Monday, November 25, 2013

Do Not Neglect the Association During the Developer Control Period

[NOTE: This article first appeared in the Spring 2012 Edition of Hyatt & Stubblefield, P.C.'s "Community Developments"]
When there are just a few residents in the community, it is easy to overlook the homeowners or condominium association.  Many developers think that, if there is nothing or nothing much for the association to do, the association does not have to hold meetings, enter into contracts, or otherwise be operational.  While the developer is still in control of a project and the association, and will be for quite some time, why bother?  This approach is a recipe for disaster.  While developers may perceive their biggest risk as a weak real estate market, it actually can get worse if the developer, and in some cases, the developer representatives personally, have to face lawsuits for mismanaging the association.
The association is a separate legal entity with its own board of directors and legal requirements and must be treated as such from the date that the first lot is sold.  Association operations may be minimal for a period of time (years even), but that does not mean that observing required corporate formalities may be neglected.  Among other requirements, the association must hold meetings of its board of directors as frequently as the documents or state law require; must also hold an annual meeting of the members; and, most importantly, must prepare and pass a budget and levy assessments for the subsequent fiscal year.
If you would like more information on the developer's obligation with respect to the operation of the association or need assistance in developing an operational roadmap, please contact us.

Thursday, November 21, 2013

Social Host Alcohol Liability

[NOTE: This article first appeared in the Fall 2011 Edition of Hyatt & Stubblefield, P.C.'s "The Client Letter"]
If someone has too much to drink at a social function hosted by a community association or private club and then the person causes property damage or injury or death to a third party due to his or her intoxicated state, can the association or club (the host) be liable for the injury or damage?  The answer may vary depending upon whether the host is licensed to sell alcohol.  Persons and establishments that are licensed to sell alcohol may have liability under what are called "dram shop" laws.  Licensed vendors are generally well aware of the rules that govern their business, so dram shop liability is not the subject of this article.  Instead, the focus is on the social host that does not sell alcohol but serves alcohol at a social function.
The laws vary from state to state, but the prevailing thought is a social host should not be liable for injuries to a third party since the act of the host serving the alcohol was not the cause of the injury but rather was the act of the intoxicated person.  The intoxicated person may be liable to the third party for the injury he or she caused, but the social host is generally not liable to the third party.
There are two common exceptions to this general rule, however.  In many states, the social host may be liable for third party injuries if alcohol was served or otherwise made available at the event to a minor or to a person that had obviously had too much to drink.  At least one state will not impose third party liability unless the social host knew that the intoxicated person would soon be driving, but most states do not make that distinction.  So what can an association do to protect itself from social host liability for serving alcohol?  Here are a few recommendations:

Monday, November 18, 2013

Don't Rush to Make Changes in Club Membership Structures

[NOTE: This article first appeared in the December 2010 Edition of Hyatt & Stubblefield, P.C.'s "The Client Letter"]
A great many clubs are having a difficult time selling memberships in these economic times.  In many cases, they have a lot of unsold inventory.  At the same time, the club might be experiencing an expanding resale wait list.  As a result, clubs are trying to think of creative ways to invigorate their sales programs to generate new interest or to tap into a new market.
If your club is considering making a change in the membership structure or offering new types of memberships or new membership arrangements, we encourage you to obtain legal advice before making any changes to ensure that the new structure or offering is permitted by the club documents and is structured to avoid inadvertently creating securities problems.
Depending upon how they are structured and marketed, the offering of club memberships can be considered a securities offering under state and/or federal laws, requiring registration of the offering with state or federal authorities unless an exemption is available.  Failure to comply can result in significant liability for the club and those involved in the sale of unregistered securities.  

Thursday, November 14, 2013

Due Diligence for Planned Community Acquisitions

[NOTE: This article first appeared in the Summer 2013 Edition of Hyatt & Stubblefield, P.C.'s "Community Developments"]
Now that sales of homes and condominium units are picking back up, developers are once again looking for development opportunities.  Sometimes a better deal can be made by buying a partially completed development rather than starting from scratch and assembling raw land.  However, buying into an existing development can bring risks and obligations as well.  A prudent buyer always conducts research and analysis of a proposed real estate acquisition, but purchasing unsold inventory in a planned community or condominium project may require additional research beyond what is normally done when acquiring raw land for future development.  This is particularly true where the seller is a lender who acquired the property through foreclosure.  This article outlines a few of the issues to be examined.

