November 5, 2021
In property and construction disputes, it’s easy to allege wrongdoing. What separates a viable claim from mere allegations is the essential facts that can be proved. A favored type of evidence is any “admission” by an opposing party. Unless privileged or a settlement deliberation, a relevant party admission will get into evidence, leaving that party with the task of explaining it away. In real estate, many parties operate through managers, supervisors, realtors, brokers, employees, community managers, board directors, committee members, or attorneys. These agents can find themselves in the middle of acrimonious disputes.
October 21, 2021
Virginia statutes provide enforcement remedies giving community association leaders great power over their members. Sometimes such powers are misused by submission of inaccurate statements in a lawsuit, notice, lien or certificate that harms the reputation of the owner or interferes with sale to a purchaser.
May 20, 2021
On May 14, 2021, Virginia Governor Ralph Northam lifted the indoor mask mandate in light of updated CDC guidance. Governor Northam also declared that the indoor capacity restrictions and distancing restrictions will ease, effective May 28, 2021. The District of Columbia and neighboring states are also lifting restrictions, effective around the Memorial Day weekend.
May 13, 2021
Whenever a legal dispute seems intractable, many people want an agency or official to bring the power of the government to bear on their problem with their adversary. Aggrieved persons often try to exhaust such possibilities before retaining their own attorney. Regulatory enforcement through federal, state or local resources seems more attractive than expending one’s own.
April 28, 2021
People usually think of a “litigation settlement” as written, agreed terms signed by the parties. However, parties can become legally bound to oral or electronic settlement terms before the parties get to a formal writing or court order. Generally speaking, a contract to settle a lawsuit or other dispute does not require a signed writing to be binding. When settlement discussions culminate late at night or on the courthouse steps, the parties may be confused as to whether the exchange constitutes a binding agreement or a mere step towards a future agreement. When the parties agree upon a set of settlement terms, the legal work does not end there. Best practices call for the attorneys to properly reduce the agreement to a written agreement, so that its terms may be implemented and avoid the acrimony over what had been agreed to.
There have been recent judicial opinions about what constitutes a settlement agreement. In the 2019 personal injury case Cully v. Smith, the Circuit Court of Fairfax County found that although the parties had not signed a written instrument, they had entered into a binding agreement in the form of email exchanges between their lawyers regarding settlement of a personal injury case by payment of $610,000.00 in exchange for a dismissal. In Cully v. Smith, the insurance defense lawyer representing Todd Smith sent the plaintiff David Cully’s counsel an email stating, “Our last and final offer is $610,000. If not accepted before the settlement deadline of May 7 at noon, that offer is withdrawn and no further settlement will be considered.” Cully’s lawyer responded, “Mr. Cully accepted your below offer of $610,000 in full and final settlement of this case.” Next, the insurance companies sent $610,000.00 to the defense lawyers, who then told the plaintiff they would pay the money if provided with a written release of Smith, Smith’s employer and the insurance companies. Counsel to the Plaintiff Cully responded that the settlement only had two terms: (1) payment of $610,000 and (2) settlement of the civil suit. The insurance defense lawyers argued that the execution of a written release was customary in settlement of personal injury claims and ought to be included in understanding what the parties meant, or alternatively that the agreement was only “in principle” and ought not to be enforced by the court as to only those two terms because it wasn’t fully formed. The wording used in negotiations determines whether it is mere words discussing ideas about settlement or if the exchange constitutes an enforceable contract itself. So, if there is a preliminary settlement agreement, how does one know if it is binding or unenforceable? Some states such as Maryland (in the 2020 case 4900 Park Heights Ave. LLC v. Cromwell Retail 1, LLC) recognize four categories of “settlements in principle” as identified in the treatise, Corbin on Contracts:
- At one extreme, the parties may say specifically that they intend not to be bound until the formal writing is executed, or one of the parties has announced to the other such an intention.
- Next, there are cases in which they clearly point out one or more specific matters on which they must yet agree before negotiations are concluded.
- There are many cases in which the parties express definite agreement on all necessary terms, and say nothing as to other relevant matters that are not essential, but that other people often include in similar contracts.
- At the opposite extreme are cases like those of the third class, with the addition that the parties expressly state that they intend their present expressions to be a binding agreement or contract; such an express statement should be conclusive on the question of their “intention.”
According to this analysis, when an agreement to settle falls into the first or second categories, it is not yet enforceable, and the parties must finalize the terms before it becomes binding. For agreements that fall within the third or fourth categories, they do not require any additional formalization to be legally enforceable. Even if there is already a binding contract, the parties can agree to amend or restate it for whatever reason. While Judge David Oblon does not cite the Maryland case law outlining these categories, the settlement emails in the Cully v. Smith case would appear to fall within the third category. A settlement agreement is a “contract,” formed by “consideration” and “mutual assent.” Consideration is what is bargained for, i.e., a price, property, benefit to the party making the promise or the detriment to whom the promise is made. A promise that does not include anything bargained for in exchange isn’t a contract. Mutual assent is determined by the reasonable meaning of the parties’ expressions actually communicated to the other party. We typically think of this in terms of “offer and acceptance.” When one party communicates something that comes across as a clear, definite take-it-or-leave-it proposition, and that is accepted, then that creates a binding contract. An exchange of emails between lawyers (or the parties themselves) regarding settlement can result in an enforceable contract between the parties (without the necessity of later reducing that to a formal looking written agreement). Not all email exchanges accomplish this, because the wording of the exchanged communications matters. Generally speaking, attorneys have authority to bind their clients in matters dealing with the litigation, such as signing consent orders or submitting responses that may be deemed a party admission. However, in settlement negotiations, attorneys do not have implied authority – there must be express authority from the client to bind him under contract law. However, no authorization letter from the client is necessary. The client’s express authorization of the attorney may be inferred from the words or conduct of the attorney.
