Archive | Real Property RSS feed for this section

Radon disclosure effective January 1, 2014

3 Jan

Making Sense of the Radon Awareness Act

Buyers and sellers of residential real estate in Minnesota should be aware, if they are not already, of a law passed in the last legislative session that became effective January 1, 2014.  The new law requires sellers to disclose to buyers, in writing, any knowledge the seller has concerning radon concentrations in the dwelling.  It also requires very specific disclosure in the form of a statutory notice and accompanying publication, as detailed below.

Clearing the confusion.  While this law has only been in effect two days as of the time of this writing, it is clear that there is already some confusion and misinformation concerning what the law requires. Perhaps it is worth clarifying what the law does not require, first.  The law DOES NOT require a seller or buyer to perform a radon test before the property is sold.  The law DOES NOT require a seller to provide, or a buyer to obtain, a radon inspection.

  • What transactions are impacted? While the law became effective January 1, 2014, it applies very specifically to “[…]agreements to sell or transfer residential real property executed on or after that date.”  Minn. Stat. Sec. 144.496, subd. 6.
  • What does the Minnesota Radon Awareness Act require?  You can find the full text of the law here: https://www.revisor.mn.gov/statutes/?id=144.496. The new radon disclosure law is somewhat similar in approach to other Minnesota seller disclosure obligations, and also to federal lead-based paint disclosure.  The statutory language states:

Before signing an agreement to sell or transfer residential real property, the seller shall disclose in writing to the buyer any knowledge the seller has of radon concentrations in the dwelling.

(Minn. Stat. Sec. 144.496, subd. 3)

  • Additional requirements.  The disclosure must also include additional information, including whether radon tests have been performed on the property, recent records pertaining to radon concentration levels, a description of any remediation/mitigation efforts taken, etc.  Additionally, the law requires two very specific disclosure obligations be met: 1) the seller must provide a very specific radon disclosure statement containing language specified within the statute (Minn. Stat. Sec. 144.496, subd. 4); and 2) the seller must provide the buyer with a copy of the Minnesota Department of Health publication entitled “Radon in Real Estate Transactions”.  You can find that publication here: http://www.health.state.mn.us/divs/eh/indoorair/radon/rnrealestateweb.pdf
  • Certain transactions are excepted from the requirements.  The statute lists an array of transactions for which the Radon Awareness Act does not apply.  Minn. Stat. Sec. 144.496, subd. 3(d). To determine if your transaction may be excepted from the requirements, review the statute carefully and speak with your legal counsel to clarify any questions.

Some trade organizations, like the Minnesota Association of Realtors(R), and the Minnesota State Bar Association have created forms that incorporate the disclosure requirements.  If you are already utilizing an attorney or real estate agent in your transaction, hopefully they are assisting you with understanding and complying with this disclosure obligation.  If they aren’t, or you have not already engaged a real estate agent or attorney you should be sure to speak with a competent real estate attorney to ensure you obtain the advice and counsel you may need to help you fulfill this disclosure, and other applicable disclosure obligations.

For residential buyers, it is important that you understand that while a seller is obligated to disclose what they know, regarding radon, many sellers have no reason to know radon levels are normal or abnormal unless they have had an inspection done.  Buyers are free to negotiate a radon inspection into the terms of a purchase agreement.

If you are curious about the health concerns or rationale for why the legislature believed a radon disclosure to be necessary, radon facts and background information can be found at the Minnesota Department of Health website, here.  According to the Minnesota Department of Health,

High radon exist [sic] in every state in the US.  In Minnesota, 2 in 5 homes has radon levels that pose a significant health risk, and nearly 80% of counties are rated high radon zones.

Source: http://www.health.state.mn.us/divs/eh/indoorair/radon/index.html?utm_source=print&utm_medium=brochure&utm_campaign=general

Additional radon-related information can be found within the MDH website, here.

As real estate transactions become increasingly complex, it is prudent to engage professionals such as a real estate agent and attorney to help you navigate disclosure obligations and other responsibilities involved in buying or selling residential real estate.

_______________

Follow MNLegalAdvisor on Twitter

This blog entry is written by Brad Boyd, a Shareholder at Thomsen Nybeck.  Brad’s practice focuses primarily in Real Estate, Real Estate Brokerage, Business and Corporate law.  Brad provides legal advice, guidance, and representation related to risk management in a wide variety of real estate and business law matters.  a

Advertisements

Matt Drewes Quoted in Recent Article at HOALeader.com: Does Your Architectural Committee Have the Right or Responsibility to Enforce Local Laws?

