Myrtle Beach banned converting short-term rentals. Now, the city faces a lawsuit
The City of Myrtle Beach banned converting short-term rentals into long-term ones in December 2024 to protect its tax revenue. Now, the ban triggered a lawsuit in February 2025.
Horry County Court Records show that MBSC Property South, LLC — a Delaware-based company — sued the City of Myrtle Beach Feb. 5, 2025.
The lawsuit centers on the Sand Castle South property at 2207 South Ocean Blvd. in Myrtle Beach. It claims that the city’s moratorium on converting short-term rentals for long-term use in April 2024 prevented the firm from obtaining a long-term rental business license for the Sand Castle South.
The lawsuit also alleges that the moratorium prevented Sand Castle South from receiving Project-Based Housing Choice Vouchers from the Myrtle Beach Housing Authority for affordable housing.
The city banned converting short-term rentals to long-term use with a new zoning overlay. The overlay banned these conversions for properties larger than a single-family home or duplex east of Kings Highway and near the oceanfront in December 2024.
The lawsuit further alleges that the moratorium and ban cost the company more than $6.4 million in profits because it prevented MBSC Property South, LLC from converting the resort to a long-term, multi-family building that the property’s zoning didn’t bar. The filing claims the firm incurred more than $10 million in total damages.
“MBSC’s inability to engage in long-term rentals at the Properties has caused significant damages and devalued the Properties,” the lawsuit alleged. “MBSC acquired the Properties with the specific investment-backed expectation of long-term renting the Properties and selling them as a stabilized, income-producing asset.”
The lawsuit further claims that the ban and new zoning overlay violate MBSC Property South, LLC’s rights. It alleges that the zoning overlay is unlawful under the South Carolina Local Government Comprehensive Planning Enabling Act of 1994, the Fifth and 14th Amendments of the U.S. Constitution, the Fair Housing Act of 1968 and other legal precedents.
“The STRC Overlay is arbitrary, unreasonable, an abuse of discretion, and has no reasonable relation to a lawful purpose,” MBSC Property South LLC claimed in its filing.
The lawsuit claims the property was in “distressed condition” when MBSC Property South, LLC bought it for $16.9 million in late 2022.
Ross Appel represents MBSC Property South, LLC, in the lawsuit. He did not return a request for comment before publication. A City of Myrtle Beach spokesperson declined to comment, citing the ongoing litigation.
The Beverly Hills-based firm Hybridge Capital Management owns the Sandcastle property. Managing Partner In Principle Max Mellman declined to comment regarding the lawsuit.
Here’s why Myrtle Beach banned converting some short-term rentals for long-term use near the oceanfront
The lawsuit follows a close-to-year effort by the City of Myrtle Beach to protect its short-term rentals and ensure tax revenue didn’t fall.
Myrtle Beach’s efforts to protect short-term rentals came to the forefront in April 2024, when the city first placed a nine-month moratorium on converting ones near the oceanfront to long-term use. In a November 2024 city meeting, Myrtle Beach Assistant City Manager Brian Tucker said that conversion requests along Ocean Boulevard drew particular concern. The Sandcastle property is along South Ocean Boulevard.
The city commissioned a study because it was alarmed by the number of properties requesting to convert to long-term use. Presented in early October 2024, the study showed that converting short-term units that allow occupancy for 90 days or less could lead to the city and county losing millions in tax revenue if enough became long-term rentals.
In a previous September 2024 interview with The Sun News, Mellman disagreed with the rationale that converting rentals would hurt the city long-term. He added converting some rental properties would create more housing in Myrtle Beach.
“Getting people to move to Myrtle Beach is essential for the growth. I know they have goals for housing. We were trying to solve that,” Mellman added at the time. “We understand the rationale why because they think (converting short-term rentals to long-term ones) will take dollars away from the city, but in the long run, it’ll really help.”
