The short answer is probably not. There was a similar case in the State of Georgia wherein a homeowner claimed that the prohibition against signs did not apply to a real estate agent’s right to erect a “for sale” sign on the property.  The court rejected the claim stating that the agent may not do any more than his or her principal and that the agent; therefore, lacked the authority to erect the sign on the homeowner’s behalf The Georgia court also rejected the homeowner’s argument that the restrictive covenant was an unenforceable restraint on trade.  Based upon these facts, one is likely to get a similar result in Michigan if they choose to fight the “for sale” sign prohibition.

For more information, contact Robert Meisner @ 800.470.4433 or bmeisner@meisner-associates.com.

Co-owners must understand that when they are dealing with the association attorney that the give and take is a two way street.  It all depends on how reasonable co-owners are in working it out payment plans with the Association’s attorney, and, of course, whether the Association’s attorney has communicated the information to the Association that ultimately makes the decision as to what payment plan or other type of resolution will be acceptable.  If co-owners find themselves in this position, they are best advised to retain their own attorney to negotiate with the Association’s attorney so that he or she is on an even playing field.

 The FCC order does not cover satellite TV companies and, therefore, exclusive agreements between associations and satellite TV providers will remain.  However, it is a bad idea, in my judgment, to enter into any type of exclusive service provider agreement with any particular company

For more info, visit www.meisner-law.com

 On behalf of many of the condominium associations this firm represents, we have been able to negotiate a compensation package with their cable company in exchange for the non-exclusive right of the cable company to provide service to the members of the condo Association.  An exclusivity clause gives a video services provider the exclusive right to provide service in a community.  If an Association has entered into an agreement for video services on behalf of its residents, that agreement could be affected, even if the community consists of single family homes.  It is best to consult with a knowledgeable Community Association attorney before entering into a binding agreement with you cable provider.  

 On behalf of many of the condominium associations this firm represents, we have been able to negotiate a compensation package with their cable company in exchange for the non-exclusive right of the cable company to provide service to the members of the condo Association.  An exclusivity clause gives a video services provider the exclusive right to provide service in a community.  If an Association has entered into an agreement for video services on behalf of its residents, that agreement could be affected, even if the community consists of single family homes.  It is best to consult with a knowledgeable Community Association attorney before entering into a binding agreement with you cable provider.  

On December 18, 2007, Congress approved legislation to eliminate taxes on mortgage debt, presumably, to help struggling homeowners to avoid foreclosure.  The legislation which was subsequently signed into law by President Bush on December 20, 2007, provides a temporary, three (3) year change to the tax code to eliminate any taxes homeowners might face when banks renegotiate the terms of a home loan and forgive a portion of the outstanding mortgage debt.  The change in the tax law caps untaxable forgiven debt at $2 million and applies only to principal residences. This change was necessitated because existing tax rules under Section 108 of the Internal Revenue Code impel many struggling homeowners to seek foreclosure over restructuring their loan with lenders because forgiven mortgage debt is taxed as ordinary income.  The Mortgage Forgiveness Debt Relief Act, removes this tax burden on mortgage indebtedness, encourages market based restructuring between lenders and homeowners and discourages foreclosures.  The legislation also includes a provision that extends the deductibility of mortgage insurance for three (3) more years. 

“There are specific limitations on the allowable business deductions available to a taxpayer who uses a vacation home for both personal and rental purposes.  These limitations apply to individuals, S-corporations, partnerships, trusts and estates.  The number of days that a vacation home is used for personal purposes, as compared to the number of days that the property is rented at fair value, determines the availability of tax deductions.  As of the date of publication of this book, these rules may be summarized as follows:

Rule No 1: If the vacation condominium is used by the taxpayer for personal purposes for not more that fourteen (14) days during the taxable year, or for ten percent (10%) of days that it is rented at a fair price (if this is greater), then it is not considered the taxpayer’s ‘home.’  In this case, tax deductions attributable to income derived from the rental of the property are not limited to gross income produced by the property.

Rule No 2: If the personal use of the vacation condominium exceeds the greater of : (a) fourteen (14) days; or (b) ten percent (10%) of the number of days during the taxable year that it is rented at a fair price, then it is considered the taxpayer’s ‘home.’ In such cases, the tax deductions attributable to income derived from the rental of the property can not exceed the gross income generated by the property.

