Posts Tagged ‘Condominium’

Leasing Limits Conflict with HUD Lending Rules

December 11, 2014

Today this Connecticut-area condo lender posted some interesting analysis about HUD Lending and Lease restrictions.   The gist of the article is that the lender has seen some situations where the FHA has held that condo leasing restrictions violate HUD’s restrictions on free transfer of property.  Because these HUD guidelines are federal, they would apply across the country, even here in Idaho.

The entire post is worth reading.  It outlines why sometimes a condo association’s leasing restrictions can overstep what is permitted and thereby jeopardize the HUD-financing availability for an entire project.   For that reason, it suggests sticking to the specific limits authorized by HUD, and asserting nothing more:

In 2011, FHA announced that certain leasing restrictions are allowed.  This was made permanent by the Condominium Project Approval and Processing Guide (page 26).  Basically, it allows associations to

  • Set minimum and maximum lease terms
  • Require copies of leases and that they be in writing
  • Request the names of the tenants
  • Require that the leases conform to the legal documents, and
  • Set a maximum number of units that may be leased at any time.

I think I’ll keep an eye out for updates from this blog.  Good post!

Florida’s Freeway to Foreclosure

February 7, 2013

In a move that would recognize the value HOAs and condo associations add to their communities, Florida is considering a bill that would fast-track association foreclosures.  This would get defaulting/nonpaying owners and slow-to-foreclose banks out of the picture faster and allow the community to ensure that properties are marketable.  Hopefully the result would be a decrease in unkempt, deserted properties stuck in legal limbo for months and years.

It will be interesting to see how it all plays out.  There are some that challenge whether it is fair to require the owner to pay all back assessments in order to challenge the assessment foreclosure in court.  It seems to me that the law should simply distinguish between regular assessments and special assessments, for which the owner had title notice and should pay, and any limited assessments or fines piled on top of that.

Ranking: Brevard top U.S. spot for buying a foreclosure

 

http://www.orlandosentinel.com/business/os-overdue-hoa-bills-20130206,0,2306446.story

 

Arbitration Clauses Binding On HOAs In California (!?)

August 23, 2012

Courts: The Judicial Branch of California

On August 16, the California Supreme Court issued a ruling in Pinnacle Museum Tower Association v. Pinnacle Market Development (US), LLC, et al.  that could affect Idaho HOA cases and others here in the Ninth Circuit as well.  It could effectively strip the right to jury trial from condominium owners and associations.

As the Court summarized:

Petition for review after the Court of Appeal affirmed an order denying a motion to compel arbitration in a civil action. This case presents the following issues: (1) Is a homeowners association bound by an arbitration provision contained in the covenants, conditions and restrictions for a common interest development that were executed and recorded prior to the time the association came into existence? (2) Did the Court of Appeal err by applying the state law doctrine of unconscionability only to the arbitration provision, and not to other provisions in the covenants, conditions and restrictions, in light of federal law prohibiting the application of state law to treat arbitration provisions differently from other provisions of the same agreement? (See Allied-Bruce Terminix Cos. v. Dobson (1995) 513 U.S. 265.)

Historically, many have argued against the application of arbitration clauses to HOAs.  A developer creates the HOA, after all, and drafts the CC&Rs, representing both his own interests and (to a much lesser extent) those of the future HOA.  The future owners and future association have little or no say in any of the terms that the developer inserts into the CC&Rs.  As a result, many courts have found that it would be unconscionable to enforce arbitration clauses against the party that had no representation in the drafting of the documents.

The Pinnacle opinion held, to the contrary:

…even though the association did not exist as an entity independent of the developer when the declaration was drafted and recorded, it is settled under the statutory and decisional law pertaining to common interest developments that the covenants and terms in the recorded declaration reflect written promises and agreements that are subject to enforcement against the association.  We conclude that the arbitration clause binds the association and is not unconscionable.

What is interesting for those of us outside of the Golden State is that the California Supreme Court based its opinion on provisions in the Federal Arbitration Act.  The same federal provisions would apply to any state.  In particular, the Court held:

…the FAA pre-empts state laws which ‘require a judicial forum for the resolution of claims which the contracting parties agreed to resolve by arbitration…Likewise, the FAA precludes a court from construing an arbitration agreement “in a manner different from that in which it otherwise construes nonarbitration agreements under state law.  Nor may a court rely on the uniqueness of an agreement to arbitrate as a basis for a state-law holding that enforcement would be unconscionable, for this would enable the court to effect what . . . the state legislature cannot.

I will leave it to the courts and legal scholars to analyze the strength of California’s analysis.  However, if the arguments relied on by this Court are seen as persuasive, we may be seeing a major shift in how condominium and association construction defects are handled across the country.

Thanks to California’s Miller Law Firm for summarizing the decision.