6 Jun

Matt Drewes recently contributed quotes for the following articles published at www.hoaleader.com, a national web-based publication focused on homeowners association and condominium board members and association management professionals:

  • Does Your HOA’s ARC Have to Enforce Local Laws? Discussion Forum Follow-up; published April, 2013 at HOALeader.com
    • Publisher: Plain-English Media, LLC (quoting Matthew A. Drewes); Read it now.

Matt is a Shareholder with Thomsen Nybeck.  He is the head of the firm’s eight-member Community Association Representation Group and the firm’s Creditors’ Remedies Group, and practices in the areas of business and real estate litigation and transactions, employment law, construction litigation, community association law, debtor/creditor law and insurance. He has been included in the annual list of Minnesota’s Rising Stars for several years, and has been quoted in the Minneapolis StarTribune, Minnesota Lawyer, Habitat Magazine, and on various websites including Yahoo!Finance.com, Bankrate.com, MSN.com, and elsewhere on issues involving construction litigation, community associations and real property issues. He can be reached at mdrewes@tn-law.com or by phone at 952.835.7000.

Bank agrees to postpone foreclosure sale; forecloses anyway and obtains dismissal of lawsuit against it

28 Dec

The Minnesota Federal District Court recently dismissed the legal action that Etta Bracewell and her husband commenced against U.S. Bank for allegedly breaking its promise that it wouldn’t foreclose on them. Ms. Bracewell and her husband sued the Bank because it foreclosed on them on December 29, 2011, even though just days earlier they say the Bank had promised it would cancel the foreclosure sale.

The case was dismissed because of the Minnesota Credit Agreement Statute (“MCAS”). Minn. Stat. § 513.33. The MCAS insulates banks from lawsuits claiming they made promises or agreements relating to the grant, extension, or even holding off on the collection of loans unless the bank and the borrower have signed a credit agreement specifically stating the terms of the bank’s obligation and the value the bank is receiving in return.

The MCAS exists for a reason. Many people have sued banks claiming they were supposed to get a loan or that they had received an extension of time to pay the bank back, but the promise either was not made or someone within the bank without authority to make such a deal said they would try to get it approved. Sometimes, however, the results can appear unfair to the borrower. If the allegations by Ms. Bracewell and her husband are true, this may be one of those instances, as they alleged they might have taken other action to stop the foreclosure sale if they had known the Bank would not follow through with, or be bound by, its alleged promise.

The case, which is currently available only if you have a subscription to the Federal Courts electronic case filing system or if you subscribe to a legal research publishing service, is Bracewell v. U.S. Bank National Association. In its decision, the court explains the application of the MCAS as follows:

The Eighth Circuit has held that a creditor’s promise to postpone a foreclosure sale constitutes a “financial accommodation” for purposes of the MCAS. Brisbin v. Aurora Loan Servs., 679 F.3d 748, 753 (8th Cir. 2012). Therefore, Plaintiffs may only maintain an action on U.S. Bank’s alleged promise to cancel the sale if that promise “is in writing, expresses consideration, sets forth relevant terms and conditions, and is signed by” Bracewell and U.S. Bank.

Bracewell v. U.S. Bank (citing Minn. Stat. § 513.33, subd. 2). The Court went on to cite to several other recent cases where plaintiffs’ claims were barred by failure to verify their arrangements in signed agreements, including where the bank did not dispute that it made a promise to postpone the foreclosure sale. The Court found that, because Ms. Bracewell and her husband could not, and had not, asserted any of these requirements had been met, their claims are barred.

It may be that the MCAS was applied in the proper manner in this case, and that Ms. Bracewell and her husband did not receive the promise they say they did. But the case nevertheless represents a word to the wise; be sure to get that promise in writing, especially where the MCAS may apply.

Matt Drewes contributed this post. Matt is a Shareholder with Thomsen Nybeck.  He is the head of the firm’s eight-member Community Association Representation Group and the firm’s Creditors’ Remedies Group, and practices in the areas of business and real estate litigation and transactions, employment law, construction litigation, community association law, debtor/creditor law, and insurance. He has been included in several years’ annual lists of Minnesota’s Rising Stars, and has been quoted in the Minneapolis StarTribune, Minnesota Lawyer, Habitat Magazine, and on various websites including Yahoo!Finance.com, Bankrate.com, MSN.com, HOALeader.com, and elsewhere on issues involving construction litigation, community associations and real property issues. He can be reached at mdrewes@tn-law.com or by phone at 952.835.7000.