In the Cully v. Smith case, there was no apparent issue with the lawyers’ authority to negotiate the settlement. The defense attorney’s email was deemed a contractual “offer” because of how clear and unequivocal it was. His words manifested an intention for the recipient to have the power to accept it, because of the take-it-or-leave-it qualities. Courts are loathe to set aside formed contracts (even if oral or unofficial looking). There is a judicial presumption in favor of finding the contract not to be so indefinite or uncertain as to set it aside. The lawyer’s email included a specific dollar amount. The court observed that the term “settlement” unambiguously refers to ending of a suit or dispute by a compromise including specific compensation. By contrast, a “release” is an immediate relinquishment or discharge of the right of action. Both a release and a settlement preclude further suit regarding the resolved claim. Documents are often styled “Settlement and Release Agreement” or “Settlement Agreement and Release” because the insurers want the release and the claimant views the compensation as essential. Fairfax County Circuit Court ruled that the email exchange was binding and that the plaintiff was not required to provide the written release as an additional requirement to get the $610,000.00. Insurance companies are accustomed to getting things resolved the way they desire because they are the ones paying the money. Its common for plaintiffs, once they get to a certain point in the case and the promise of money is made, to be willing to sign what they are asked to sign when they are okay with the price. It’s not uncommon for the parties and lawyers to agree upon certain terms and then the lawyer for one side prepares a written agreement that fails to properly reflect the agreed upon terms, adds additional language that changes the overall meaning of the settlement or other bait-and-switch tactics. Sometimes the parties agree to terms, and then all the terms have to be re-negotiated in the context of reducing the agreement to a written instrument to be signed.
In his opinion, Judge Oblon discussed a 2001 settlement dispute that went to the Supreme Court of Virginia, Alexakis v. Mallios. In that case, the parties informed the judge that the case had been settled and recited the terms into the court reporter’s transcript at the hearing, indicating that they had resolved all claims. Included in the settlement was sale of a parcel of real estate on documentation identical to those used in a prior transaction. In that case, the Supreme Court observed that the purchaser’s undisclosed interpretation could not defeat the unambiguous, express terms of the settlement. If one side later had concerns arising after the recitation of the terms into the record, they came too late. The Alexakis case illustrates why lawyers should be on their toes should their opponent try to recite settlement terms in open court before a judge so that they are recorded in the court reporter’s transcript as an official evidence of contract, because the terms may not be recited correctly. Also, counsel should be cautious about employing the “read the terms into the record” trick because their opponent may later hold them to precisely those terms, despite the absence of desired items. Once the terms are recited into the court reporter transcript and assented to, either side can move the court to reduce the terms to a written order that can subsequently enforced legally if breached. In the Cromwell Retail 1, LLC opinion, the Maryland Court of Special Appeals partially reversed the judgment because the trial court entered an order that did not accurately reflect the terms of the settlement made by the parties.
In April 2021, the Supreme Court of Virginia decided Bolton v McKinney, reflecting a development of the law in Virginia with respect to litigation settlements. Generally speaking, prevailing litigants in Virginia (and almost all other states) may not, with very limited exception, recover their attorney’s fees against their opponent unless there is a statute or contract that provides for an award of attorney’s fees. This is called the “American Rule.” The issue of attorney’s fees arises in the context of settlement agreements because having to pay a lawyer to defend a lawsuit brought after there has been a settlement and release is contrary to the whole notion of settling in the first place. Attorneys routinely put prevailing party attorneys’ fees provisions into their settlement agreements. Bolton and McKinney made a “Settlement Agreement and Global Mutual Release of Claims.” Later, McKinney sued Bolton three times relating to the same issues in the settlement, causing Bolton to incur lawyer bills in excess of $80,000.00. The Settlement Agreement was silent on the issue of attorney fee awards. The issue of Bolton’s attorney’s fees came up, and the circuit court declined to award them, because they weren’t provided for in the contract or any applicable legislation. The Supreme Court decided that the “American Rule” does not apply in breach of covenants not to sue cases, because the expenditure of attorney time in a direct or consequential result of the breach of the covenant not to sue. The Court observed that without a fee-shifting effect, the covenant not to sue could not be vindicated, because there would not be any practical consequence if a party can repeatedly breach the covenant not to sue and not bear financial consequences. The holding of Bolton v. McKinney is important to understand in cases like Cully v. Smith or Alexakis v. Mallios where there is a covenant not to sue that is agreed upon in emails or in a recorded conversation, and later there is a subsequent suit and the issue of attorneys’ fees arises.
These things may make settlement agreements sound mysterious or scary but they really aren’t. The meaning of words used in settlement negotiations matters. An experienced attorney can help the client when the opponent tries to walk back on terms already agreed. Parties should carefully consider what is being said or not said when engaged in settlement discussions that become exhaustingly protracted or are sprung on you unexpectedly.
April 8, 2021
When a homeowner receives a notice of violation from their HOA or condominium, they must decide if they are going to fight it, comply or file an architectural application to receive formal approval. There are many instances when the homeowner can and ought to keep the installed improvement. However, there are other situations in which it makes more sense to comply with the HOA’s request or to otherwise adjust things to address the violation. Also, HOAs frequently send out notices in error or the homeowner receives them after the violation was cured. However, the story does not always end with the voluntary compliance by the landowner. Often the covenant enforcement process will continue with additional letters or HOA hearings despite the correction. There may be pending litigation. The HOA or neighbor instigating such in or out of court complaints may have some sort of axe to grind and wants to continue the legal action vindictively. This blog post addresses the legal aspects of covenant enforcement when the accused owner has cured or abandoned the complained of structure or activity. I am not saying that the owner’s default response to a HOA letter ought to be to just obey it.