Rule No. 3: If the vacation condominium is the taxpayer’s ‘home,’ and is rented fro fewer than fifteen (15) days during the tax year, any income derived from the rental during the tax year is not taxable, but the deductions attributable to income derived from the rental of the property are not allowed (the usual personal deductions for mortgage, interest and real estate taxes, however, may be taken).

Rule No. 4: If the vacation condominium is not the taxpayer’s ‘home,’ as described under the vacation home rules, but the rental use is not an activity from which the taxpayer expects to make a profit, the taxpayer’s deductible rental expenses may not exceed his rental income, in the same manner as they are limited for a ‘home’ under the vacation home rules.  However, if the rental results in a profit during three (3) or more years during a period of five consecutive tax years, it is presumed by the IRS to be an activity engaged in ‘for profit.’

In all cases, except the situation described in Rule No. 3, the personal use of the vacation property, on even a single day, requires that investment expenses be allocated between personal and rental days.  The allocation between personal and rental expense is calculated, usually, in the following ratio:

                 Days rented at a fair rental price divided by Days of total use

According to the IRS, ‘Days of total use’ equals the number of days the property was rented at a fair rental price plus the number of days of personal use.  ‘Days rented at a fair rental price’ is the number of days the property was rented at a fair rental price, excluding any day that the taxpayer also personally used the home.  Days that the vacation home is vacant (even if the home is being advertised for rent at a fair rental value) and days spent maintaining the home are not included as days of ‘personal use.’   What constitutes ‘personal use’?  The taxpayer is deemed to have used his vacation home for ‘personal use’ for the entire day, even if it is used for only a part of that day, in any of the following instances:

1. If the taxpayer, a member of his family or any person who has an interest in the home uses it for any part of the day, it is a ‘personal use’ day.  Family includes the spouse, brothers, sisters, lineal descendants and ancestors of the taxpayer.  However, if the family member rents the vacation property for a fair price for use as his principal residence on that day, this use is not considered “personal use” by the taxpayer.  However, if the taxpayer stays at the home while renting it to a family member who is using it as a principal residence, the days that the taxpayer spends at the vacation home count as days of ‘personal use’ by the taxpayer, regardless of the rental agreement.
2. If the vacation home is used by an individual under an arrangement that enables the taxpayer to use some other unit (whether or not fair rental is charged for the use of the other house), the taxpayer is considered to have used the vacation home for ‘personal use.’  Thus, a house-swapping arrangement, under which two homeowners rent each other’s home as a personal residence, is “personal use” by each taxpayer.
3. Unless a fair rental is received, any period of rental of a vacation home is considered to be ‘personal use’ by the taxpayer.

 It generally is to the taxpayer’s advantage to avoid having a dwelling unit classified as his ‘home,’ because it would subject rental deductions to the gross rent loss limitation.  Therefore, most tax planning strategies involve controlling the variables of the fixed formula: rental days and personal days.” (Meisner, Robert (2005). Condo Living: A Buyers Guide to Buying, Owning, & Selling a Condominium.  Troy, MI: Momentum Books)

 For more information on how to purchase Condo Living: A Guide to Buying, Owning, and Selling a Condominium, please visit www.meisner-law.com or call 800-470-4433.

I have also heard of attorneys stating that they are just “too swamped” or “too busy” to return calls.  I have even heard it said that they just don’t have the large staff or man power to respond in a timely fashion.  To this I say that the size of the attorney’s office or the number of staff that he or she may or may not have does not matter; commitment to service does!  In a recent article in Michigan Lawyer’s Weekly, Ed Poll made the following statement: “Whether the organization is large, small or even a solo practice, response time is a matter of philosophy.”  I could not agree with him more.  My response time to the needs and concerns of my clients is not predicated on the number of attorneys or secretaries I have in my office; it is based solely on my commitment to service.  I personally make it a practice to return calls within 24 hours, and most of the time I am able to return the call with the same day.  It is simply a matter of philosophy – my clients come first.

Are you frustrated with your attorney not returning calls and emails?  If so, do some comparison shopping.  You may like what you find.

