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Committee Activity 2013

December 2013

Wyman v. Ayer Properties, LLC (Massachusetts)

The question raised in this case is whether the economic loss doctrine may preclude an organization of unit owners from recovering against a condominium developer for defective construction, and if so, whether the economic loss doctrine can be satisfied by an association demonstrating that a defective element caused harm to other common area property or units.

Shortly after turnover of control from the condo trust to a unit elected owner board, the plaintiffs engaged an engineering consultant to investigate possible construction defects. The investigation revealed deficiencies associated with the windows, the roof and masonry of the building. The Trial Court ruled that the windows and roof had been deficient but that economic loss doctrine precluded an assessment for injury to masonry.

The plaintiff and the defendant both filed appeals. The appeal court affirmed the plaintiff’s claims regarding the windows and roof and also ruled that damage to the masonry be included in the award, but elected to apply the trial courts 20% reduction which factored in earlier-time repair costs. Both parties filed an application for further appellate review. The case has been referred to the Supreme Judicial Court of Massachusetts. 

Brief: CAI's Amicus Brief
Prior Ruling: Lower Court Ruling
Status: Pending
CAI Amicus Brief Author: Henry Goodman, Esq. 
CAI Amicus Brief Review Committee: Richard Ekimoto, Esq; Michael Karpoff, Esq; Gary Daddario, Esq; Marc Markel, Esq; Lara Anderson, Esq.

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November 2013

The Currituck Club POA v. Mancuso Development, Inc. (North Carolina)

Currituck POA took action to claim approximately $122,000 in unpaid assessments owed by Mancuso Development, Inc. Mancuso Development argued that a previously entered agreement with the original owner/declarant excused any obligation it had to pay assessments.

The question raised in this case is whether an owner and member of an association may have their obligation to pay assessments waived by the declarant by contract with the declarant. The facts of the case present a Pandora’s Box of problems. Mancuso Development successfully argued against its obligation to pay assessments on Currituck POA’s property by virtue of arguments never before used in cases by builders attempting to avoid payment to an association. Mancuso argued that its third party relationship with the original declarant erased any claim held by the POA. However, a declarant cannot legally waive a builder’s obligation to pay assessments to an association.

This matter presents issues of importance to community association law in North Carolina and would have a substantive negative impact if affirmed by the North Carolina Court of Appeals. The amicus filing will address the principle that the previous ruling was based on a flawed concept; that side agreement would create uncertainty in community associations; the ruling would allow a developer to extinguish  an existing obligation via a bulk transfer; and the ruling demonstrates that the court of appeal is anti-community association.

Brief: CAI's Amicus Brief
Prior Ruling: Superior Court Ruling
Status: Pending
CAI Amicus Brief Author: Jordan Price Wall Gray Jones & Carlton 
CAI Amicus Brief Review Committee: David Ramsey, Esq; Stephen Marcus, Esq; Steve Weil, Esq; Mary Howell, Esq; Steven Sugarman, Esq.

 

Chase Bank v. Chase Plaza Condominium Association (Washington, DC)

The question raised in this case is if an association foreclosure wipes out the first mortgage on a property (except to the extent excess monies attach to the proceeds IF NOTICE is given). Importance lies in the fact that the lower court got it wrong on the narrow issue of that an association foreclosure does not wipe out the first mortgage. By basics of foreclosure law the foreclosure action must extinguish the first lien as a matter of law.

Ultimately, the questions to be answered in the brief is what is the meaning of “priority” in conjunction with the right of the bank to re-secure its position by payment prior to lien sale by payment? How is the statute designed to help an association which is otherwise subject to the bank’s priority? In other words, who would want to bid at an auction, especially where there is no right of the bidder to recoup amounts bid and expenses incurred in a situation where the lender then forecloses its mortgage?

CAI’s Amicus Committee is asking the intended brief author to limit the argument to whether a foreclosure of a condominium priority lien extinguishes the first mortgage. CAI is not looking to support one side or the other in terms of who should prevail in this case so CAI does not need to address the issue of lack of notice to lenders.