Fairfax County Circuit Court considered such questions in a 2004 decision. Rose Hall HOA filed a complaint with the court seeking an injunction and attorney’s fees against an owner, Charles H. Jelinek, whose architectural application for a black ornamental fence was denied but they installed it anyway. While suit was pending, the Jenlineks removed the complained of fence. The letter opinion of Judge Kathleen MacKay doesn’t say whether they removed the fence because it was not allowed by the language of the covenants or if the owners took it down not because they were in the wrong but to simply avoid continued legal action. The HOA filed discovery requests in an effort to continue fighting in court. The Jelineks filed a motion to have the suit dismissed on the grounds that it was now moot because the fence was removed. The HOA wanted to continue the suit, not because they thought that the fence would be put back up, but only because they wanted to get an award of attorney’s fees as the prevailing party. Did the HOA “prevail” in the litigation because the owner removed the complained of fence after suit was filed? In this suit, the HOA did not seek any damages. The court found that now that the fence is gone, the HOA cannot prevail because an injunction order cannot be entered because the grounds for the injunction is no longer at issue. Where the defendants action sought to be enjoined has been abandoned, the whole grounds for equitable relief no longer exists, and the matter ought to be dismissed. Unlike suits for money damages, cases like injunctions or declaratory judgments are in what’s called “equity jurisdiction,” which requires an actual controversy to be presently existing. This doctrine is commonly referred to as a question of “mootness” (when the alleged violation has ceased) or “ripeness” (when the offense hasn’t happened yet). The court found the case moot and dismissed it in its entirely.
In some cases, the factual context for the mootness question is less clear-cut than a complaint about a fence that has been completely removed. Sometimes suits for injunctions are more about conduct or how improvements or objects on the property are used rather than their mere existence. In cases involve flooding or erosion, the water infiltration may not occur every day, and in fact may be irregular depending upon the weather or how the defendant has configured downspouts that day, or other conditions. In some cases, an injunction may be granted even if the complained of conduct only occurred once. Some cases raises a question as to whether the complained of improvement actually violates a legal obligation owed by the landowner to the association under the governing instruments or if the HOA is overstepping its bounds. The owner may decide to reconfigure the fence, drain or other structure or vegetation to conform to the instruments (and not necessary what the manager is ordering them to do). The opponents may want to pursue the case more aggressively, arguing that the corrective activity somehow functioned as an admission that the HOA or neighbor was right and the owner was wrong. However, that may misconstrue the defendant’s actions or intentions. Also, angry people sometimes want their opponent to cease doing things related things that have always been legal as a kind of punishment.
For reasons such as these, when HOA or neighbor disputes escalate to litigation, sometimes “giving in” on certain points can be a powerful legal defense strategy, but one that must be properly navigated to resolve the dispute while adequately defending the owner’s rights.
Rose Hall HOA, Inc. v. Jelinek, et al., 66 Va. Cir. 172 (Fairfax Co. Oct. 28, 2004)(MacKay, J.).
Note that the picture associated with this blog post is a stock image and does not depict anything discussed in this article.
December 4, 2020
Homeowners disputes with HOAs and condominium associations frequently revolve around disputed demands for payments, large and small. Homeowners often wonder if they have to pay their monthly assessments if their HOA failed to fulfill an obligation. Generally speaking, if the assessments were legitimately determined by the HOA’s board of directors pursuant to its recorded instruments, then lot owners have to pay them. The assessments are made to fund the upkeep of commonly owned property. Ordinarily, the obligation to pay legitimately imposed assessments and the HOA’s obligations to its members are “independent covenants.” The lot owners usual remedy is to compel the HOA’s performance, not to withhold dues. However, under certain circumstances the owner must not voluntarily make a payment in order to preserve a legal challenge to the payment demand. This is because when an owner is in full knowledge of all of the facts, and makes the payment anyway, then it is as though he waived the legal challenge to the payment. Various courts recognize that application of the Voluntary Payment Doctrine can be harsh. Some consumer protection advocates call for its abolition. But as of 2020, it remains the law in Virginia. This rule has a number of important caveats and exceptions. The doctrine is particularly important in the context of the financial realities of community association life.
A 2020 court opinion from Missouri illustrates one way the Voluntary Payment Doctrine may be applied. Michael and Wendy Halliday owned a unit in the Malibu Shores Condominium, located on the Lake of the Ozarks. The Hallidays became delinquent on their assessments. In March 2016, the condominium obtained a $6,156.46 court judgment against them and lien against the condo unit. In May 2016, Randall Koeller and Jeff Haskenhoff purchased the unit at the sheriff’s sale. At that time, Jeff and Randall’s wife Angela were directors on the condominium board. Yes, dear reader, this is shady! It is not uncommon for people with family or business connections with an association board to purchase foreclosures, especially in a waterfront development where many are rentals or second homes. However, such connections may not insulate them from the risks and surprises that can come from investing in foreclosures. In June 2016, Randal and Jeff asked what the amount was of any lien. They were told that it increased to $8,154.00 because of additional months, finance charges, late fees, and attorneys’ fees. In fact, Jeff (who was a board member) assured Randall that this amount was correct. In July 2016, Randall and Jeff signed separate checks, each paying half of the updated demand. Later Randall and Jeff sold the unit to a third party at a profit.
But the story does not end there. Later, Randall and Jeff sued the condominium for allegedly misrepresenting the value and validity of the lien. The trial court found in favor of the association, finding insufficient evidence of misrepresentation, and ruling that by paying the sum, the two men could not later challenge its legality.
The Missouri Court of Appeals focused on the trial court’s application of the Voluntary Payment Doctrine. The Missouri rule is that a person who voluntarily pays money with full knowledge of all of the facts in the case, and in the absence of fraud and duress, cannot recover it back, even though the payment is made without sufficient consideration and under protest. The Missouri Court of Appeals explained the reason behind the rule.
a person who, induced thereto solely by a mistake of law, has conferred a benefit upon another to satisfy in whole or in part an honest claim of the other to the performance given, is not entitled to restitution. The underlying reason for those requirements is that it would be inequitable to give such a person the privilege of selecting his own time and convenience for litigation. . . .
