This lawsuit was filed in 2018 by C Investments 2 LLC, a real estate developer in Charlotte North Carolina. The Plaintiff sued all the lot owners in a neighborhood called Country Colony in Mecklenburg County, North Carolina. Country Colony was established in 1952, and consisted at that time of 17 residential lots. A copy of the plat map for Country Colony is attached to this Executive Summary as Exhibit A. The developers of Country Colony, Henry Newson and Miriam Newson, recorded Protective Covenants for Country Colony, and all lots were sold subject to the Protective Covenants. A copy of the Protective Covenants is attached to this Executive Summary as Exhibit B. Country Colony continues to be a single-family residential neighborhood developed in accordance with scheme of development set forth by the Newsons in the Protective Covenants. However, Plaintiff acquired several of the lots in Country Colony and seeks to subdivide them and to construct substantial multifamily projects on the lots it owns.
The main issue advanced by the Plaintiff at the trial level, and the primary issue on appeal, is whether or not the North Carolina Marketable Title Act, N.C.G.S. § 478-1, et seq., ha extinguished a// the Protective Covenants other than the residential use restriction. Specifically, the Plaintiff successfully argued to the trial court that the Marketable Title Act extinguished all of the restrictions other than the residential use restriction, because none of the exceptions in the Act applied. We, representing a group of the Defendants, argued that the exception contained in N.C.G.S. § 478-3(13) protected all the scheme of development restrictions set forth in the Protective Covenants filed by the Newsons. The trial court agreed with Plaintiff and entered an Order granting Summary Judgment extinguishing the Protective Covenants, other than the "residential use only" covenant. Upon receipt of the Court's ruling, the Defendants we represent timely filed Notice of Appeal to the North Carolina Court of Appeals. The Record on Appeal has been filed and the Appellants' brief is due 6 January 2020.
North Carolina Court
of Appeals Opinion: Issued May 2021
Brief Author: H. Weldon Jones, III of Jordan Price
CAI Amicus Review Panel: Mr. Robert Diamond, Esq., Mr. Stephen Marcus, Esq., Ms. Hope Carmichael, Esq (NC), Mr. Clint Goodman, Esq. (AZ), Ms. Terry A. Kessler Esq. (NJ), Ms. Melissa Ward, Esq. (CA), and Mr. Scott Weiss, Esq. (TN)
Phoenix on the Bay II is a condominium created in 2007 ("Condominium") pursuant to the Alabama Uniform Condominium Act of 1991 ("Act") found at Ala. Code§§ 35-BA-101, et seq. (2014 Repl. Vol.). The Condominium is situated in a resort community on the Alabama Gulf Coast and consists of a free-standing house and one eight-story building with an attached parking garage, marina, and other amenities common in a coastal condominium. The Developer of the Condominium was three individuals, who have developed 18 other condominiums. Through "Affiliates," Developer develops, constructs, sells Units pre construction, and provides post completion rental and management services. Developer formed the Association in 2007 simultaneously with the creation of the Condominium to maintain, operate, and manage the Condominium common elements pursuant to the Act. The Association was managed by an Affiliate under a written Management Agreement from inception until May of 2015. Montgomery, along with her spouse, contracted with Developer to buy Unit 2G1 pre-construction. She has owned Unit 2G1 since shortly after completion of the Condominium. She has been President of the Association since May of 2015.
Undisputedly, Developer represented to pre-construction purchasers and all permitting agencies that the Condominium was restricted to single family use and would contain only 104 residential Units. An offering statement, along with all the exhibits thereto, inclusive of a proposed declaration with plats and plans, is a mandatory statutory disclosure required by Article 4 of the Act pursuant to which a developer must truthfully disclose the number of units that can exist within a condominium and any non-residential uses that could be made of units. Developer's offering statement and the proposed declaration, plats and plans attached thereto represented that the Condominium was to consist of 104 Units; that the Condominium was restricted to single family residential use; that ownership of the common elements was allocated to only 104 Units; and that any areas to be reserved were as indicated on the plats and plans attached thereto. The plats and plans did not indicate any reserved areas.