Monday, November 11, 2013

Is Your Senior Housing Community Legal?

The news is full of reports about the enormous rise in the senior population as baby boomers begin to reach retirement age.  The population of seniors is projected to grow at a faster rate than the total population of the United States in the coming years.  Therefore, it is not surprising that many developers are building housing that is geared towards and marketed to seniors.  However, many developers are marketing their products in a manner that violates the Federal Fair Housing Act.

Thursday, November 7, 2013

Applicability of New ADA Regulations Affecting Pool Facilities Revised and Extended

[NOTE: This article first appeared in the Spring 2012 Edition of Hyatt & Stubblefield, P.C.'s "Community Developments"]
Last fall we reported that the U.S. Department of Justice ("DOJ") issued revised regulations for the Americans with Disabilities Act ("ADA") that included new accessibility standards (the "2010 Standards").  Prior to the 2010 Standards, the regulations provided that new construction and alteration of existing construction had to meet the building codes and standards applicable at the time of the alteration or construction.  A facilities owner did not have to "retrofit" or comply with newer standards unless they were building new facilities or modifying the existing facilities. 
Under the 2010 Standards, however, recreational facilities that are considered to be "public accommodations" may have to comply with the barrier removal requirements of the new regulations if it is "readily achievable" to do so.  While there is no hard and fast rule, "readily achievable" means easily accomplished without much difficulty or expense.
There is a "safe harbor" provision with respect to the obligation to modify some facilities, but the 2010 Standards provide that facilities for which no previous standards existed do not fall within the "safe harbor" provision.  Specifically identified as not falling with the safe harbor of the 2010 Standard's are swimming pools, wading pools, and spas.

Monday, November 4, 2013

HUD Charges Homeowners Association with Discrimination

[NOTE: This article first appeared in the Fall 2011 Edition of Hyatt & Stubblefield, P.C.'s "The Client Letter"]
The U.S. Department of Housing and Urban Development ("HUD") filed charges against a homeowners association and its property management company for refusing to accommodate a veteran who required an emotional support dog due to a disability resulting from his war service.  The Fair Housing Act makes it unlawful to make reasonable accommodations in rules, policies, practices or services when such accommodations may be necessary to afford persons with disabilities equal opportunity to use and enjoy a dwelling.
According to the HUD charges, the association required the disabled resident to pay a $150 registration fee for the dog, provide proof of liability coverage, and sign a medical release for the association to obtain his medical records.  The resident provided medical documentation of his need for the assistance animal and obtained liability insurance, but he refused to give the association access to his medical information or to pay the registration fee.  The association then began levying fines against the unit for non-payment of the registration fee.  HUD asserts that the Fair Housing Act requires that reasonable accommodations be made to no-pet rules for persons with disabilities who need support animals.  HUD also asserts that requiring a disabled person to pay a registration fee for a service animal, obtain liability insurance, or provide access to medical records is prohibited by the Act.  The case is currently pending.

Thursday, October 31, 2013

FHFA Publishes Final Rule on Private Transfer Fee Covenants

[NOTE: This article first appeared in the Spring 2012 Edition of Hyatt & Stubblefield, P.C.'s "Community Developments"]
Last summer we reported that the Federal Housing Finance Agency (FHFA) had moved beyond proposed "guidance" and had proposed a final rule in its effort to restrict Fannie Mae and Freddie Mac and all federal home loan banks from purchasing mortgages on properties in communities with "private transfer fee covenants." 
The proposed guidance broadly construed the term "private transfer fee covenant" to include essentially any kind of transfer fee payable on successive transfers of property regardless of who collects the fee or the intended use of the fee.  This would have adversely impacted many communities with covenants that provide for collection of such fees as contributions to working capital or capital reserves, for community enhancement, or to fund nonprofit entities organized to promote cultural, educational, environmental conservation, historic preservation, and similar purposes.
FHFA's proposed final rule purported to exempt transfer fees paid to homeowner associations to be used for the direct benefit of the community.  However, the language of the proposed final rule created numerous practical and interpretative issues reflecting a lack of understanding as to how such fees are really used.  Due to the difficulty of determining when a transfer fee qualified for the exemption, the proposed final rule would have created major problems for financing of home purchases in communities with transfer fees.