In other words, when all the facts are known to the payor, the time for objecting is when the demand is made, not after the payment is made. In this case, Angela (the widow of Randall) and Jeff both were fully aware of the facts because they were also board members of the same association. This circumstance deprived them of the ability to claim that they were unaware of the facts relevant to their decision to make the payment. For this reason, the court deemed this to be purely a mistake of law, not of fact. In other cases where the association may claim voluntary payment, the homeowner may not be imputed full knowledge. In fact, many associations keep their owners in the dark about many decisions, including those that may affect specific lot owners in unique ways. This illustrates why directors may have legal problems when they do transactions with the association even though the deal may not be forbidden by the covenants or statutes. A purchaser who was less in the know may have been able to challenge the amount of the lien.
The Malibu Shores case concerned unique facts where the payor was imputed full knowledge of the facts because of their unique position as board members, transforming it into a purely legal question. In other cases, the question turns on whether the payment was voluntary or involuntary. For example, in a recent Supreme Court of Virginia case, Rene Williams obtained a money judgment against Kerry Ann Sheehy and recorded it in the land records where Sheehy owned property. After initiating an appeal, Sheehy sold the property, and Williams obtained a payoff check out of the real estate closing. In Virginia, a defendant forfeits her appeal if she voluntarily pays off a judgment. The Supreme Court of Virginia contrasted the voluntariness of a payoff of a lien in a real state closing with payments made by the defendant during post-judgment execution proceedings such as garnishments, levies, or judicial sales. Such post-judgment collection proceedings would constitute coerced payments that do not fit into the definition of a voluntary payment. The Supreme Court of Virginia noted that there may be coercion in the foreclosure context. The Supreme Court remanded the case for the trial court to determine whether the transactional payoff was in fact voluntary.
In D.R. Horton, Inc. v. Board of Supervisors of Warrant County, the Supreme Court of Virginia observed that for purposes of the Voluntary Payment Doctrine, it doesn’t matter if the payor submits a written protest of the legality of the demand at the time payment is made for purposes of determining voluntariness. However, in D.R. Horton, the Court recognized three exceptions to the Voluntary Payment Doctrine: (1) in the event of “an immediate and urgent necessity,” (2) the payment is made to release his person or property from detention and (3) to prevent an immediate seizure of his person or property. As seen by these cases, what constitutes a necessity, detention or seizure is akin to duress or coercion, and not just an inconvenience. Also, the Voluntary Payment Doctrine does not apply where the plaintiff is not suing for return of erroneously sums paid.
The state legislatures granted HOAs and condominium associations substantial legal powers by allowing recordation of a lien without first initiating a civil claim and reducing it to a judgment at trial. In a sense, the legislation blesses, through legal recognition, attempts to coerce owners to pay certain sums to their associations, be they assessments, fines, late fees, attorneys fees, interest. It is common for associations to overstep what they are entitled to charge. Sometimes representatives of an association do not want the owner to climb out of default, for various reasons. For many owners, payment of the lien is seen as less troublesome and more certain than mounting a legal challenge or defense. However, owners do not have to surrender to extortionary or overbearing tactics. How is one to know whether payment would be necessary to prevent further bona fide collections action or if it would constitute a waiver of legitimate claims? Often it may not be clear to the landowner whether making the payment or refusing to pay is the right thing to do. The answer may require review of the governing instruments in light of state law. There is a “big picture” to the HOA-owner relationship that frames the issues raised by a specific demand for payment.
Referenced Legal Authority.
NOTE: The photo associated with this blog post does not illustrate anyone specifically referenced in the text of the article.
November 11, 2020
Contemporary land development policies would not work well without trees. Lot owners use trees for shade, ornamentation, and to screening. Subdivisions, especially cluster developments, often include common areas where trees or shrubs provide dense visual screening of the development. Vegetation can be more attractive and taller than fences. When a tree dies, it transforms from an asset to a liability, threatening damage to nearby structures or people. It is in a lot owner’s self-interest to remove dead trees from their own lots to avoid potential damage. In HOAs, it is common for large trees to rot on common areas. Boards sometimes lack focus or motivation to address such concerns. When common area trees die and cause damage, aggrieved parties want to hold someone responsible. HOA covenants impose general duties on the board to maintain the common areas but may not contain language that would hold the HOA responsible for personal injury or property damage caused by dead trees. In an HOA, the directors typically do not personally perform landscaping work themselves. The board or a manager will hire advisors and tree men for such things. What happens if the HOA hires an arborist to inspect trees in a forest and the consultant overlooks a tree that later causes harm? That’s the subject of a case currently pending in the Circuit Court of Fairfax County. In Cawlo v. Rose Hill Reserve HOA, et al., homeowners sued the HOA, property manager and arborist when a tree fell and hurt them a year after the arborist conducted an inspection on an adjacent conservation easement. In August 2017, the HOA contracted with arborist Adam Wingo to inspect all trees on a conservation easement to assess which ones were dying or otherwise posed a threat to others, including the Cawlo property. Mr. Wingo identified certain trees that the HOA removed. Eleven months later, Mr. Cawlo and his daughters were playing in the backyard when a 40-foot-tall tree fell on them, causing injuries. The Cawlos alleged that Mr. Wingo owed a duty to them and caused or contributed to their injuries.
Mr. Wingo’s attorney filed a demurrer to the Cawlos amended lawsuit, and the court dismissed the claims against him personally. Judge John Tran explained his rulings in an opinion letter. Judge Tran observed that under Virginia case law, a property owner does not owe a duty to others who are harmed outside his property due to a “natural condition” such as a dead tree failing down. The Court found that although the HOA hired the arborist to assess trees that might be a threat to adjoining owners, Mr. Wingo did not have a legal duty to protect the Cawlos. In this case, the arborist did nothing to make the trees more unsafe, and this particular tree was not in imminent risk of collapse during his inspection. This tree did not fall until 11 months later. Trees are living, natural things that lack legal qualities of manmade structures. If the development plan contemplated a 10-foot-tall fence instead of trees, and the fence fell on the family, the owners might have a stronger lawsuit. It doesn’t matter if the tree sprouted because nature brought a seed to that location or was planted by human design. These legal particulars enhance the value of trees for landscape design. For lot owners, many HOA covenants don’t treat trees as a “structure” requiring HOA approval for installation or removal.