Despite the offering statement representations, Developer undisputedly intended at the time it issued the offering statement to ensure that its Affiliates could operate in the Condominium in perpetuity. Without any disclosure, Developer made changes to the Condominium building and declaration to convert common area to four commercial Units and included illegal easements for the purpose of reserving areas in the building for Affiliates to operate its condominium rental management business or such "other business" in perpetuity. Developer's conduct violated the Act in the following ways: the lack of timely and truthful disclosure violated Article 4; the changes purporting to create the four commercial Units shortly before recording the declaration failed to comply with Article 2 and caused internal conflicts within the document; the changes in the building resulted in violations of Article 3 regarding operations of the Association; and negated the Section 35-SA-305 power of an association to terminate service contracts entered into by a declarant in an effort to prevent a declarant from creating "sweetheart transactions" benefitting itself or its affiliates.
Developer thus effectively thwarted the ability of the Association to contract with a third-party management agent of its choice. Since Developer constructed critical infrastructure that a management agent must necessarily utilize and maintain to provide management services for the Condominium in these areas and claimed ·to reserve exclusively to the use of Developer either by illegal easements or as claimed commercial Units, it is practically impossible for the Association to hire another management agent with Developer/Affiliates occupying the areas from which a management agent would naturally stage its operations. To alter the status quo, the Association would be forced to recreate the spaces and relocate infrastructure needed for the operation and management of the Condominium at significant expense and further loss of common element space to the detriment of the Condominium as a whole. Further, Developer's conduct resulted in unresolvable conflicts within the declaration that make it impossible for the Association to efficiently and consistently manage and operate the Condominium. For example, the creation of commercial Units contradicts the residential use restriction imposed upon all Units; thus, the Association is uncertain in its ability to regulate uses of the property.
Litigation was filed shortly after termination of the Management Agreement by Affiliate asserting tort claims against Association and Montgomery for entering the check-in desk area. The Association/Montgomery counterclaimed and sued Developer and Affiliate real estate company pursuant to the Act, common law fraud, and equity seeking equitable relief in the form of declaratory judgment, injunction, and reformation that the four areas were common areas and not commercial units, that the Condominium was restricted to residential use only, and that the 2015 deed purporting to convey the spaces as commercial Units was a nullity. After a bench trial, the trial court ruled in favor of the Association and Montgomery and granted equitable relief that struck the provisions from the recorded declaration purporting to create perpetual easements or commercial Units, declared the 2015 deed a nullity, and permanently enjoined Developer/Affiliates from attempting to assert any rights appertaining the four areas at issue.
Supreme Court of
Alabama Opinion (Issued June 2021)
Brief Author: Steven Casey, Esq., of Jones Walker LLP
CAI Amicus Review Panel: Mr. Robert Diamond, Esq. (VA), Mr. Gary Daddario, Esq. (NH), Mr. Matthew Heron, Esq. (MI), Mr. Marc Markel, Esq. (TX), and Mr. Thomas Schild. (MD)
CAI Uniform Law Task Force: Mr. Robert Diamond, Esq. (VA), Mr. Stephen Marcus, Esq. (MA), Mr. David Ramsey, Esq. (NJ), Mr. Scott Sandler, Esq. (CT), Mr. Steven Sugarman, Esq. (PA), Mr. Anthony Rafel, Esq. (WA), and Mr. Marc Markel, Esq. (TX)
This issue presented in this case concerns when the Statute of Repose begins to run in a multi-phase condominium. The United States District Court for the District of Massachusetts has certified the following question to the Massachusetts Supreme Judicial Court:
“Where the factual record supports the conclusion that a building or developer was engaged in the continuous construction of a single condominium development comprising multiple buildings or phases, when does the six-year period for an action of tort relating to the construction of the condominium's common or limited common elements start running?"
The issue presented is of importance in the Commonwealth of Massachusetts and could potentially impact how other states interpret the date in which the Statute of Repose (Mass. Gen. Laws ch. 260, § 2B) begins to run in multiphase condominiums. The Massachusetts statute of repose provides that any action of tort for damages arising out of any deficiency or neglect in the design, planning, construction or general administration of an improvement to real property … [shall not] be commenced more than six years after the earlier of the dates of: (1) the opening of the improvement to use; or (2) substantial completion and the taking of possession for occupancy by the owner. The United States District Court held that a multiphase condominium continuously developed is not a series of improvements but one single improvement and as a result, the repose period starts running upon the completion of the entire improvement, as completion is defined in the statute.
This decision is beneficial for condominium associations as it provides them additional time to discover defects which may be latent and allows them to avoid the need to file multiple lawsuits arising out of the construction and development of multiple phases of one condominium, (i.e. six years after the completion of each phase). It also allows a condominium to capture or include in a construction defect suit earlier phases that may otherwise have been time barred, as sometimes the association will not discover the defects until more than 6 years after the completion of earlier phases. It also alleviates concerns about a board having to rush to file suit to beat the statute where the developer holds onto control of the association for years after the completion of certain but not all phases.