 

Brief: CAI's Amicus Brief
Prior Ruling: Order on Partial Motion for Summary Judgment
Status: Ruling for CAI's Position
CAI Amicus Brief Author: Thomas Moriarty, Esq; Henry Goodman, Esq; Loura Sanchez, Esq.
CAI Amicus Brief Review Committee: Henry Goodman, Esq; Stephen Marcus, Esq; Jonathan Levine, Esq; Steve Weil, Esq; Gary Kessler, Esq.

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October 2013

Hellmann v. Grand Point Island Homeowners Association (Missouri)

The Hellmanns and HCR contest the legitimacy of the Association and the authority of the Directors to govern the subdivision under the Declaration on a variety of ever-evolving legal theories. Their significant contentions generally challenging the Association and Directors include: there is no valid or legitimate homeowners association because the original Association was administratively dissolved in 2006; the Declarant Bayberry "voluntarily relinquished" is right to appoint individuals as directors; and the Directors had no authority to reinstate Association. Consequently, the Appellants contest any and every action taken by the Association or its Directors.

The Hellmanns’ attacks are motivated because the Association opposed the Hellmanns’ unilateral attempts to relocate the Community Dock, which the other owners want to remain attached to the common Park parcel. HCR, who has been in alliance with the Hellmanns, contests the authority of the Association and Directors based primarily on the belief that a subdivision of 13 lots does not need a homeowners association, regardless of the what the recorded covenants provide, and HCR does not want to pay the assessments that all of the other owners, except for the Hellmanns, have already paid.

As in the May 7, 2013 Amended Judgment, the Court found the Association was properly reinstated, is currently in good standing, and Restelli, Lowe, and Fulton are the proper Directors of the Association with authority to govern the subdivision pursuant to the Declaration.

Brief: CAI's Amicus Brief
Prior Ruling: Trial Court's Amended Judgment
Status: Pending
CAI Amicus Brief Author: The Law Office of Marvin J. Nodiff 
CAI Amicus Brief Review Committee: Robert Diamond, Esq; Lara Anderson, Esq; Stephen Marcus, Esq; Marc Markel, Esq; Gary Daddario, Esq.
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July 2013

Villas at the Boulders Association v. Lennar Corp. (Colorado)

At issue is the interpretation of Colorado’s statute of repose for community associations. Villas at the Boulders Association received a favorable order from the District Court stating that Colorado’s six-year statute of repose in construction defect cases begins to run upon the issuance of the certificate of occupancy for the final building developed in the association. However, the interpretation of the statute urged by Lennar would be to have a separate statute of repose period for each building in the project based upon the individual certificate of repose for that building. Lennar is seeking to gain approval of this interpretation from the appellate court.

Ultimately, Lennar’s proposed interpretation would be devastating for Colorado community associations suffering from construction defects because it would significantly shorten the deadlines for associations to file construction defect lawsuits and create multiple deadlines for a single community association. This would encourage premature litigation and/or multiple lawsuits in the same association, shift the liability for builder caused construction defects to community associations, and interfere with community association homeowners and potential purchasers from obtaining financing. All of these consequences could result in reduction in property values for Community Associations. For these reasons, other states, including California and New Jersey, have rejected the building-by-building approach urged by Lennar.

Brief: Pending
Prior Ruling: District Court Decision
Status: Pending
CAI Amicus Brief Author: Winzenburg, Leff, Purvis & Payne
CAI Amicus Brief Review Committee: Richard Ekimoto, Esq; Stephen Marcus, Esq; Laurie Poole, Esq; David Ramsey, Esq; Steve Weil, Esq.
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June 2013

Fowler v. M&C Association Management (California)

Associa’s member company M&C was sued by a resident of a client community alleging the two fees charged by M&C were in violation of California Code section 1098.5. The fees in question are common fees levied for change of records and other services provided at the time of transfer of title and authorized by the Davis-Stirling Act and exemptions found in code section 1098.5.

At issue is an attempt by a plaintiff's attorney to establish a class action suit to recover damages for lawful fees charged by Associa pursuant to the Davis-Stirling Act and allowable under California's statute that regulates transfer fees. At issue is the current legal framework governing management companies' ability to charge fees to clients and the current interpretation of California's statutory requirements and case law on allowable transfer fees for common interest communities and their agents. In this case, M&C levied a fee of $125 transfer fee and a $100 foreclosure transfer fee.

