Bluffton homeowners sue Palmetto Bluff Club over mandatory membership waiver

In an effort to reverse what some Palmetto Bluff residents see as an overreach by the developer to soften club membership requirements, five homeowners filed a lawsuit in March.

The lawsuit piggybacks off of a 2022 lawsuit that demands the club become a non-profit and ownership be moved from the developer to the homeowners, as is common in many other Hilton Head area communities.

The filing is a response to the developer deciding last year not to require club membership from residents, as residents were previously mandated to join. The homeowners allege that the decision changed the community structure without the homeowner’s consent or amending governing documents, and therefore isn’t valid.

South Street Partners Vice President Rob Duckett said the opposite: the club can waive the provision in the community’s governing documents that requires mandatory membership.

South Street Partners bought the club from another developer in early 2022. The for-profit, developer-owned club structure is unlike many Hilton Head-area communities, which residents and club members own. The structure is what some residents say is the root of Palmetto Bluff’s problems, especially because they weren’t given the first option to buy the club in 2022.

Now members of the high-end community are turning to litigation as a solution. Palmetto Bluff had a $2.26 million median home price in 2023 compared to the Hilton Head area’s $516,500, according to the Hilton Head Area Association of Realtors. The community garnered national media attention for Hailey and Justin Bieber’s wedding at its Montage Palmetto Bluff resort in 2019.

The lawsuit cites how the Palmetto Bluff Club emailed residents in Spring 2023 waiving mandatory membership requirements for all current and future residents. The 2024 joining fee is $40,000 with a subsequent $8,170 per year for members. The lawsuit says that Palmetto Bluff Club shouldn’t be allowed to change governing documents without a member vote.

“The ideal situation is for the special referee to rule that the developer cannot, on its own, make fundamental changes to the community governing documents and their terms without a vote of the members,” said attorney Ian Ford, who represents Palmetto Bluff members in the lawsuit.

This isn’t the first time homeowners have brought civil action against Palmetto Bluff Club. A separate group, which Ford also represents, filed a lawsuit against Palmetto Bluff Club, South Street Partners and 10 other defendants in 2022, which is ongoing. In that lawsuit they allege it’s unlawful to require homeowners to join the for-profit Palmetto Bluff Club, there is an attack on short-term rentals and facilities are overcrowded.

The most recent lawsuit is an effect of how Palmetto Bluff’s ownership attempted to quell protest against mandatory membership brought up in the 2022 lawsuit: with emailed changes.

The 2023 changes to club membership policies, referenced in the lawsuit, were partially in response to the 2022 lawsuit, Duckett told the Island Packet and Beaufort Gazette at the time. He also said the changes were to prepare for community growth.

Duckett said Tuesday that the lawsuits haven’t impacted South Street Partners’ development plans in Palmetto Bluff.

“We’ve never slowed down on those,” he said. “We are bullish and focused on our mission, which is to provide a wonderful lifestyle to all the residents in Palmetto Bluff.”