If this decision is reversed it would result in condominium associations being forced to file multiple suits on a phase by phase basis concerning identical construction defects. More importantly it would also be the first published decision of its kind in Massachusetts recognizing that the statute of repose on a phased project runs upon final completion of the entire project.
This decision if affirmed by the Massachusetts Supreme Judicial Court could also have bearing on how other courts and jurisdictions across the country interpret the running of statutes of repose in multi phased projects where there are latent construction defects.
Court: Massachusetts Supreme Judicial Court, Court Opinion
Topic: Statute of Repose
Brief Author: Edmund A. Allcock of Marcus, Errico, Emmer & Brooks, P.C. and Thomas O. Moriarty of Moriarty, Troyer & Malloy.
CAI Amicus Review Panel: Mr. Robert Diamond, Esq. (VA), Mr. Stephen Marcus Esq. (MA), Mr. Jeffrey Beaumont, Esq. (CA), Ms. Gabriella Comstock, Esq. (IL), and Ms. Sara Ross, Esq. (VA)
A purchaser of a foreclosed unit sued in DC Superior Court to quiet the title of a unit. The lender/servicer (New Penn Financial) removed the matter to federal court and filed a 3rd Party Complaint against, the Condo Association (Langston Lofts) alleging that the Association failed to obtain the consent of FNMA as per HERA. FNMA is not a party to the litigation. The lender then filed a Motion for Summary Judgment on the sole grounds that HERA trumps the non-judicial foreclosure provisions of the DC Condo Act that provide the Association with a superior lien. The association argues that HERA does not apply because Freddie Mac transferred all risk of loss to the loan servicer so that there is no federal interest at risk and that HERA does not preempt the D.C. Code under the Supremacy Clause because federal and state law operates in harmony without conflict. It is crucial the court understands that community associations provide essential services that benefit homeowners and lenders and require financial stability with effective remedies to recover unpaid assessments. Community associations are self-governing organizations that provide essential services benefiting homeowners and lenders. Homeowners fund associations and rely on effective and timely means to collect unpaid assessments to operate with financial stability.
Court: United States District Court for the District of Columbia
Topic: Super priority lien
Brief Author: Katherine J. Seiklay, Esq. and Robert M. Diamond, Esq., CCAL of Reed Smith, LLP and Marvin J. Nodiff, Esq., CCAL.
CAI Amicus Review Panel: Mr. Robert Diamond, Esq. (VA), Mr. Stephen Marcus Esq. (MA), Mr. Gregory Cagle, Esq. (TX), Ms. Karyn Kennedy Branco, Esq. (NJ), Mr. Kimball A. Forbes, Esq., (UT), Mr. Thomas Morarity, Esq. (MA), and Mr. Steven Sugarman, Esq. (PA)
This lawsuit was filed in 2018 by Wade and Margaret Williams and several of their neighbors to enforce the protective covenants in their Eastover neighborhood in Charlotte, North Carolina. The Plaintiff sued all the lot owners in a neighborhood called Eastover in Mecklenburg County, North Carolina. Eastover was established in 1952. and consisted at that time of 17 residential lots. However, Defendants acquired a lot in Eastover and seeks to violate the scheme of development.
The main issue advanced by the Defendants at the trial level, and the sole issue on appeal, is whether or not the North Carolina Marketable Title Act, N.C.G.S. § 478-1, et seq., ha extinguished a// the Protective Covenants other than the residential use restriction for Eastover. Specifically, the Defendants successfully argued to the trial court that the Marketable Title Act extinguished all of the restrictions other than the residential use restriction, because none of the exceptions in the Act applied. We argued that the exception contained in N.C.G.S. § .478-3(13) protected all the scheme of development restrictions set forth in the Protective Covenants. The trial court agreed with Defendants and entered an Order granting Summary Judgment extinguishing the Protective Covenants, other than the "residential use only covenant. A copy of that Order granting Summary Judgment is attached hereto as Exhibit C. Memoranda in Support of the Defendants Motion for Summary Judgment, and in Opposition to the Defendants' Motion for Summary Judgment were filed, and are attached hereto as Exhibits D & E. Upon receipt of the Court's ruling, the Plaintiffs and other timely filed Notice of Appeal to the North Carolina Court of Appeals. The Record on Appeal has been filed and the Appellants' brief is due 3 August 2020.