The condominium association argued that they had an obligation to protect property values in the community and their rental ban was needed to assist with that obligation. The Indiana State Supreme Court held in favor of the association.  The court stated that both renters and home owners have an incentive to improve their property by presently enjoying those improvements, but only homeowners are able to reap the fruits of their labor upon selling the home.  The court further noted that prospective buyers might choose to purchase their home based upon the notion that their owner-occupant neighbors are likely to make such investments in maintaining the property.   While this case did not take place in Michigan, it is vitally important to community associations in that it is not uncommon for courts in one jurisdiction to rely on the decisions of courts in other jurisdictions.

On one hand there is some financial obligation on the part of the association board to keep its members apprised of the financial condition of the association, and co-owners do have the right to check the books and records of the association, but embarrassing a co-owner should never be an avenue of recourse when associations are attempting to collect delinquent assessments.

There are a number of major developments going on including condominiums, duplexes, and single family homes.  A major American developer has completed its first phase of the project which offers lots for sale as well as condominiums.  Some of the lots allow for the erection of duplexes which can result in an excellent rental property opportunity.  The climate is analogous to southern California and there is, of course, access to the Sea of Cortez.  You are best advised to contact a realtor or a major American developer in the area.

 However, with that being said, one must recognize that when publishing a community association newsletter, it can lead to liability for the association.  Here are five rules to help avoid liability when publishing a newsletter.  (1) The Board of Directors must maintain control over what material gets published.  Turning this decision making ability over to a “volunteer editor” could be legally hazardous to your health; (2) know which photos of members you can and cannot publish without permission.  It would be a good idea to have co-owners sign a “permission slip” giving you the authority to post their picture; (3) print only verifiable facts.  You do not want to publish rumors and/or hearsay, which will cause a divisive attitude to permeate the neighborhood; (4) do not print ads that violate fair housing laws; and (5) be especially careful when even considering publishing names of delinquent members.  You should consult with your community association lawyer concerning the content of your newsletter and it may be appropriate for you to have him or her review it before it is being sent.

For more information contact Robert Meisner: bmeisner@meisner-associates.com; www.meisner-law.com

The FBI reports that mortgage fraud remains a very real problem as new scams involving “foreclosure rescue” are being offered on a daily basis.  While not all foreclosure rescue programs are scams, you can avoid becoming a victim by following the five tips below:

1.      Be wary of unsolicited contacts and pressure sales techniques.

2.      Be wary of what you are signing.

3.      Check the licenses of the people involved, making sure they are qualified.

4.      If it sounds too good to be true, it probably is.

5.      See a real estate lawyer before you sign anything.

Association Budget Items That Must Be Verified
Under the new guidelines, Fannie Mae wants lenders to perform full scale reviews of most condominium loans as opposed to the spot reviews that lenders have performed in the past.  The full scale reviews will require lenders to verify the following four essential association budgetary items:

1. The association has an “adequate” budget.
2. The budget contains a line item allocating ten percent (10%) of annual revenues for the association’s reserves.
3. The association has available funds equaling the deductible under the association’s master insurance policy.
4. No more than 15 percent (15%) of the common area fees are delinquent by more than one month.

While the first three requirements are most likely already being meant by condominium and community associations, the fourth requirement could cause a definite problem for associations and lenders alike.  With the housing market at an all time high foreclosure rate in the State of Michigan, as well as the entire country, community and condominium associations may have a difficult time keeping under the 15 percent (15%) delinquency rate, especially the smaller associations.

How Do These Guidelines Affect The Buyer?
While these are recent guidelines imposed by Fannie Mae, I have been preaching for years that potential buyers must look into the financial condition of any association into which they intend to move.  It is only sound business practice that one would strongly consider the economic state of any investment, and for most Americans the purchase of a home is the largest investment they will make in their lifetime.  For example, if the roofs of buildings in a distant portion of a condominium project are deteriorating and the condominium documents provide that the association is responsible for the maintenance of the roofs (as is usually the case), the fact that your own roof is in good condition and will not soon leak may not mean that your investment in the condominium project will be a good one. 