The HOA was in a “contractual” relationship with the Cawlos with regard to the conservation easement, as defined by the recorded instruments. However, Mr. Wingo was not a party to that document. The family alleged that they could hold Mr. Wingo personally liable on a theory that he assumed a duty of care towards them by the nature of what he agreed to inspect for the HOA. To make a claim for negligence based on a theory of assumption of duty, the plaintiffs must show an agreement, promise or express intent to undertake a duty specific to the plaintiffs. The Court found that he never said or did anything to expressly assume a duty to the Cawlos. For those reasons, the judge entered an order dismissing the lawsuit with respect to Mr. Wingo. The opinion implies that litigation continues against the HOA.
The Supreme Court of Virginia held in Fancher v. Fagella that an adjoining owner may sue a neighbor for nuisance when encroaching trees and plants cause actual harm or pose an imminent danger of actual harm to adjoining owners. The owner of the tree or plant may be held responsible for harm and may also be required to cut back the encroaching branches or roots, assuming the encroaching vegetation constitutes a nuisance. The adjoining landowner may, at his own expense, cut away the encroaching vegetation to the property line whether or not the encroaching vegetation constitutes a nuisance or is otherwise causing harm or possible harm to the adjoining property. However, the principles of Fancher v. Fagella don’t seem to apply in a case where the tree is entirely on the adjoining land.
Tree law problems won’t decline as Northern Virginia transforms into an urban area. Many people desire secluded, natural locations within convenient distances to commercial areas. Some cities, counties and HOAs want landowners to replace trees they cut down. Trees and shrubs will continue to play a prominent role in giving people a sense of privacy while increasing density in Northern Virginia. People are drawn to seclusion for the relaxing psychological effects achieved by separation from noise, traffic and eyesores. However, a large dead tree next door forces the homeowner to live in a continual fear of harm compounded by the stress of interpersonal conflict. Under the law of Virginia and most states, it matters a great deal if it is a 40-foot dead tree or a 40-foot builders’ crane that fall on top of the family, even if the effect is similar. Communities that fail to adequately address the problem of dead or invasive trees will continue to see problems with trees causing harm. Homeowners ought to carefully consider the threat posed by large, older trees on adjoining property.
Note that the image used for this blog post does not depict anything specifically referenced in the article or cited case authority.
May 20, 2020
Successful athletes, owners and coaches share a passion for winning. In 2020, ESPN aired a documentary about Michael Jordan’s Chicago Bulls basketball dynasty. Cancellation of professional sports during the Coronavirus is a disappointment to many Americans. Basketball Hall of Famer Steve Nash once said, “Nothing is black-and-white, except for winning and losing, and maybe that’s why people gravitate to that so much.” Attorneys and their clients also love winning, hate losing and look for things in black or white. When a client interviews a potential attorney, they want to know whether the attorney thinks that they can win, what that victory would look like, and what it would take to get there. The attorney is interested in learning what the client’s expectations are, what evidence exists, what the legal issues are and whether the client has the resolve and resources to take the case to trial if necessary. According to Ken Shigley, past president of the Georgia Bar, an attorney should, “Accept only cases you would be willing to take to trial.” The best time to have a “moment of truth” about the wisdom or meritoriousness of a lawsuit is before initial filing. The outcome of litigation is typically harsh for the losing side. Property owners value their sense of control, and submission of a case to a judge or jury means relinquishing control over major questions about the future. These are important considerations in cases among neighbors, HOAs, condominium associations, lenders, landlords, tenants, or contractors. Property and construction cases often include more than controversy over payment of a disputed sum. In property law, parties look to the court to resolve disputes concerning boundary lines, easements, walls shared among townhouses, the validity of legal documents, partition of property among multiple co-owners, injunctions against stormwater nuisances, and so on. After hearing evidence and argument, the court may make findings and rulings contrary to both sides’ legal positions. Whether the property represents an owner’s home, business or investment, there is always a “bigger picture” to their plans, needs and expectations that exceeds the scope of what could be won or lost in court.
Usually it is best for parties to settle the dispute on terms that all can live with. At trial, the judge applies the law to the testimony and documents entered into evidence in the context of the remedies requested in the pleadings. In settlement, the parties’ negotiations are not limited that way. It is not always enough for the parties to work out the terms of settlement simply by discussing the dispute with each other and the lawyers. It can be difficult to arrive at mutually acceptable terms by exchange or emails or letters. Settling disputes requires momentum in negotiations, which is difficult to achieve through emails or voicemails. Matters are in litigation because of pre-existing animosity that gave rise to the seemingly intractable dispute.
Fortunately, there are ways to resolve many legal disputes without the risks and expenses of further litigation or arbitration. Many property or construction cases are suitable for mediation as a form of alternative dispute resolution. In mediation, a retired judge or experienced attorney facilitates settlement negotiations. Some courts have institutionalized mediation programs. For example, in D.C. Superior Court, parties to go through a mediation program before the pretrial conference. The D.C. court mediators are local attorneys with stipends paid for out of the court’s budget. In courts that do not sponsor mediation, parties can obtain it through mediators who charge by the hour. Many judges go on to work as mediators after they retire from the bench.
The mediator does not decide the case or “rule” on any issues. What goes on in mediation is confidential. If the parties do not reach an agreement, then the case continues in court or arbitration. Both sides have the option of leaving at any time if they believe that the mediation is not working.
Mediation makes sense in the context of the coronavirus epidemic and the evolving changes in court operations. Virginia courts are just starting to reschedule in-person hearings and trials in civil cases. Private mediations do not require scheduling by the court or use of government buildings. If the court decides to push the trial date out 6-18 more months, the parties may want to mediate to get it over faster. Some mediators are willing to conduct sessions by remote meeting technology such as Zoom or Webex.