The one appellate issue on appeal is does the exception to the real property Marketable Title Act contained in N.C.G.S.§ 478-3(13), protect all of the restrictive covenants imposed for Eastover under the common scheme of development, or does it merely protect the residential use only restriction.
The Court's ruling, if upheld will adversely affect every neighborhood association in the State of North Carolina. The trial Court's Summary Judgment decision would effectively allow developers to avoid the protective covenants for most planned communities in North Carolina, except for the residential use restriction. The elimination of single-family restrictions, setback restrictions, height restrictions, and the numerous other standard restrictions which form the scheme of development for most neighborhoods in North Carolina are at risk if this opinion is upheld by the Court of Appeals. No appellate court in North Carolina has ruled upon the issue presented in this case, so this will be a landmark decision affecting the practice a real estate in the State of North Carolina from Murphy to Manteo. It is extremely important that the judge's decision be reversed, and the exception to the Marketable Title Act be interpreted to include all the restrictive covenants set forth in the scheme of development of each neighborhood. We believe strongly this was intent of the drafters of the legislation. This has been confirmed by conversations with the leading proponent of the legislation. The trial courts in North Carolina have differed on this issue, so it is ripe for Appellate determination to settle the law in the State of North Carolina.
North Carolina Court
of Appeals Opinion (Issue June 2021)
Court: North Carolina Court of Appeals
Topic: North Carolina Marketable Title Act/Protective Covenants
Brief Author: H. Weldon Jones, III and Hope Derby Carmichael of Jordan Price Wall Gray Jones & Carlton PLLC
CAI Amicus Review Panel: Mr. Robert Diamond, Esq. (VA), Mr. Stephen Marcus Esq. (MA), Mr. Ed Allcock, Esq. (MA), Mr. Kenneth Chadwick, Esq. (VA), Ms. Mary Howell, Esq. (CA), Mr. Randall Lipshutz, Esq. (GA), Mr. Stefan Richter, Esq. (PA), and Patrick Whelan, Esq. (AZ)
This case was initiated as an action for declaratory judgment filed by Plaintiff Lori Postal in the Superior Court of Buncombe County, North Carolina. In 2017, Ms. Postal purchased a parcel of undeveloped real property in Asheville, NC located in a residential subdivision known as "Beaverlake Heights." The Beaverlake Heights subdivision was created in the late 1950s and is subject to a set of Restrictive Covenants recorded in the Buncombe County Registry. These restrictive covenants provide, among other things, that real property located within the subdivision be used solely for residential purposes, be limited to single family dwellings not to exceed two and half stories, etc. The restrictive covenants also contain setback restrictions for all buildings and provide that no residential structure shall be places on any lot having an area of less that 15,000 square feet. A complete copy of the restrictive covenants at issue are provided in these materials.
The undeveloped lot purchased by Ms. Postal is smaller than the minimum lot requirement, and she has filed this lawsuit against all other property owners in the subdivision seeking to have the restrictive covenants declared invalid. Ms. Postal filed a Motion for Partial Summary Judgment on the grounds that the North Carolina Marketable Title Act, N.C.G.S. 47B-l et seq., operates to invalidate all restrictive covenants other than the one limiting her property to residential use because the restrictive covenants do not appear in her 30-year chain of title. The trial court granted summary judgment on these grounds and the Defendants have appealed this decision. In effect, this decision invalidates the entire set of restrictive covenants other than the one specifically limiting the property to residential use.
The issue in this case regarding the interpretation of the North Carolina Marketable Title Act is also involved in two other cases currently pending before in the Court of Appeals, C Investments 2, LLC v. Arlene Auger, et al., 18-CvS- 12903(Mecklenburg County), COA 19-976 and Williams et al. v. Readon et al., 18- CvS-15898(Mecklenburg County), COA 20-450. H. Weldon Jones, III has filed amicus curiae briefs on behalf of CAl in both of those cases advocating for our position, and we are requesting that he do the same in our case.
The only issue on appeal involves the proper legal interpretation of the North Carolina Marketable Title Act. Specifically, it is a question of how broadly or narrowly to interpret the statutory exception which provides that restrictive covenants are not affected or extinguished by the operation of the Act.
The Defendants-Appellants are advocating for a broad interpretation of the statutory exception regarding restrictive covenants. Briefly, this argument is that all restrictive covenants which form a general or uniform scheme of residential development are valid and enforceable, regardless of whether the covenants appear in Plaintiffs 30-year chain of title.
