days struck in Huskins.
Why this reaches ordinary associations, not just luxury clubs
The instrument here was a club membership agreement, not a declaration of covenants. But the Court treated it as what it is: an ordinary contract, mandatory as a condition of property ownership, and subject to ordinary unconscionability analysis.
That reasoning transfers. Where a South Carolina community's governing documents or a related mandatory agreement contain an arbitration provision with a short demand window, the window itself is now a live vulnerability — independent of anything about the merits of the underlying dispute.
Section 15-3-140 bars contractual shortening of a limitations period. After Huskins at ninety days and 315 Corley at sixty, the direction is clear even if the precise floor is not.
The delegation point is the more unusual one
On arbitrability, South Carolina has now separated itself from a substantial body of federal circuit authority. Where a governing instrument recites the South Carolina Uniform Arbitration Act and selects South Carolina law, a South Carolina court keeps the question of whether a dispute is arbitrable at all, notwithstanding incorporation of the AAA Rules.
For a community association, that means a boilerplate AAA reference does not reliably move the threshold question out of court. Which forum decides arbitrability frequently decides the case, because it determines who rules on the validity of the clause that would otherwise remove the case from court.
The short-term rental backdrop
The conduct that started the litigation — withdrawing amenity access from renters' guests — is a recurring pattern in South Carolina resort communities, where the association or club controls the amenities and the covenants may not clearly address rentals.
Two things about the South Carolina position are worth stating together. First, no state statute governs short-term rentals, and both 2025-2026 bills died in committee. Second, where a rental restriction in a covenant is capable of two reasonable readings, South Carolina resolves the ambiguity in favour of free use — which is why amenity access, a matter of club rules rather than covenant interpretation, became the battleground here instead.
Municipalities have moved into the gap in their own way: Hilton Head Island now requires a letter from the association before it will issue a short-term rental permit.
A related fractional-ownership ruling
In the same window, the Court of Appeals reversed a Town of Sullivan's Island determination that a fractional co-ownership arrangement violated the town's ordinance as a "vacation rental." In 2026-UP-078, filed February 18, 2026, the court held that construction of an ordinance is a question of law reviewed de novo rather than a factual finding owed deference, and that the board of zoning appeals misconstrued it.2
It is unpublished and adjacent rather than central, but it addresses the same underlying pressure: South Carolina communities trying to regulate evolving forms of shared and short-term occupancy with instruments written before those forms existed.
See also how South Carolina handles association dispute resolution.
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