Archive for 'Real Estate'
The Perils of Covenant Enforcement!
Posted on 04. Aug, 2011 by briankoeberle.
Most planned communities in Pennsylvania are governed by a set of restrictive covenants that govern the use of each individual lot owner’s property. Covenant enforcement can fall on the homeowners association, as well as individual lot owners if they so choose. A recent Commonwealth Court of Pennsylvania decision, Big Bass Lake Community Association v. Warren, sheds some light on the perils of overreaching by some associations in covenant enforcement.
In the Big Bass Lake case, lot owners began a landscaping project in front of their property that included a stone retaining wall approximately 2 feet high and 50 feet long, and a raised ground planter. Shortly after the project began, a representative of the homeowners association informed the lot owners that the landscaping and stone wall interfered with the Association’s utility easement and road right-of-way in violation of certain restrictive covenants. When the lot owners refused to remove the stone wall and landscaping, the Association sued. The trial court issued a permanent injunction and ordered the lot owners to remove the landscaping and stone wall. The trial court found that the landscaping and stone wall violated the Association’s utility easement and right-of-way in violation of the restrictive covenants in question.
On appeal, the Commonwealth Court concluded that the trial court erred in granting a permanent injunction. The Court also held that the Association had failed to show a clear right to injunctive relief due to the fact that the Association had not proven a violation of the cited covenants. The Court concluded that the covenants did not prohibit landscaping projects within the utility easement, and did not prohibit the lot owners from using the road right-of-way, as the covenants specifically gave lot owners in the development the right to use the roads.
Homeowners Associations might want to take note that covenant enforcement should be narrowly tailored to avoid both costly litigation and big headaches.
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Collecting Delinquent Homeowners Association Fees!
Posted on 26. Apr, 2011 by briankoeberle.
Homeowners association fees and assessments are the lifeblood of private residential communities. In today’s economy, many HOA’s are faced with increasing delinquencies in their respective communities. However, if your HOA isn’t vigilant about collecting delinquent assessments, the other owners end up having to pick up the slack. If the situation goes on too long, home values and resale of units begin to suffer, as the HOA becomes short of funds necessary for the upkeep of the community. Common areas become run down, roads deteriorate, and essential services like snow removal, security and garbage pickup suffer. Equally important, lenders are avoiding communities with high delinquency rates. Freddie Mac, Fannie Mae and the FHA are all refusing to write new mortgages in communities where more than 15% of owners are delinquent in HOA fees.
So what is an HOA to do to collect delinquent fees from “deadbeats”? Look to both Pennsylvania common law, as well as the statutory authority of the Uniform Condominium Act (UCA) or the Uniform Planned Community Act (UPCA), for relief. PA courts have long held that owners of property in private residential communities have an implied obligation to pay their fair share for the upkeep of the roads and other common areas of the development.
The UCA and UPCA both give HOA’s statutory authority to collect assessments and fees from all property owners. The Acts create a “statutory lien” against the property of a delinquent homeowner, which can be “foreclosed in a like manner as a mortgage in real estate”. However, the association’s lien for unpaid assessments is extinguished unless proceedings to enforce the lien are instituted within three years after the assessments become due. Another option for the HOA is to file a breach of contract claim against the delinquent homeowner, which is subject to a 4-year statute of limitations. So insist that your HOA collect all delinquent dues in a timely manner!
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Turn Over of Control in Planned Communities under the UPCA!
Posted on 18. Dec, 2010 by briankoeberle.
Many homeowners today are living in planned communities governed by a homeowners association (“HOA”) and subject to the Uniform Planned Community Act (“UPCA”). Typically the developer, otherwise known as the declarant, initially controls the HOA and the common elements of the planned community. In order to prevent a developer from controlling the HOA, common elements, and lives of the homeowners into perpetuity, the UPCA provides for the turnover of control from the developer to the homeowners.
Section 5303(C) of the UPCA provides that “Any period of declarant control extends from the date of the first conveyance of a unit to a person other than a declarant for a period of not more than:
(i) seven years in the case of a flexible planned community containing convertible real estate or to which additional real estate may be added; and
(ii) five years in the case of any other planned community.”
Section 5303(C) further provides that “Regardless of the period provided in the declaration, a period of declarant control terminates no later than the earlier of:
(i) sixty days after conveyance of 75% of the units which may be created to unit owners other than a declarant;
(ii) two years after all declarants have ceased to offer units for sale in the ordinary course of business; or
(iii) two years after any development right to add new units was last exercised.”
The concept of mandatory turnover of control is also addressed in the Restatement Third, of Property (Servitudes) which provides that “After the time necessary to protect its interests in completing and marketing the project, the developer has a duty to transfer the common property to the association… .”
So, worse case scenario, a developer can only control the homeowners lives for no more than seven years. After that, you’re on your own.
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Fiduciary Duty of Homeowners Association Board Members
Posted on 09. Aug, 2010 by briankoeberle.