Finally a break in the real estate industry

30 May

Last week the United States Supreme Court decided a case which refines a commonly debated interpretation of the Real Estate Settlement Procedures Act (“RESPA”) by lower courts.  RESPA is a Federal law that plays a significant role in how real estate brokerage companies (among others) conduct day-to-day business.  It has myriad prohibitions, restrictions and disclosure requirements that are applicable to such “settlement service providers” as title companies, mortgage lenders, real estate brokers and more.  Generally, it prohibits referral fees and unearned fees by settlement service providers in connection with a federally-related mortgage, imposes restrictions and requirements on “affiliated business providers”, mandates certain disclosures to increase transparency of transactions for consumers, and more.

Until this month, the issue of how RESPA impacts “administrative fees” charged by real estate brokers and agents was a controversial and often debated real estate brokerage issue, nationwide.  There was a split in how the decisions in various cases across the country interpreted Section 2607(b) of RESPA.  That section provides:

“[n]o person shall give and no person shall accept any portion, split, or percentage of any charge made or received for the rendering of a real estate settlement service […] other than for services actually performed.” 12 U. S. C. §2607(b)

The various split in decisions and HUD interpretations addressing this issue left some unanswered questions as to whether a real estate brokerage would find itself in hot water when charging an “administrative fee” or similar charge in addition to a commission, if the real estate broker could not readily identify what service was being rendered pursuant to that admin fee.

The United States Supreme Court decided a case last week (May 24, 2012) which clarifies this issue significantly, and simplifies this issue for real estate brokers.  In the case of Freeman v. Quicken Loans, the Supreme Court found that there is no violation of §2607(b) of RESPA without showing that a charge for a settlement service was divided with a third party.

The full decision of the Freeman case can be found here: http://www.supremecourt.gov/opinions/11pdf/10-1042.pdf.  An interpretation of how this decision impacts real estate brokerage companies and brokers/agents was offered by the National Association of Realtors(R) (“NAR”), and their article can be found here: http://speakingofrealestate.blogs.realtor.org/2012/05/24/supreme-court-rules-fee-split-required-for-respa-violation/.

In short, this author suspects that some of the national controversy and confusion surrounding real estate brokerage admin fees will now become an easier topic to  address consistently, and with less controversy. Prior cases, including the controversial 2009 decision in Busby v. JRHBW Realty, Inc. d/b/a Realty South, had suggested that merely charging an “admin fee” in addition to a commission, even if it is disclosed to the consumer paying such fee, is in and of itself a violation of RESPA.  In January 2010, a HUD letter from Helen Kanovsky (Office of the General Counsel at HUD) clarified that there may be some room from brokerages to have commissions composed of a flat fee or commission or both.

Now that the Supreme Court has weighed in, it would seem likely that admin fees charged by real estate brokers should draw less scrutiny.  Additionally, the prior caselaw and unfavorable decisions interpreting RESPA in such a way as to further restrict the real estate industry than was explicitly stated in RESPA are probably of dramatically less impact, or their impact is narrowed significantly by this decision.

Stay tuned to the Thomsen Nybeck Legal Update blog for further discussion of this issue as more information, interpretations, and decisions bring this issue into even sharper focus.  For now, real estate brokerage companies, agents, and brokers who charge (or have ceased charging) administrative fees may wish to discuss these issues once again with their legal counsel to identify how they want their business practices to fit within the fluid and evolutionary laws surrounding these practices.

_______________
Follow brokerageatty on Twitter

This blog entry is written by Brad Boyd, a Shareholder at Thomsen Nybeck.  Brad’s practice focuses primarily in Real Estate, Real Estate Brokerage, Business and Corporate law.  Brad provides legal advice, guidance, and representation related to risk management in a wide variety of real estate and business law matters.  He is counsel to the Minnesota Association of Realtors, many individual Realtors and brokerages, business clients and individuals, and is a frequent speaker for real estate continuing education throughout the state of Minnesota.

Recent Freddie Mac Bulletin May Stop or Stall Short Sales After Sheriff’s Sale

3 Apr

Last Friday the Minnesota Association of Realtors® (“MNAR”) released a member update identifying that there has been some recent disruption in the short sale process (where lenders/servicers are sometimes refusing to allow a short sale after the sheriff’s sale has taken place).  This is apparently due, in large part, to reaction by lenders/servicers to a recent (March 13th) Freddie Mac bulletin.

