Robert Meisner

Many condominium associations have a prohibition on “for sale” signs in unit windows.  I recently heard from a co-owner whose real estate agent put a “for sale” sign in their unit and the owner was wondering if they had a basis to stop the association from interfering.

 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.

I have written in depth lately about cable contracts with condominium associations, and was approached recently by another association being contacted by a cable contractor to negotiate a contract.  There are generally four key terms of a cable contract.  Depending upon your documents, you want to be sure, among other things, that 1) you give a license and not an easement if possible, 2) set service standards, 3) avoid a long term contract with automatic renewal terms, and 4) arrange for a revenue sharing if at all possible. In any event, make sure that you have a qualified community association attorney review and/or negotiate your contract before you sign it.  Otherwise, you are at a distinct disadvantage.  

I recently heard from a co-owner who is being foreclosed upon by his condominium association for nonpayment of assessments.  The individual stated that he has tried to work it out with the Association’s attorney but the attorney is steadfast in pursuing the matter.  This co-owner asked what he could do to eliminate the problem.

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.

A few days ago I wrote a blog regarding condominium and/or community associations entering into exclusive agreements with cable providers.  That article prompted one co-owner to ask me about his condo board which signed an exclusive agreement with a satellite TV company.  The community is now dissatisfied with the vendor because of poor service, and he asked if the recent FCC order banning exclusive clauses applies to dish providers.

 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

I recently heard from a community association board whose members were wondering about their association being able to negotiate a compensation package with one or more of the cable companies for access to their condominiums, and how this plays into a recent FCC ruling regarding exclusivity.    

 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.  

I recently heard from a community association board whose members were wondering about their association being able to negotiate a compensation package with one or more of the cable companies for access to their condominiums, and how this plays into a recent FCC ruling regarding exclusivity.    

 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.  

I recently fielded a question regarding congress passing legislation to eliminate taxes on mortgage debt, and I thought I would include my answer here as a benefit to my readers:

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. 

With tax season upon us, individuals who own vacation condos must be certain they are able to claim every tax credit and/or deduction allowed them by law.  The following is an excerpt from my book, Condo Living: A Guide to Buying, Owning & Selling a Condominium and is part of a tax credit series for the condominium owner and investor.

“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.

More and more I am hearing from frustrated individuals who are complaining about the level of service they receive from the business and professional community.  Many of these complaints are geared especially toward lawyers who simply will not follow through with something as basic as returning a phone call.  Many members of my profession may feel that if they delay responding to calls and e-mails they might be more efficient due to the lack of interruptions.  In my opinion, this is a flawed premise.  I know I would not be happy with an attorney who placed “his efficiency” over my satisfaction!

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.

Many individuals who serve on condominium and/or community   association boards may have an in depth understanding of parliamentary procedures, and yet not fully understand what they should and should not place in the minutes of their board meetings.  I was recently told by a board member that his association board likes to document in the minutes the names of delinquent co-owners.  As a practicing attorney for over 38 years, I can tell you that this is not a good idea for several reasons, but the main reason would be that if a board is incorrect in terms of what they are saying about a delinquent co-owner, they may be opening themselves up to a discrimination and/or libel claim.

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.

I have heard from interested buyers looking into property in San Felipe, Mexico, which could very well be the new Cabo San Lucas.

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.

Board communication with co-owners is essential to operating a successful condominium or homeowners association.  Establishing a community association newsletter to provide notice of meetings and to announce community events is a wonderful way for board members to communicate with the association members. 

 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

While speaking at a seminar a few weeks ago, a real estate agent, who happens to be heavily involved in the foreclosure market, approached me during the break and we began to discuss the current housing crisis in the State of Michigan.  She stated that based on the number of homes in default that were yet to enter the foreclosure market, the current housing conditions were only going to get worse due to the large amount of inventory.  I know many real estate experts feel that Michigan has not seen the bottom of the foreclosure tumult.  With this thought in mind, it is imperative that home owners and buyers be on the lookout for mortgage fraud.

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.