Friday, February 3, 2017

Club Members Cannot be Forced Into Giving Up Contractual Rights

By Janet L. Bozeman, Esq.

Hirsch v. Jupiter Golf Club LLC, No. 13-80456-CIV (S.D. Fla. Feb. 1. 2017), provides a cautionary tale for clubs looking to restructure their membership options:  tread lightly on existing members' rights.  It is possible to restructure a membership program, but care must be taken not to breach existing membership agreements.  Where the club owner does not have the right to alter existing membership rights, members may be offered incentives in exchange for giving up membership rights, but a change in membership rights cannot be forced on the members.  

Tuesday, May 3, 2016

Law Unsettled on Liability for Post-Chapter 13 Association Assessments

By:  Janet L. Bozeman

If a condominium unit owner files for bankruptcy protection under Chapter 13 of the Bankruptcy Code and continues to own the unit, should the owner be responsible for future assessments by the condominium association?  Most people would say, "Yes."  After all, why should the unit owner reap the benefit of the association's maintenance and insurance and, in some cases, the provision of services and utilities to the unit for free?  Unfortunately, that is the result in some jurisdictions where the bankruptcy courts have relieved the unit owner of assessment responsibility.

State condominium law generally creates two types of liability for association assessments – the personal liability of the unit owner and the in rem liability (property liability) of the unit.  The unit's in rem liability means that the association has a lien against the unit for unpaid assessments.  The owner's personal liability means that the association can sue the owner to obtain a money judgment.  Once a money judgment is obtained, the association may pursue any of the owner's assets to satisfy the judgment, including garnishing the owner's bank accounts and wages.

The bankruptcy courts are in agreement that a Chapter 13 bankruptcy does not affect the association's assessment lien against the unit.  However, there is a split in authority among bankruptcy courts as to whether a unit owner remains personally liable for assessments by a condominium or homeowners association after the owner completes a Chapter 13 bankruptcy plan.  A Chapter 13 bankruptcy allows the owner/debtor to create a plan for paying all or a portion of his or her pre-bankruptcy debts.  The plan must be approved by the bankruptcy court and may include discharging or relieving the debtor of responsibility for some pre-bankruptcy debts.

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.