Before mediation, the parties submit copies of lawsuits, contracts, statements, etc. for review by the mediator. Mediation begins with the parties meeting at the court’s mediation center or the offices of a law firm. The mediator will explain how mediation works and answer questions. Mediators ask the parties to sign mediation agreements that spell out the confidential nature of the activity and the fees required, if any. After this, each side will break out into separate conference rooms. The mediator will go back and forth, listening to each side explain the facts, their expectations, and details of the settlement negotiations. It is a good idea to bring relevant documents and files to the mediation to facilitate these discussions. Parties who are well prepared are more likely to get their needs met. Some mediators tell participants that they will share with the other side whatever you share with the mediator, unless someone tells them to keep it confidential. Other mediators have the practice of only disclosing to the other side the confidence that someone expressly authorizes the mediator to share.
Mediation can take several hours. It is common for parties to be in mediation all day. It is a bad idea to schedule other things in the late afternoon or evening with the expectation that the mediation will be successful or abandoned by a set time.
Mediation is valuable in disputes between owners of neighboring parties. In family law, disputes between parents over child custody can be acrimonious. Challenges of shared custody are not placed on hold because litigation is threatened or pending. Sometimes new disputes can erupt during litigation that affect the case or the settlement negotiations. Disputes over boundary lines, easements, party walls, water channels, etc. are challenging in the sense that the parties need to maintain and use their property rights while the case has not yet been resolved. Often, one or both parties want to continue to live there for many years thereafter. Mediation offers a way out of disputes which have the potential to continue for years, even after the judge makes rulings at trial. In disputes between adjoining property owners, there is a value to cases being over in a fashion that is acceptable that well exceeds taking the matter to trial, after which there may be additional conflicts in court or on the premises. In such cases, the parties have interests that go beyond the exchange of money. I believe in exploring use of retired judges as mediators in disputes between owners of adjoining parcels of land. Mediation is also used to resolve disputes between lot or unit owners and their community association boards.
Sometimes the parties lack interest in mediation at the beginning, but later, for various reasons, become less reluctant to negotiate compromises. Mediation only works when both sides are willing to engage in a discussion that entails some compromise.
To be clear, I love winning and hate losing. That said, there is a bigger picture in property disputes than who wins and how big. Art Rooney, owner of the Pittsburg Steelers, once said, “The biggest thrill wasn’t in winning on Sunday but in meeting the payroll on Monday.” Whether they own a 500 square-foot studio apartment condominium unit or a large commercial property, landowners need to think more like Mr. Rooney and less like Vince Lombardy. Property cases are unique because they touch on such basic questions about human relationships, ambitions, and sense of safety. For many owners, mediation is the best route to secure their best interests and get past the current problems.
March 26, 2020
Americans are now familiar with the “flatten the curve” tactic to prevent spikes in coronavirus cases from overwhelming health care systems. Governors impose limits on the number of people who may publicly congregate and encourage people to stay at home to slow viral communication. Otherwise, the ill may soon go to the hospital and discover that there are no beds or doctors available. There is another “curve” that poses a lesser-but-still-dangerous threat. Because of the restrictions on business, many wage earners and self-employs are now out of work. Even if workers can telecommute, closure of daycares and schools adds financial burden on families. Many Americans are now unable to make their rent or mortgage payments. Many citizens are at risk of eviction before the states lift stay-at-home orders. Defaults are worse beyond the reach of the public safety net into commercial property. Millions do not know how long they will be at home.
Washington, D.C. is trying to mitigate a spike in foreclosures, bankruptcies and evictions. The Washington Post recently reported (“Homeowners are getting federal mortgage relief, but renters aren’t so lucky”, Renae Merle, March 20, 2020) that the U.S. Department of Housing and Urban Development, Federal Housing Finance Agency, Fannie Mae, and Freddie Mac directed loan servicers to halt all foreclosures until mid-May 2020. The FHFA wants to establish a mortgage forbearance program as done in the 2008 financial crisis. Borrowers who cannot pay their mortgages can apply to the servicers for a deferral of their payments. They may still have to pay the money back later. Servicers do not have to automatically grant the loan modification request. Many people had bad experiences with that loan modification process. It is unclear whether this program will be more user friendly. These loan modifications don’t release the debt, they just push payment out. Pausing foreclosures until mid-May or beyond doesn’t make the loan defaults go away, it just postpones action.
As federal mortgage regulators hit the foreclosure “pause” button, the courts are restricting access to legal remedies for loan or lease defaults. The courts based their orders to defer scheduled hearings and trials in civil cases on social distancing concerns, not housing policy. In Virginia, all civil cases are continued through April 6th by general, emergency order of the state Supreme Court. Some local courts have stayed eviction orders. Continuance of “non-essential” civil cases will likely be pushed out past April 6th, but no one knows how long. The courts are under a lot of pressure to get things moving again while also promoting social distancing. The eviction or small claims dockets of some courts normally have hundreds of people in the courtroom. The longer courts push out unlawful detainer dockets, the greater the spike in cases after they return to their regularly scheduled dockets. These government actions aren’t flattening the curve on foreclosures, bankruptcies and evictions. They are merely postponing the increase until whenever restrictions disappear. Many owners will have less money then.
During the previous recession, mortgage servicers and foreclosure law firms made many mistakes because the sheer number of defaults overloaded the system. They frequently ignored the terms of mortgage documents and statutes to maximize volume-based profits. Sometimes servicers would foreclose on borrowers who went through a rough patch but had well-paying jobs. For example, if a worker has a decent salary from a government contractor, they could be furloughed if their employer lost a big contract to a competitor. The employee would then put their resume out to other government contractors. Months later they could find a new, good paying job. But loan servicing policies didn’t distinguish between such individuals from those who were incapable of making a mutually acceptable workout feasible. I predict that we are going to see similar things in 2020 and 2021 as workers go through periods of intense financial hardship before getting back to work.