This bulletin (Freddie Mac Bulletin 2012-7) identified a revised definition for the term “REO Rollback”.  Additionally, it changed the calculation and fee structure for various workout or modification programs, changed fees and costs for researching/reconstructing servicer records, and made other changes that may impact how servicers approach mortgage modification or workout arrangements.  According to the MNAR update, a few days after the Bulletin was published, mortgage servicers began notifying homeowners who were past the sheriff’s sale that the investor would no longer approve short sales during redemption, and that the homeowner should contact Freddie Mac.

So, for those who were planning to accomplish a short sale during the redemption period, after sheriff’s sale, that option may be much more limited.

Exploring Options – Seek Legal Advice

For those who are exploring options in advance of foreclosure, you should speak with an attorney experienced in real estate transactions and distressed property scenarios.  Scenarios such as foreclosure postponement (a process detailed in Minnesota Statute §580.07) may be well worth exploring.  While it is important to seek the advice of a competent attorney to ensure you are not making a decision that creates more risk/problems than benefit, some homeowners in distress do not believe they can afford to do so.  Such individuals may wish to seek out attorneys who may offer a limited scope review or advising at a contained cost.

Exploring Options – Consult Other Resources

Since many foreclosure and short sale related scenarios have significant financial, credit, or tax consequences, exploring scenarios with your financial advisor, tax, advisor, real estate agent and other professionals is also important.  For those who want to make better use of their time with an attorney or who are looking for additional or independent resources while considering options in connection with mortgage foreclosure or distressed property, you may also wish to explore the Minnesota Home Ownership Center’s website.  The MN Home Ownership Center (HOCMN) such as the following:

  • the “Know your Options” summary guide, found here
  • an overview of foreclosure postponement by a mortgagee (borrower) and an online tool to help with the process, found here
  • a summary of common scams and warning signs for those who prey upon individuals in financial distress, found here.
None of the resources above replace or substitute for the advice of an attorney.  However, they can be helpful for those looking for preliminary information or to supplement the advice or information that individuals may be gathering from other (sometimes far less reliable) resources.  Although it is uncertain when or how the short sale process will adjust to the Freddie Mac bulletin that is the subject of this article, we will continue to monitor this issue and try to release new information as it becomes available.
By searching within the Thomsen & Nybeck Legal Update blog, you can find many articles and lots of information about short sale, foreclosure and other legal updates that address similar issues.

_______________
Follow brokerageatty on Twitter

This blog entry is written by Brad Boyd, a Shareholder at Thomsen Nybeck.  Brad’s practice focuses primarily in Real Estate, Real Estate Brokerage, Business and Corporate law.  Brad provides legal advice, guidance, and representation related to risk management in a wide variety of real estate and business law matters.  He is counsel to the Minnesota Association of Realtors, many individual Realtors and brokerages, business clients and individuals, and is a frequent speaker for real estate continuing education throughout the state of Minnesota.

Real Estate Fraud is Alive and Well in Minnesota

6 Feb

Real estate fraud is alive and well  — a recent prosecution results in 75-month sentence for Minnesota mortgage broker; more scams continue to get uncovered

Some significant mortgage and real estate fraud schemes have been recently prosecuted in Minnesota.   Michael Hadalla, CEO and co-owner of Enzo Mortgage Group, was sentenced to 75 months in prison and ordered to pay $800,000 in restitution and a fine of $10,000.  (http://minnesota.cbslocal.com/tag/enzo-mortgage-group/)  Prosecutions involving the Enzo Mortgage firm have previously resulted in the conviction of other individuals involved in the scams. ( http://www.hennepinattorney.org/NewsPress/tabid/391/EntryId/56/Three-defendants-sentenced-to-serious-time-for-mortgage-fraud-racketeering.aspx)

Another mortgage company (Mortgage Planners, Inc.), alleged to be involved in a “sophisticated” fraud scheme found itself in the eye of the storm in 2011 when a collaborative investigation / prosecution team involving the Commissioner of Commerce, HUD, and the Hennepin County Attorney’s Office initiated charges of racketeering in an alleged fraud scheme involving more than 60 properties.  (http://minnesota.publicradio.org/display/web/2011/06/22/mortgage-fraud-charges/)  This scheme is alleged to have involved “straw buyers” purchasing properties at foreclosure sale, who never intended to be the owners or occupants of the property.