The Plaintiff-Appellee is advocating for a narrow interpretation of the statutory exception regarding restrictive covenants. Briefly, this argument is that the North Carolina Marketable Title Act operates to invalidate all restrictive covenants, other than the one specifically limiting the property to residential use, because the restrictive covenants do not appear in her 30-year chain of title.
If the Plaintiff-Appellee's narrow interpretation of the North Carolina Marketable Title Act is adopted by the Court, this will have the effect of seriously limiting the validity and efficacy of restrictive covenants throughout the entire state. Many neighborhoods and residential developments will have existing covenants called into doubt and in many cases these covenants will become unenforceable. Further, the usefulness of restrictive covenants to help future community associations plan and develop will be negatively impacted.
Topic: Marketable Title Act
Brief Author: H. Weldon Jones, III, Esq. of Jordan Price
CAI Amicus Review Panel: Mr. Robert Diamond, Esq. (VA), Mr. Stephen Marcus Esq. (MA), Mr. Darren Bevan, Esq (CA), Mr. Gary Daddario, Esq., CCAL (NH), Mr. Matthew Heron, Esq. (MI), Mr. Marc Markel, Esq., CCAL (TX), and Mr. Thomas Schild, Esq, CCAL (MD)
This request is the same case for which the Committee approved an amicus curiae brief on April 25, 2019. The first appeal was remanded by the Colorado Court of Appeals to the District Court due to the lack of a final judgment. This request pertains to the second appeal after additional orders entered after remand.In 1987, the Town of Vail enacted an Ordinance zoning the Village Inn Plaza Development. Under such Ordinance, the owners of the property within the Village Inn Plaza Development agreed to convey Unit 2 of the Village Inn Plaza Development to the Town of Vail with no use restrictions. Under §11(6) of the Ordinance, all new condominium units were to “remain in the short-term rental market to be used as temporary accommodations available to the general public."Village Inn Plaza-Phase V Condominium Association (the "Association" or “Phase V") recorded a Declaration with restrictions similar to those in the Ordinance. The Association later adopted Amended Policies, Rules, Regulations and Guidelines (the "Amended Rules") stating that it would not enforce §11(6) of the Ordinance.The requestor has asked CAI in its amicus brief to appeal to this Court affirm the District Court's ruling in this matter. Colorado protects its citizens' property rights. A real property owner has the right to use property within reasonable private restrictions set forth in private easements and covenants, as well as through public restrictions established by zoning ordinances and building codes.Ownership of real property in the condominium form of ownership is a protected property right in Colorado. When it adopted CCIOA in 1991, the 06953893.DOCX;1 3 General Assembly recognized the need to protect condominium properties by explicitly forbidding discrimination against the condominium form of ownership. Because the Town of Vail's ordinance at issue in this case discriminates solely on the basis of ownership of real property as a condominium, the District Court acted properly in dismissing Vail's Amended Cross Claim.This is an important case for CAI to submit a second amicus brief in, and for Colorado community associations, developers, and owners. A published decision in favor of the Town of Vail would impair protected property rights, condone discrimination against the condominium form of ownership, and harm condominium owners and community associations throughout Colorado. The public policy of Colorado, the legislative declaration for CCIOA, as well as specific CCIOA provisions, all prohibit the discriminatory legislation embodied by the Vail ordinance.Several arguments were made in the first amicus brief that will be re-argued in the second brief, if approved. These arguments include that CCIOA applies to the Town's attempts to enforce the Vail ordinance, the ordinance discriminates against the condominium form of ownership, and the fact that CCIOA is unambiguous and there is no basis for relying upon the drafters' comments. This brief will allow our industry to appeal to the Colorado Court of Appeals that CAI advocated for the passage of CCIOA in 1991 because the Act conferred important rights in Colorado and established a uniform legal framework for its operation and that our industry still respectfully urges the Court to affirm the Trial Court's orders and judgments.
Amicus Brief Court: Colorado Court of AppealsTopic: Colorado Uniform Common Interest Ownership Act
Brief Author: David A. Firmin and William H. Short, both of Altitude Community Law P.C.
CAI Amicus Review Panel: Mr. Robert Diamond, Esq. (VA), Mr. Stephen Marcus Esq. (MA), Mr. Jeffrey Beaumont, Esq (CA), Ms. Sara Ross, Esq., (VA), Ms. Gabriella Comstock, Esq. CCAL (IL) and Mr. David Eldridge, Esq. (NY)