Monday, October 28, 2013

Georgia Imposes Restrictions on Transfer Fee Covenants

[NOTE: This article first appeared in the Summer 2013 Edition of Hyatt & Stubblefield, P.C.'s "Community Developments"]

Georgia recently adopted a statute which prohibits the imposition of a non-exempt restriction or covenant running with the land on real property which obligates the seller or purchaser of the real property, or their heirs, successors, or assigns, to pay a fee in connection with the transfer of such property to the person establishing the restriction or covenant or to a third-party (often called a "transfer fee covenant").  A transfer fee covenant, however, may be imposed under limited circumstances.  The statute makes only new non-exempt transfer fee covenants created on or after July 1, 2013 void and unenforceable and does not affect existing transfer fee covenants.
The prohibition does not apply to a restriction or covenant running with the land that requires the fee to be paid in connection with the conveyance of property to:

Friday, October 25, 2013

Upcoming Event - CCR's and Easements for Commercial and Mixed-Use Projects

On November 7, 2013, 1:00-2:30 PM EST, David Herrigel will be presenting in a webinar entitled CCR’s and Easements for Commercial and Mixed-Use Projects, sponsored by Strafford Publications.

The  panel will provide real estate practitioners guidance for drafting effective easements and declarations of covenants, conditions, and restrictions (CCR's) for commercial and mixed-use projects, avoiding common pitfalls, and amending existing documents, offering perspectives and guidance on these and other critical questions:

  • What are the fundamental components of commercial or mixed-use CCR's?
  • What are some common, and potentially costly, drafting errors that attorneys make when drafting CCR's?
  • What are the best practices for drafting, analyzing, interpreting and amending CCR's?
After the presentations, the panel will engage in a live question-and-answer session with participants.

For registration information, please visit the Strafford Publications website.

Thursday, October 24, 2013

Wayne Hyatt Receives National Recognition

[NOTE: This article first appeared in the Summer 2013 Edition of Hyatt & Stubblefield, P.C.'s "Community Developments"]
The American College of Real Estate Lawyers (ACREL) awarded its prestigious Frederick S. Lane Award to Wayne Hyatt at its Mid-Year Meeting in Florida this past spring.  Jonathan R. Shils, President of ACREL, stated:  "The Frederick Lane Award is the highest honor the College can bestow.  The Lane Award has previously been given only seven times since the College was founded in 1978 to honor the career contributions of distinguished real estate lawyers who have selflessly served the profession, the College and their community.  In honoring Wayne Hyatt with the Lane Award, the College affirms these values by recognizing such a worthy recipient with this accolade from his peers."
Wayne served as President of ACREL in 2004.  His prior service to the organization included terms as President-Elect, Vice President, Secretary, and member of the Board of Governors; Chair of the Bylaws, Common Interest Ownership and Affordable Housing committees; and membership and leadership participation in over a dozen committees.  He was the driving force behind establishing ACREL Cares, a community service program. 
ACREL was founded in 1978 as a non-profit organization of lawyers who have gained distinction in the practice of real estate law.  The group devotes its efforts to improving the practice of real estate law around the country, and its membership consists of lawyers from 50 states, the District of Columbia, and the U.S. Virgin Islands.  It has become the nation's most prestigious peer selected organization for practicing real estate lawyers. 
Admission to ACREL is by invitation only.  This national legal real estate organization elects to its membership lawyers distinguished for their skill, experience and high standards of professional and ethical conduct in the practice of real estate law