When residents buy into Palmetto Bluff, one of South Carolina's most prestigious master-planned communities, they are making a significant financial commitment based on promises embedded in the community's governing documents. Since private equity firms South Street Partners and Henderson Park acquired Palmetto Bluff in 2021, some of those promises have been tested in ways that have driven homeowners into court and revealed a pattern that is playing out in master-planned communities across the country: when a developer controls the governing structure, residents can lose.

In 2022, the new ownership restricted amenity access for short-term renters. At first glance it appeared to be a response to pandemic-era overcrowding. Then an internal business plan was anonymously mailed to residents. The document, reviewed by The Wall Street Journal, outlined a strategy to eliminate third-party rental platforms like Vrbo and consolidate the short-term rental market under the hotel's own management program. Resident Jennifer Albero, who relied on Vrbo income to offset ownership costs before moving to Palmetto Bluff fulltime, said the change put her ownership at risk: "If they took away the amenities and I was still renting it out and living in New York, then I would have had to sell it."

Resident and lawsuit plaintiff Geoff Block put the stakes plainly: "If they could do this to short-term rentals, what group could they do it next?"

That question matters because the structure at Palmetto Bluff gives the developer extraordinary authority. The Palmetto Bluff Club, which requires mandatory membership, can change its own rules at the owner's discretion. The Palmetto Bluff Preservation Trust, which manages community-owned common areas on behalf of residents, has a board appointed entirely by the developer rather than elected by homeowners. That board has been renting the Village Green, a shared community asset, to the developer's own hotel for weddings at rates residents say do not reflect the revenue those events generate.

Residents who raised concerns about the situation have described being targeted. After complaining about loud music during a hotel wedding event, two homeowners received a letter suspending their access to hotel amenities and accusing them of misconduct. They deny those accusations and have filed a defamation lawsuit. A third resident received a similar suspension and filed a parallel suit. These are not minor administrative disputes. They are homeowners exercising their rights and being silenced for it.

The courts have begun to push back. A South Carolina special referee sided with homeowners on an improper attempt to waive mandatory membership in 2023. The state's Supreme Court upheld a lower court ruling this year refusing to force the dispute into private arbitration, which the court found was too one-sided to enforce. These decisions reflect a legal system recognizing that the governing structure residents agreed to when they bought into Palmetto Bluff was not being administered in their interest.

Palmetto Bluff is not unique. Private equity firms are acquiring master-planned communities and luxury developments across the country, then using developer-controlled governance structures to maximize returns in ways that were not disclosed to buyers. Homeowners need stronger protections, and communities like Palmetto Bluff need governing boards that answer to residents, not to the firms that built and sold the homes.

We are calling on the developer, South Street Partners and Henderson Park, to convert the Palmetto Bluff Preservation Trust board to a resident-elected structure, to end the practice of retaliatory suspensions against homeowners who raise concerns, and to ensure that shared community assets are managed for the benefit of all residents. We are also calling on South Carolina legislators to take up HOA governance reform so that future buyers are protected when developers sell into communities they continue to control.