Many homeowners today are living in either planned communities or condominiums governed by homeowners associations (“HOA”). And some of these homeowners end up serving on the board of the HOA without any understanding of their fiduciary duty to the other homeowners. In short, a board member has a fiduciary duty of undivided loyalty to the association and its membership, and must avoid any conflict of interest or self-dealing. When acting as a fiduciary, a homeowner serves in a representative capacity, and must put the interests of the community first. Board members must also use sound business judgement and handle certain association matters and information with confidentiality. This includes a duty to also manage the financial and business affairs of the HOA with ordinary prudence. Concerning conflicts of interest, board members need to avoid even the appearance of impropriety. If a matter comes up before the board in which either the director or a family member has an interest, that director should immediately recuse himself or herself. Board members can breach their fiduciary duty by failing to perform the regular tasks involved in governing the association, such as holding regular meetings, keeping adequate financial and business records, properly collecting assessments, maintaining common areas, and adhering to the association bylaws. A breach of your fiduciary duty as a board members of the HOA can have legal consequences. Even if you unknowingly or unintentionally breach that duty, you may open yourself and the association up to a lawsuit by an aggrieved homeowner. Certain breaches of fiduciary duty can also negate any protection the HOA’s Officers and Directors liability policy may afford. Inexperienced board members of an HOA would be wise to consider consulting with the Community Associations Institute (www.caionline.org) on this issue.
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Resale of Units in Planned Communities
Posted on 28. Apr, 2010 by briankoeberle.
Many homeowners in Pennsylvania today are living in either planned communities or condominiums subject to either the Uniform Planned Community Act (“UPCA”) or Uniform Condominium Act (“UCA”). Prior to selling their home, such homeowners are required to furnish to the purchaser, prior to execution of a sales agreement, a copy of the declaration, the bylaws and rules and regulations of the association, and a certificate or resale. A certificate of resale in a planned community must contain numerous statements, such as in part:
- A statement disclosing any “right of first refusal” on the property.
- A statement pertaining to assessments for common expenses, including any unpaid common expenses and/or any special assessments due.
- A statement of any other fees payable by homeowners.
- A statement of any capital expenditures proposed by the association for the current and two next fiscal years.
- A statement of the amount of any reserves for capital expenditures and of any portions of those reserves designated by the association for any specified project.
- The association must also provide the current operating budget of the association, along with the most recent, regularly prepared balance sheet and income and expense statement.
The association has ten days after a request by a homeowner to furnish the certificate and copies of all documents necessary to enable the homeowner to comply with the law. A homeowner providing a certificate to a purchaser is not liable to the purchaser for any erroneous information provided by the association and included in the certificate. However, the purchase contract is voidable by the purchaser until the certificate has been provided and for five days thereafter or until conveyance, whichever occurs first.
Many homeowners associations are unprepared to comply with this request. However, as a seller do not let your association off the hook, and be adamant that they provide you with the resale certificate and copies of all relevant documents within the ten-day deadline. And potential buyers of property in a planned community, be leery of signing a sales agreement prior to receiving the certificate and supporting documentation from the seller. Remember, an educated and informed buyer is a smart buyer!
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Homeowners Associations Have the Upper Hand!
Posted on 01. Sep, 2009 by briankoeberle.
Mad at your homeowners association? Considering not paying your annual assessment pending resolution of the dispute? You might want to think twice. Homeowners Associations (HOA’s) have gained a lot of power under Pennsylvania Law in the past decade or so. Since the adoption of the Uniform Planned Community Act (UPCA) in 1997, Pennsylvania law now recognizes HOA’s as “mini-governments”, with the legal right to assess homeowners their proportionate share of the cost of upkeeping common areas such as roads, lakes, pools and clubhouses. And if you don’t pay your share? The UPCA provides for an automatic statutory lien once a homeowner becomes delinquent. The UPCA further provides that the HOA can foreclose on the property in the same manner as a delinquent mortgage. So it is really worth facing foreclosure proceedings over a spat with your HOA? Instead, settle the dispute, pay your fair share, then run for a board position with your HOA!
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Defective Subdivision Plans Can Create Future Headaches
Posted on 25. Aug, 2009 by briankoeberle.
Recently I settled a case involving a defective subdivision plan that should be of interest to homeowners living – or contemplating buying a home – in a recorded subdivision plan. The developer in question bought the residue of a rural residential resort property out of bankruptcy court in the mid 1970′s. In 1978 the developer created a new residential subdivision plan and subsequently recorded said plan in 1979. Shortly after recording the plan, the developer began to convey lots pursuant to a “revised” plan that had not been approved by the county planning commission and that did not match the original recorded subdivision plan. Fast forward to 2006. Upon surveying several residential lots in the plan, we uncovered major discrepancies in the metes and bounds descriptions of the lots conveyed by the developer in question. To complicate matters, conveyances by the original owner of the resort property were made pursuant to a number of “unrecorded” plans. The result was a number of overlaps in lots, as well as several lots that had been “double-sold” resulting in two owners laying claim to title to the property. The ultimate result of all of this was a cloud on the title of virtually every property owner in the development. We brought suit seeking injunctive relief to prevent the developer from engaging in any future development at the resort until such time as a revised subdivision plan correcting said deficiencies was approved by the planning commission and recorded as a subdivision plan in the recorder of deeds office. We ultimately settled the case by allowing the developer to file a “corrected” plan with the planning commission so long as any affected homeowners were given notice of said corrections to the original subdivision plan. So instead of having to file a “revised” plan pursuant to current subdivision regulations, the developer was permitted to simply correct any lot line discrepancies and match the prior conveyances to a “corrected” plan. The moral of this story? Make sure your attorney does his/her due diligence and compares the deed to the property you are buying with the recorded subdivision plan to insure that there are no discrepancies between what was conveyed and what is represented on the recorded subdivision plan.
