Skip Ribbon Commands
Skip to main content

Committee Activity 2020

January 2020

C Investments 2, LLC v. Arlene Auger, eta/. 18-CVS-12903- COA 19-976

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.

Amicus Brief

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)

April 2020

Brett/Robinson Gulf Corporation v. Phoenix on the Bay II Owners Associations, Inc.

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.

Amicus Brief

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)

D'Allesandro et al v. Lennar Hingham Holdings, LLC

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.

Amicus Brief

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)

May 2020

Wonder Twins Holdings, LLC, v. Daniel Kanter, et al.

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.

Amicus Brief

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)