In a June 2011 press release, the U.S. Department of Justice indicated more than 30 individuals in MN were prosecuted for mortgage fraud or related crimes, and that number had reached more than a dozen by the middle of 2011.  http://www.justice.gov/usao/mn/press/jun047.pdf

The June U.S. Department of Justice 2011 press release details the prosecution and conviction of several notable mortgage fraud schemes that have taken place in Minnesota, including the infamous scandal involving the Cloud 9 Sky Flats.  The carnage left by that scandal continues to unfold, with business owners involved in a mortgage brokerage and title company having ties to the Cloud 9 development entering guilty pleas as recently as last month. (http://www.bizjournals.com/twincities/news/2012/01/19/two-more-guilty-cloud-9-fraud-trooien.html)

In March, the author of this blog entry, Thomsen Nybeck shareholder Brad Boyd, will join representatives of the FBI and the Department of Commerce in presenting a seminar to real estate agents and brokers addressing some of the current fraud issues in today’s real estate marketplace.  It is important for real estate professionals (real estate agents, brokers, mortgage brokers, title companies, attorneys) and consumers alike to recognize that we have not emerged from a fraud-ridden marketplace, fraud continues to occur.

While many people mistakenly believe real estate fraud is part of a bygone era, that’s simply untrue.  FBI statistics report that FBI mortgage fraud pending investigations totaled 3129 in FY 2010, up 12% from FY 2009 and up 90 percent from FY 2008 (source: FBI.gov). Minnesota ranks in the top 3 states for mortgage fraud cases nationally, based on dollar amount (as of Q3 2011 based on a MortgageDaily.com report).

Mortgage fraud hurts consumers and taxpayers by taking money away from banks.  While banks are not always a sympathetic victim, what hurts the banks in turn hurts consumers.  Lending standards go from nearly unregulated to hyper-regulated, making financing more difficult to obtain for legitimate and qualified buyers.  In the end, many of the economic woes of a damaged real estate marketplace and devalued housing market can be directly or indirectly linked to fraud scams and real estate values which were simply a mirage, propped up by illicit transactions.

In a market filled with foreclosure and short sale transactions, fraud hasn’t disappeared, it’s simply found a new format, and we all need to remain alert to the new trends.  Everyone can play a role in being alert to avoiding the misrepresentations, omissions, or false information that form the basis of a mortgage fraud scheme.

_______________
Follow brokerageatty on Twitter

This blog entry is written by Brad Boyd, a Shareholder at Thomsen Nybeck.  Brad’s practice focuses primarily in Real Estate, Real Estate Brokerage, Business and Corporate law.  Brad provides legal advice, guidance, and representation related to risk management in a wide variety of real estate and business law matters.  He is counsel to the Minnesota Association of Realtors, many individual Realtors and brokerages, business clients and individuals, and is a frequent speaker for real estate continuing education throughout the state of Minnesota.

http://www.startribune.com/local/north/127963973.html

Ice Dams: Answers to Five Frequently Asked Questions

20 Dec

Ice dams are all too common during Minnesota winters. They may happen for a number of reasons, and there are debates about whether they should happen at all. When they occur, arguments frequently arise about how to take care of the problem. In common interest communities this also leads to disputes about who is responsible to perform the repair work and, more importantly, who should have to pay for it. Sadly, winter again is approaching, and for many, ice dams will follow. This article will review the causes of ice damming, the various parties who may have responsibility to pay for repairing the damage, and who might have the responsibility to correct the problem.

What Are Ice Dams?

Ice dams are characterized by a buildup of ice at the edge of a roof. They occur when snow accumulates on a roof and the surface of the roof is heated sufficiently to melt the snow, while the eaves (the portions of the roof more exposed to the elements) remain below freezing due to cooler outside temperatures. Icicles may form as a result of ice dams, but the presence of icicles does not necessarily signal the presence of ice dams. That said, it’s better to be safe than sorry, and if you’re in doubt you should react as though you have ice dams until you receive a credible confirmation that ice dams are not present.

What Causes Ice Dams and How Do They Cause Damage?

Sunny winter days, which are common in Minnesota, frequently contribute to ice dams. What many people don’t realize is that one or more other factors usually cause the ice dam. Some builders or their representatives will contribute to the confusion about the nature or cause of ice dams by attempting to excuse their presence. They may assure homeowners that ice dams are normal and unpreventable, or that the problem is caused by the homeowner’s or the association’s failure to maintain its roofs properly, or instead that the problem has arisen due to abnormal or extreme weather conditions that could not have been foreseen. In fact, ice dams should not occur and in most cases are preventable, though fault and financial responsibility may present some thorny issues.