During the 2008 financial crisis, I worked on numerous foreclosure-related litigation matters. I represented banks, borrowers or foreclosure sale purchasers. Many owners will have legal options for resisting foreclosures that will not be easily found by a keyword internet search. The servicers and foreclosure attorneys are going to be under a lot of pressure to handle a sudden, large volume of loan defaults. Borrowers will have some time in which to figure out how they are going to reinstate the loan or obtain a modification or forbearance. Even where they aren’t making mistakes, there are nonetheless opportunities to keep homes. The biggest mistake that owners or tenants can do is to simply ignore the notices that come in the mail or becoming easily discouraged by the confusing and unhelpful things that the servicers may be saying on the phone. Owners will not have unlimited time to stave off foreclosure and eviction. When there is a sudden explosion of foreclosures and evictions, there will be scam artists who will promise frightened borrowers that if they give their money to the foreclosure rescuer, then the foreclosure rescuer will stop the foreclosure and use the money to obtain a modification. However, these scams put owners ultimately in a worse position than had they done nothing. Owners receiving threatening letters from a foreclosure trustee or law firm may need to retain a qualified attorney to protect their rights. In a few days I’m planning on posting a “part two” to this that includes a timeline of what usually happens after a mortgage loan default in Virginia.
March 17, 2020
When a public crisis occurs, pre-existing problems don’t go away. The crisis falls on top of all other burdens and conflicts of life. The Coronavirus epidemic is no different. This pandemic poses unique challenges not present in other crises. No one knows how long this will last, how many people will be affected or how far governmental restrictions will go. Some things can be deferred indefinitely without much difficulty, especially if they are only in the planning stages. If you have always wanted to put an addition on your house and planned on doing it in 2020 but haven’t bought anything, signed any contracts or other preparations, it’s easy to just put it on hold.
Other problems are not so easily deferred. For example, if a tenant is behind on her rent and the landlord wants to evict, the landlord’s mortgage payments aren’t going to be excused simply because the tenant isn’t paying, and the courts are not hearing eviction cases. Likewise, if an owner is in the middle of a major construction project requiring many people to be on the jobsite at the same time while the government is encouraging everyone to stay at home and delivery of materials are not coming on schedule, then decisions have to be made now. In this blog post, I would like to share a few thoughts about handling property-related disputes amid a public health crisis. This is not intended to replace the instructions of the authorities or other best practices to avoid getting sick. Note that these ideas may become obsolete as the situation continues to evolve. Generally, people should put health concerns first. However, sometimes there are urgencies or deadlines that must be considered.
- Availability of Court Remedies Will be Substantially Delayed. In Virginia, the District of Columbia and other places, courts are cancelling trials, postponing hearings and discouraging the sick, elderly and those with health conditions from coming. As a practical matter, while the doors of the courts may be technically open for filing, aggrieved parties may not be able to get a hearing anytime soon. When the Courts return to their regular schedule, the system will be clogged with a backlog of rescheduled hearings. Nonetheless, statutes of limitation and other deadlines may still be in effect. People should not assume that they can ignore a summons just because the governor is encouraging everyone to stay home.
- Consult with Counsel Before Exercising Self-Help. Sometimes, parties can exercise self-help legal remedies without court assistance. For example, residential landlords can’t just throw a tenant’s belongings out and change the locks just because they stop paying rent. They need a court order to direct the sheriff to transfer possession. However, on the commercial side, self-help may be an option. When adjoining owners have boundary or easement disputes, they may want to simply construct a fence in a disputed location, lock a gate across an easement or dispose of encroachments in the face of an adverse neighbor and without the blessing of the courts. However, there are potential unapparent risks of self-help, especially when the conflict has already escalated. For example, self-help can sometimes lead to threats of violence or someone calling the police. Landowners should consult with counsel to determine if some form of self-help would be helpful or risky.
- Law Enforcement and Regulators are Overwhelmed. Sometimes when disputes between adjoining owners, HOAs, contractors or landlords and tenants escalate, people may want to call the police, county departments or other regulators to protect themselves. During a public health crisis, law enforcement is already overwhelmed and may not view a neighborhood dispute with the same sense of urgency as someone living there. Code enforcement officials may be swamped with other work because of persons taking leave or other urgent matters. Unless there is an eminent threat of physical harm, theft or other crimes that cannot wait for a lawyer to respond to an inquiry, landowners ought to consider consulting with an attorney before contacting law enforcement.
- Avoid Physical Confrontations or Defects Posing Safety Threats. Sometimes neighborhood disputes escalate to the point that the parties come to fisticuffs or leave their property in a dangerous condition. Landowners should take every precaution to avoid contributing to a situation where someone gets hurt or must go to the doctor or hospital, and further burden the healthcare system.
- Avoid Homeowners Association Meetings, Hearings, and Events When Possible. The Coronavirus epidemic poses a unique threat to Americans living in condominiums and HOAs. This is because the community association form of living requires people to interact with each other to manage common concerns. The residents of associations tend to be older and at higher risk of infection. Governing instruments and state laws require “open” meetings which take place in person with the entire community free to attend, unless closed session is available. Owners are legally entitled to use common areas and facilities. Few statutes or declarations address emergency management or remote access to meetings. Many managers or directors will pursue their own agendas despite warnings from experts. Smart boards and committees will postpone nonessential meetings, prevent or discourage unnecessary gatherings and take commonsense measures to prevent common areas from becoming a venue for transmission of the virus. If an owner receives a notice of violation letter from the HOA or condominium board, she should consult with legal counsel if a postponement is not offered.
The Coronavirus has the potential to make deadlocked property disputes worse because everyone will be under greater stress, economic hardship and the legal system offers fewer immediate remedies. However, the advice of a trusted advisor such as a qualified attorney can lead to devising a self-protection strategy when the ordinary rules do not seem to apply.
February 20, 2020
HOAs and condominiums, as legal entities, are creatures that derive their power from documents. Governing documents must be in writing. Rules, regulations, policies, and resolutions must be put into writing. To maintain and manage the common areas, the board must make contracts with vendors. Covenant enforcement requires data collection and issuance of notices to lot owners. The process of making and collecting assessments is also document driven. Owners in disputes with associations frequently complain that they cannot obtain access to essential records necessary to resolve the disputes or discover that the records do not exist. The creation, organization, and storage of paper and electronic records and documents are essential to the operation of a community association. HOAs derive power from the creation, organization, and control of this information. Owners often complain that they cannot get the records they want from their association or documents that would exculpate them cannot be found.