If the association’s reserves are not adequate, the association may be required to levy substantial special or additional assessments to defray the cost to replace the roofs at the other end of the project.  Or, if the roofs were defectively constructed by the developer and the right to sue has not expired, the association may start a lawsuit against the developer, which, potentially, may cost tens of thousands of dollars to prosecute.  The bottom line is that these new imposed guidelines also may protect the buyer from getting into a situation where he or she does not want to be.

 The answer, of course, depends upon the state in which the association is located but in a case of first impression in New York, the Court held that the unit owners did not have statutory liability for safe maintenance of the building because the nature of the unit owners interest in the common elements is Amaterially dissimilar to the free hold interest@ normally held by owners of multiple dwellings.  The Court also indicated in that case that vicarious liability for unit owners was inappropriate because the common elements were solely under the control of the board of managers.  It would appear, therefore, that the individuals may have some immunity from liability since it should be a corporate obligation, namely that of the Association.

 The short answer is that it all depends on the association’s documents as normally the condominium association has an obligation to repair a unit in a reasonable manner to the extent they have responsibility for same.  I suggested that the co-owner or his attorney write the association a letter demanding that they take measures to correct the unit whether or not they have insurance proceeds at this time.  It may be that the Association may have to levy an additional assessment or they may have already levied one but the co-owner should not be without the benefit of the use and enjoyment of his unit indefinitely. 

We have consistently advised our clients to avoid signing any exclusive agreements with cable companies without first allowing us to review and critique the agreement.  As we have discovered in our negotiations, routinely the cable company has offered to pay the association or apartment community a one time up front sum equal up to several hundred dollars per unit in exchange for the association’s or community’s agreement to perform the following two items: (1) exclusively market the cable company’s services to its co-owners or residents; (2) grant the cable company an exclusive right to provide services to the condominium. Failure by the association or the community to fulfill these exclusive obligations would render it in default thereby triggering certain remedies such as the ability to terminate the agreement and seek the return of the lump sum payment or a prorata portion thereof. 

If your community association or apartment complex has such an agreement with a cable provider, that agreement may indeed be null and void under the recent FCC ruling, which would allow for residents to obtain cable and internet services from companies such as Verizon and AT&T.  You may want to contact a knowledgeable community association attorney in your area immediately if you find that your association has an exclusive agreement with a cable operator.

 It is clear that her association lacks the basic financial protections.  The Board has not complied with basic recording requirements. Condominium and community associations are best advised to have more than one person signing checks if the association does not have a professional management company.  The expense of a certified audit is justified if the Board suspects that there has been unusual activity or that the Association funds or the size of the building requires a complete examination.  Audits should be performed annually with a certified audit being performed at least once every five years.

This may very well be in violation of the nine (9) day business rule of the Michigan Condominium Act, which allows a purchaser to withdraw from the condominium and, in my view, that agreement would be unenforceable.  If you do not live in Michigan, it would behoove you to contact a knowledgeabel condominium attorney in your area who might know if your state has such a rule.  Too many purchasers sign agreements for the purchase of condos without obtaining the services of a knowledgeable condominium attorney to insure that the purchase agreement is in conformity with the condominium statutes and laws.  Without proper advice they could find themselves faced with the prospect of wanting to be extricated from the agreement and find that they may not be able to do so because of an unconscionable clause.  You are best advised to seek redress at your earliest convenience.  Please feel free to contact me for information on attonreys in your area who might be in a position to assist you in your condominium purchase.

The Michigan Condominium Act requires that the first mortgage holder provide notice to a condominium association of an impending sheriff’s sale.  In its first impression decision, Oakland County Circuit Court Judge Fred M. Mester held that due to the first mortgagee’s failure to notify the association of the impending sheriff’s sale as required by the Michigan Condominium Act, the first mortgagee took title to the unit subject to the condominium association’s lien for non-payment of assessments, inclusive of interest, late charges and attorney fees.  The Michigan Condominium Act does not state the specific remedy that is available to the association when the mortgagee fails to give notice.  This decision clarifies that remedy.  This case was argued on behalf of the condominium association by Jennifer Cordon Thor of Meisner & Associates, P.C., and the decision allowed for the association to secure its lien upon the unit as well as to preserve its claim for interest, costs and attorney fees incurred in the collection of unpaid assessments as they are secured by the lien.

