SC charter schools board sues landlord over alleged ‘excessive’ rents, breach of contract

The governing board of two South Carolina charter schools is demanding $40 million in damages to cover the “excessive” rents they’re being charged by a Florida-based company that developed and owns the schools’ buildings, according to a lawsuit filed last month in Berkeley County and transferred Wednesday to federal court.

The Berkeley Charter Education Association, which oversees Mevers School of Excellence in Goose Creek and Berkeley Preparatory Academy in Summerville, claims in a lawsuit filed Feb. 11 that Red Apple Development deceived the association and failed to proceed in good faith upon its promises.

Red Apple is the real estate development sister company of Charter Schools USA, a Florida-based for-profit management firm that operates both schools and more than 80 others across four states.

The Berkeley Charter Education Association claims Red Apple breached the parties’ development and lease agreements by failing to convert interim leases into long-term leases, as the board had anticipated, resulting in higher annual rents.

The public charter schools, which are funded by taxpayers, are paying a combined $3.1 million in rent this year, and will see rents increase 2% each year for the lifetime of their respective decades-long rental pacts, documents show. If the schools’ interim leases run their course, the Berkeley Charter Education Association claims it will have paid $40 million more in rent than it should have.

Stewart Weinberg, chairman of the Berkeley Charter Education Association, said rising rental costs have hamstrung the board and hurt employee retention.

Mevers, which opened in 2017, has had five principals in eight years, while Berkeley Prep, which opened in 2021, has had four leaders in as many years, Weinberg said.

“We need to be competitive as far as teacher salaries are concerned and administrator salaries are concerned, and this has just not allowed us to keep some of the teachers and the administrators that we would want to have,” he said.

A spokeswoman for Charter Schools USA said she could not comment on pending litigation.

Facility development often poses a major stumbling block for new charter schools because they lack the capital to self-finance construction and the track record to secure favorable borrowing terms.

Schools with large management companies behind them, such as Mevers and Berkeley Prep, often rely on those companies or their affiliates to front the financing for property acquisition and development.

Once construction is completed, the management company or its development partner leases the building back to the school.

Over time, the developer recoups its acquisition and development costs through the rent payments, even as the public charter school, which is funded by taxpayers, gains no equity in the property.

If the developer eventually decides to sell — often to the school that’s been leasing the building — it walks away with a profit while the school, i.e. taxpayers, gets stuck paying down the mortgage.

In the Berkeley Charter Education Association’s case, the board entered into separate agreements with Red Apple to develop Mevers in 2016 and Berkeley Prep in 2020.

Under the arrangements, Red Apple would earn 5% of the development costs and agreed to lease both schools back to the Berkeley Charter Education Association at a rate calculated based on those costs, documents show.

The rents would increase by 2% annually until Red Apple obtained financing for the development of each school, according to the parties’ interim lease agreements.

Once financing was secured, “replacement leases” would supersede the interim leases and rents would freeze. Thereafter, rents could not exceed the annual debt service on the financing, according to the agreements.

The lawsuit claims Red Apple failed to obtain debt financing that would trigger its obligations to execute replacement leases for either school despite requests from the charter schools’ board.

“BCEA has repeatedly urged Defendants to honor their agreements, and bring about a transaction whereby the two Interim Leases are replaced by a financing transaction,” the suit asserts. “Defendants have failed and refused, and have continued to charge Base Rent at the annually escalating rates in the Interim Leases.”

Further, the Berkeley Charter Education Association claims that when it made good faith offers to buy the schools from Red Apple, the company responded with “unfair counteroffers” and “insisted on oppressive, non-market terms” designed to entrench Charter Schools USA, its affiliated management company, as the schools’ operator.

“The deal is held up entirely because they won’t remove Charter Schools USA as the management company,” Weinberg said. “But for us to acquiesce the board’s responsibility in determining who our management company is wouldn’t be appropriate. That would be totally irresponsible.”

The scenario highlights the challenge charter schools operated by management companies face when the companies that run the schools or their affiliates also own the schools’ buildings.

As a 2015 University of North Carolina law review article on the practices of charter school management organizations identified, a school’s board of directors is “virtually powerless” to fire its management company or otherwise alter its relationship with them if that company also owns the school’s property.

This story was originally published March 6, 2025 at 5:30 AM.

Zak Koeske

The State

412-334-2443

Zak Koeske is a projects reporter for The State. He previously covered state government and politics for the paper. Before joining The State, Zak covered education, government and policing issues in the Chicago area. He’s also written for publications in his native Pittsburgh and the New York/New Jersey area.