The plaintiff alleged that under the statute, Associa was required not only to disclose but also to record such fees with the county recorder's office. Additionally, the plaintiff argued that even if the fees were allowable, M&C, as an agent of the association, was limited to actual cost for these services. This claim is in direct contradiction to two important precedents established by the California courts, Brown v. Professional Community Management (2005) and Berryman v. Merit Property Management (2007).

Brief: CAI's Amicus Brief 
Prior Ruling: Superior Court Decision
Status:
Ruling for CAI's Position
CAI Amicus Brief Author: 
Richardson, Harman & Ober
CAI Amicus Brief Review Committee: Ken Chandwick, Esq; Henry Goodman, Esq; Stephen Marcus, Esq; Thomas Moriarty, Esq; David Ramsey, Esq.
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May 2013

The Florida Bar Re: Advisory Opinion - Activities of Community Association Managers (Florida)

On March 28, 2012, The Florida Bar’s Real Property, Probate & Trust Law Section petitioned the Standing Committee on Unlicensed Practice of Law for an advisory opinion on the activities of community association managers. The petitioner sought confirmation that the activities found to be the unlicensed practice of law in The Florida Bar re: Advisory Opinion – Activities of Community Association Managers, 681 So. 2d 1119 (Fla. 1996) (“1996 Opinion”) continue to be the unlicensed practice of law.

The petitioner also asked if it was the unlicensed practice of law for a community association manager to engage in any of the following fourteen activities: Preparation of a Certificate of assessments due once the delinquent account is turned over to the association’s lawyer; Preparation of a Certificate of assessments due once a foreclosure against the unit has commenced; Preparation of Certificate of assessments due once a member disputes in writing to the association the amount alleged as owed; Drafting of amendments to declaration of covenants, bylaws, and articles of incorporation when such documents are to be voted upon by the member; Determination of number of days to be provided for statutory notice; Modification of limited proxy forms promulgated by the State; Preparation of documents concerning the right of the association to approve new prospective owners; Determination of affirmative votes needed to pass a proposition or amendment to recorded documents; Determination of owners’ votes needed to establish a quorum; Drafting of pre-arbitration demand letters required by section 718.1255, Florida Statutes; Preparation of construction lien documents; Preparation, review, drafting and/or substantial involvement in the preparation/execution of contracts; Identifying, through review of title instruments, the owners to receive pre-lien letters; and any activity that requires statutory or case law analysis to reach a legal conclusion.

The Standing Committee held a public hearing on June 22, 2012. Testifying at the hearing were many attorneys, CAMs, and other interested individuals. Hundreds of homeowner and condominium associations submitted a form petition in the written testimony. The majority of the testimony reflects the belief that the Court’s 1996 opinion provides sufficient guidance in this area and another opinion is unnecessary. In addition, the testimony reflects the concern that too much regulation may raise the cost of living in these communities and could potentially have a serious financial impact on community associations, property owners, and CAMs. On May 15, 2013, as a result of the June 22, 2012, hearing, the Standing Committee on UPL submitted the Proposed Advisory Opinion.

Brief: CAI's Amicus Brief
Prior Ruling: Supreme Court Decision
Status: Pending
CAI Amicus Brief Author: PeytonBolin, PL
CAI Amicus Brief Review Committee: Robert Diamond, Esq; Mrichael Karpoff, Esq; Marc Markel, Esq; Marvin Nodiff, Esq; Stephen Marcus, Esq.


Hudson Tea Building Condominium Association v. Block 268 (New Jersey)

Hudson Tea Building Condominium Association v. Block 268 involves two high rise residential structures known as 1500 Hudson Street and 1500 Washington Street, Hoboken, New Jersey within the Hudson Tea Buildings, which were converted from rental units to a not for profit condominium pursuant to the New Jersey Condominium Act in 2005. In this regard, a Public Offering Statement ("POS"), was issued for Hudson Tea and was filed by the Sponsor, Block 268, LLC with the State of New Jersey, Department of Community Affairs on June 30, 2005. The Association was dominated and controlled by the Sponsor until about July 2008, when the Sponsor turned over control of the Board to the Association pursuant to the New Jersey Condominium Act (N..J.S.A. -!6:813-12.1 et. seq.).