While this case specifically pertains to law in the state of Michigan, condominium associations located in other states should be aware of any and all units that are delinquent in not only association dues, but also mortgage payments as this may affect units that are delinquent in the condominium assessments.   

 What the board has to be concerned about in this case is that the rules and regulations are consistent with the Master Deed and Condominium Bylaws.  Because the co-owners have easement rights to parking areas designated for vehicle use, a more reasonable rule would be for the Board to designate the area for residents and guests unless there is a specific provision in the bylaws authorizing the Board to make this guest parking.  If the future use results in a shortage of owner or guest parking, the directors can modify the rule under its authority to administer the condominium documents.  The Board is best advised to get a legal opinion from counsel.

Obviously, many communities have bulletin boards in their lobbies or common areas.  Typically, Associations use the boards to post meeting agendas, reminders about upcoming events, units for sale, renovations and other worthy information for members. But letting members post on bulletin boards can cause problems and it is important for the Association to pass community bulletin board rules to prevent bulletin board problems. 

These rules should include banning material that may violate Fair Housing laws, banning postings related to illegal or illegitimate activity, banning profane and pornographic material, requiring postings to be approved by the Board of Directors, limiting the size of postings, as well as only allowing the manager to place and remove postings.  I would advise any association board to consult with a knowledgeable community association attorney with respect to any rules to be published, especially in relation to making sure Fair Housing Laws are followed.

BINGHAM FARMS, Mich., August 26, 2007 – Meisner & Associates, P.C., an AV rated firm, is pleased to announce its affiliation with Eisinger, Brown, Lewis & Frankel in Hollywood, Florida, by and through which it will provide representation to its Michigan clients doing business or maintaining a home in the State of Florida.

Meisner & Associates P.C., led by Robert M. Meisner, a practicing attorney for more than 38 years, is a law firm headquartered in Bingham Farms, Mich., with a branch office in Grand Rapids, Mich., which concentrates in Community Association and Condominium Governance and Development, Corporation and Contract Law, Facilitation and Dispute Resolution, Complex Commercial & General Civil Litigation, Builder and Developer Representation, Real Estate Transactions and Expert Witness Consultation.  The firm represents condominiums, subdivisions, cooperative communities, developers, businesses and individuals.  Meisner is an adjunct professor of law at Cooley Law School and Michigan State University Law School; he is a featured columnist with the Observer and Eccentric Newspapers; a member of the College of Community Association Lawyers and a co-drafter of the 1978 Michigan Condo Act and Amendments thereafter.

Eisinger, Brown, Lewis & Frankel, P.A., is a law firm headquartered in Hollywood, Florida, concentrating in Community Association Law and Real Estate Law. The firm practices in the areas of Commercial Litigation and Transactions, Construction Litigation, and Real Estate Law, including the representation of condominium associations, homeowner associations, equity clubs, charter school companies, hotel operators, lenders and real estate developers.  Meisner & Associates will be working closely with Joshua Krut, a Detroit native, who is a shareholder in the firm concentrating his practice in the areas of Real Estate Law and Community Association Law.

If you have any questions or wish to receive more information about Meisner & Associates, P.C. please contact the Bingham Farms Office at (800) 470-4433, visit the website at www.meisner-law.com or email: bmeisner@meisner-associates.com.

The third detail to which the association must pay special attention is maintaining the business of the association after a disaster. Community association boards should look into the possibility of contracting with vendors ahead of time, as every clean up crew in the county will be busy in the days and weeks following major disasters. Associations should also duplicate important records and keep them offsite. Such planning is very prudent as the association will be able to maintain a continuity of business if records are not destroyed. Moreover, associations should consult with their condominium association attorney in regard to changing their bylaws in order to deal with major risk factors that necessitate refurbishing or providing substantial renovations.

In the weeks and months following September 11^th, as well as the hurricanes which destroyed the Gulf Coast, we learned of the importance of disaster planning and how simple preparation can save a life. In light of what we now know, association boards should not take disaster planning nonchalantly. The better prepared and informed a community is, the better its chances of rising above the fray during unexpected disasters and perhaps saving its members time, frustration, and even lives.