Once judges call disputes between owners and HOAs forward for trial, the conflict over HOA records shifts to the inclusion or exclusion of association exhibits as evidence. The rules of evidence allow for the exclusion of hearsay. Hearsay is an out of court statement offered to prove the matter asserted in the statement. The hearsay rule applies to oral statements, written materials or electronic records. The hearsay rule prevents a party from proving their case with alleged passed-on statements by persons who cannot be cross-examined at trial. The right to cross-examine one’s opponent is an element of “due process”. Not all statements are presented to “prove the matter asserted.” Some statements are introduced to show that a party was on notice of or aware of a contention or some other basis other than the truth of a statement or document. Even if a statement is hearsay, there are many well established exceptions to the hearsay exclusion. For example, an admission by one’s opponent is admissible hearsay, because the party can offer evidence to try to explain the admission. Another is the “business records” or “shop-books” exception. Businesses rely upon the accuracy of data collection, entry and storage to make informed decisions, operate and make money. Properly kept business records are considered trustworthy because they are not made for purposes of having a self-serving answer, which are needed at the moment. In community associations cases, the lawyers must understand the business records exception to navigate hearsay objections.
When associations try to use their business records, one problem they experience is that the documents were made and kept by a director, community manager, accountant or other custodian who does not testify. The directors of a condominium or HOA constantly change. When members elect new boards, frequently they change management companies because of complaints about the former managers. Even within a “tenured” management company, there is significant employee turnover. A community association may have voluminous records, but no one may have personal knowledge about the making and keeping of many of them.
The business record exception to hearsay frequently arises in community association litigation. In 2013, the Fourth District Court of Appeal of Florida considered an appeal of a final judgment of foreclosure brought by Sebastian Lakes Condominium Association against Connie Yang and Frank Romero. Sebastian Lakes sent Yang and Romero letters stating that they owed over $10,000.00 in unpaid assessments and recorded a lien in the land records. Later Sebastian Lakes filed complaints to foreclose on the liens. The owners contended that the new property management company failed to accurately apply credits to the account in the records because the wife’s father made an advance payment of approximately $18,000.00 in 2008.
Yang and Romero also alleged that the association pursued the foreclosure and other “scare tactics” to retaliate against them for participating in an investigation into $100,000.00 in missing condominium funds.
At trial, Sebastian Lakes called one of the management company’s employees as a witness to testify and introduce an account ledger for the husband. The defendant owner’s attorney objected to the introduction because the plaintiff’s attorney laid insufficient foundational testimony for admission of the ledger under Florida’s business record exception. The owner challenged the association’s evidence on the grounds that they could not establish accurate balances to the owners’ ledger accounts prior to the current management company’s takeover. The owner contended that the new management company failed to accurately reflect a large payment made before the takeover. The owner contended that he stored a copy of the $18,000.00 casher’s check in his unit. He could no longer get into his condo unit. Note that the ledger amounts were submitted for their truth because the true dollar amount owed was in controversy in the foreclosure action. The trial judge cut the presentation of the owners’ evidence off after about 20 minutes and entered judgments of foreclosure in favor of the condominium association.
Yang’s and Romero’s appeal focused on their objections to the introduction of the hearsay HOA records. Under Florida law, the party seeking to use the business records exception must lay a foundation of witness testimony that (1) the record was made at or the time of the event, (2) the record was made by or from information transmitted by a person with knowledge, (3) was kept in the ordinary course of a regularly conducted business activity, and (4) it was a regular practice of that business to make such a record. The rule in Virginia is similar but not identical. The rules and practices for the business record exception vary in each state. I am not a Florida lawyer – I am using this case as an example. On direct examination, the condominium’s lawyer asked the normal foundational questions and the employee of the new property management company gave the expected answers. The trial judge overruled the owners’ objection that there was an inadequate foundation for use of the business records exception to hearsay. However, on cross examination the employee admitted that records from before the takeover were maintained by the prior accountant and she had no knowledge of how that prior accountant kept or maintained the ledger records. The witness could not explain how they verified the starting balances. Based on this testimony, the appeals court found that the introduction of the account ledgers failed to include a proper foundation of witness testimony for the use of the business records exception. The court reversed the judgments of foreclosure in favor of the association. Note that the cross examination revealed the foundation problem after the court overruled the hearsay objection. The opinion does not state whether the defendants’ counsel voir dire’d the witness or moved to strike the hearsay after the cross examination. Practitioners need to know how to properly handle such a situation should it arise to avoid waiving grounds to object to the hearsay specifically or challenge the plaintiff’s evidence generally.
Not all association records may constitute hearsay, and there are other exceptions to the hearsay exclusion other than the business records exception. However, in a HOA case everyone needs to be aware of how the business records exception works in that court system. The effect of this rule can cut both ways. Sometimes the owner may be the one trying to authenticate the books and records of the association for litigation use.
Often, associations use hearsay business records to enforce covenants or collect assessments where they bypass the evidence rules and the courtroom entirely. In Virginia (and many other states), to the extent that statutes and the declaration allow, associations can send owners notices of architectural violations, hold hearings before a board or committee, and decide whether to fine the owner without going before a judge who would impose the rules of evidence. Also, state statutes allow for associations to record liens for unpaid assessments without first obtaining a court judgment. When HOAs and condominiums take such action, often they rely upon business records that would require a proper foundation to be admitted under the hearsay exception in a court of law. These HOA and condominium statutes that allow for bypass of civil litigation is that they relieve associations of the challenges associated with turnover among the directors, management companies and employees. Yang and Romero successfully defended the assessment foreclosure action because the court rules for evidentiary foundations and cross examination uncovered that the balance used in calculation of the unpaid assessment amount was unreliable. Understanding the business records exception is essential to navigation community association litigation.