Thereafter, the Association retained The Falcon Group, ("Falcon") an engineering firm, to investigate various problems, defects and deficiencies with the buildings and common areas. Falcon has rendered several reports which show that there are substantial systemic defects and deficiencies that exist throughout the buildings, including but not limited to the fire resistance and protection walls, exterior facades, roof assemblies, window wall assemblies and perimeter terminal air-conditioning ("PTAC") unit sleeves, insulation, concrete walkways and landscaping ("Construction Deficiencies").

The case seeks to answer whether the Appellate Court erroneously upheld the policy favoring arbitration rather than yielding to the practicality of the circumstances presented by a Condominium Association tasked with remedying the defect at issue; whether a portion Plaintiff's construction defect, tort and fraud claims against the Defendants are subject to arbitration under the terms of certain Purchase Agreements entered into by a minority of the individual unit owners (not the Association), with the Sponsor; and whether the Appellate Court erred in determining that the arbitration clauses were so broad as to extend beyond the closing of the purchase. There is no indication here that the Individual Plaintiffs contemplated that they were waiving their rights to statutory or contractual claims arising from systemic latent defects in construction.

Brief: CAI's Request to File Amicus Brief
Prior Ruling: Appellate Court Decision
Status: Pending
CAI Amicus Brief Author: Hueston McNulty and Kennedy, Wronko, Kennedy
CAI Amicus Brief Review Committee: Richard Ekimoto, Esq; Mary Howell, Esq; Marc Markel, Esq; Stephen Marcus, Esq; Steven Sugarman, Esq; Steve Weil, Esq.
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March 2013

Spanish Court Condominium Association II vs. Carlson (Illinois)

Spanish Court Two filed a two-count Complaint for Possession of Condominium Unit and Assessments in the Nineteenth Judicial Circuit Court of Illinois against unit owner, Lisa Carlson and all Unknown Occupants. Based on Carlson’s failure to pay her association assessments, the association sought in of its Complaint the possession of Carlson’s condominium unit pursuant to the association’s Declaration of Condominium Ownership and of Easements, Restrictions and Covenants for Spanish Court II Condominium Development. Count II of the Complaint also sought possession, as well as monetary damages for breach of contract, in the amount of unpaid common expenses, late charges, interest and fines and attorneys’ fees. The Court granted the Association’s motion to sever the Counterclaim and to strike the affirmative defenses as not “germane” to the issue of possession.

On appeal, Carlson contended that the trial court had erred by striking her affirmative defenses and severing her identical counterclaim. In largely reversing the circuit court’s treatment of Carlson’s affirmative defenses and counterclaim, the Appellate Court made new law: that, in answer to community associations’ forcible entry and detainer complaints for possession based on unit owners’ unpaid assessments, defendant unit owners could now assert as a “germane” defense to possession their associations’ purported neglect of maintenance and repair obligations. The Appellate Court thereafter made only limited modifications to its Opinion in connection with its denial of the association’s subsequent petition for rehearing.

On March 6, 2013, an amicus brief submission was filed with the Illinois Supreme Court on behalf of CAI’s Illinois Chapter. The brief was filed with the intent to assist the court in its consideration of Spanish Court by placing the appellate court’s decision and ruling, which expanded the definition of “germane” under the Forcible Entry and Detainer Act, in a more complete context, including a discussion of the ramifications of the ruling on Illinois community associations. In late March 2013, leave was granted for CAI Illinois Chapter to file its brief. On September 17, 2013, the Illinois Supreme Court heard oral arguments in the case. In March of 2014, the Court ruled in favor of CAI’s position.

Brief: CAI's Amicus Brief
Prior Ruling: Appellate Court Decision
Status:
Ruling for CAI's Position
CAI Amicus Brief Author:
Arnstein & Lehr LLP
CAI Amicus Brief Review Committee: Michael Karpoff, Esq; David Ramsey, Esq; Stephen Marcus, Esq; Gary Kessler, Esq; Steven Sugarman, Esq.

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