Once the association has completed the time-consuming task of identifying risks, the board of directors must now focus on the safety of its residents by communicating the acknowledged risks to all co-owners. Co-owners should also be made aware that during major disasters they should be prepared for 72 hours without emergency aid or relief. They should stock food, water, and certain first aid supplies. A complete list of items that individuals should stock pile and how citizens can properly prepare for disasters can be found on the Department of Homeland Security’s website: www.dhs.gov/xcitizens.

During and following the aftermath of a disaster, community associations can run through a checklist of five things that will aid in maintaining the safety of their residents. The checklist includes the following: 1) Accounting for all residents. This can be a daunting task, especially in larger communities. The planning committee should establish a “grape vine” to check on individuals. If power lines are down, there should be a cul-de-sac “point man” that checks on his or her immediate neighbors. 2) Attend to the injured. Again, this can be a formidable assignment. A plan should be in place that allows for individuals to contact emergency organizations immediately. 3) Secure the community from vandalism and looting. 4) Remove storm debris. 5) Brace and support building structures to limit further damage.

If the residents are thoroughly informed on matters of safety, the chances are greater that more co-owners will be able to endure disasters without personal injury when the disasters occur.

Once a planning committee has been created at your condominium association, their major task is to work through the various details of arranging a disaster relief plan for their community. There are three major details that every community association should consider. The first detail that must be well-thought-out is making a risk assessment. What are the major dangers your community may be at risk of experiencing? While it is true, there are not too many communities in Michigan which are located on a fault line, we have several communities which may very well be located in a flood area - Michigan has many lakes and a plethora of wetlands. The bottom line is to locate the obvious risk factors first no matter where you live.

There may be other risk factors which are not as noticeable as the nuclear power plant next door; fortunately, there is help for that too. In Michigan, one can gather information on assessing the not-so-noticeable risks by contacting www.michigan.gov/emd. From this point, one will be able to access the proper county or municipal emergency service agencies. If you do not live in Michigan, you should contact your state’s website in order to retrieve the necessary information, or contact FEMA at www.fema.gov for a direct link to your state’s emergency information.

Many local county and municipal governments have established Local Emergency Planning Committees (LEPC). These organizations are in place to assist residents in developing their own plans and preparations in disaster anticipation. Also, community associations should contact their local police and fire departments to seek assistance in creating risk assessments and evacuation plans if necessary. Once the risk assessment has been completed, associations should contact their insurance agent to determine if they have the proper insurance in place. This should also include an assessment of the necessity of terrorism insurance.

Are you prepared?
Before you buy your next condo, or while you are at your next association board of directors meeting, you may want to enquire if your association has prepared a disaster plan. It has been duly noted that condominium associations are in a unique position to bridge the gap between displaced residents and overwhelmed emergency departments during and in the aftermath of major disasters.

A Novel Idea
Many associations have beautification committees, finance committees, marketing committees, and any other committee a board member can create. However, how many associations have a planning committee whose sole responsibility is to develop a disaster relief plan? Such an idea should be taken very seriously with the committee being made up of management staff, board members and residents. Community associations should be proactive in this area as opposed to assuming that their management company has already thought out such details.

Owning and living in a mixed residential/retail development can be a very rewarding experience or it can be a nightmare, depending upon the efforts that are being undertaken by the developer to insure that the retail does not interfere with the useful enjoyment of the condominium premises in the residential structures. There should be appropriate allocation of expenses and clear definitions of who will have control of the condominium project between the retail side and the residential side. I have seen situations where developers have been sloppy in regard to the documents which they have created thereby causing problems for the residents of the residential area. Reviewing the documents in full before one makes a purchase in a mixed development condominium should be the first rule of thumb.

Downtown Detroit is especially making a comeback with new developments in both residential and business districts as well as mixed use condominiums. There is much to offer prospective tenants in the Downtown Detroit area in the way of businesses, shops, restaurants, and entertainment; however, one is best advised to look into the various issues of mixed development condominiums with a knowledgeable condominium lawyer and perhaps an engineering consultant prior to making a purchase in a mixed condominium development whether in Detroit or elsewhere.