The two most common causes for ice dams are found inside the structure. The first cause is “bypass air” from the dwelling that enters the attic, and the other is inadequate ventilation inside the attic space. In some ways the direction a building faces may contribute to the problem, as can certain architectural styles or features, but at least one of the two issues listed above are usually involved when an ice dam forms.

The term “bypass air” refers to warm air from the dwelling that finds its way into the attic and, during the winter, can start to warm the underside of the roof. This warm air may actually leak through light fixtures or other openings between the dwelling and the attic, or it can result from insufficient insulation in the attic, allowing ambient heat from the unit to rise into the attic. It is also possible that air ducts or other ventilation systems may leak or radiate heat into the attic. Service providers exist who can perform a “blower door” test that determines whether there is excessive air escaping from the living area into the attic space of a structure. Some even work through government-subsidized programs to make their services more affordable.

A ventilation issue arises when air flow in the attic itself is inadequate. Roofing systems are designed with vents near the peak and vents in the soffits. The soffit is the horizontal surface, usually made of painted metal, that you see when you look up at the underside of the eave of your roof. These vents exist to permit air to rise up through the soffit, flow along the underside of the roof deck, and escape out the vents near the roof peak. When this air flow occurs uninterrupted, the surface of the roof is more likely to say a relatively uniform temperature from top to bottom, limiting if not eliminating the temperature variations that can cause the upper areas of the roof to be warm while the lower areas of the roof remain cold (the cause of ice dams). If insulation blocks this ventilation because it is filled or packed against the underside of the roof, inconsistent roof temperatures characterized by warm upper roofs and cold lower roofs (the cause of ice dams) can result. Ironically, insulation intended to limit the amount of bypass air in the attic can cause ice dams by blocking needed ventilation.

Of course, water leaks need not occur just because there are ice dams. Proper roofing techniques can help protect against water damage even where ice dams might form. This primarily means proper installation of an “ice/water shield” a sufficient distance up the roof, and also protecting the bottom edge of the roof, where it meets the fascia. Ice/water shield can protect the roof edge, but some contractors will install a metal “drip edge” at this location to protect against voids between the roof deck and fascia where water can enter. Gaps or openings that allow water to enter when it backs up under the shingles should not exist at or near roof edges. Consider also that just because you haven’t seen water inside your home does not mean that water has not entered the structure. Water reaching the inside of a building violates building code and constitutes a major structural defect whether it enters the dwelling space or not.

How Should You Respond if You See Ice Dams?

If you see ice dams on your home or in your community, ensure the association’s board of directors and the property manager, if any, know about the ice dams and any resulting leaks. Provide the notice in writing as quickly as possible. The association and any affected unit owners should then cooperate for the purpose of making an inspection of the roof and attic —and the unit, if necessary— to investigate the cause of the ice dams and any damage arising from them.

If your community is less than 10 years old when you first notice the ice dams (or if the ice dams occur within 10 years of a renovation to the building) you should also provide written notice to the developer, builder or contractor, as applicable. Do this immediately. Failure to provide timely notice is just one of a number of pitfalls that await you if you hope to recover from those who might be responsible for any defects causing your ice dams. Keep in mind also that, to avoid an argument of spoliation (or destruction of evidence), you should be prepared to allow the builder or contractor to investigate the cause and effect of your ice dam problem. It would be wise to seek the assistance of an attorney familiar with these issues before potentially taking an action that compromises your ability to obtain a repair or recovery for your problem.

Whose Job Is it to Fix This?
Deciding who will be responsible to take steps to stop an ice damming problem becomes a challenging question. Conditions inside the structure usually cause the ice dams, but inside the structure does not necessarily mean inside an owner’s unit. The party responsible to perform the work may depend on the type of association involved (condominium or townhome). Moreover, both interior and exterior conditions may contribute to cause damage, and repairs may be necessary in both locations to prevent further problems.

A. Exterior.
The short term solution might be the easiest to identify. The association usually has the responsibility to maintain common elements and building exteriors. Frequently, this means the association should remove snow and ice from the roofs until a more permanent solution can be implemented. While it is a temporary solution to remove snow from the roof or to melt a channel in an ice dam, this should not be a permanent solution. Raking, shoveling, or even sweeping snow off of roofs, and especially efforts to chip ice away, are likely to damage the roof and should not be necessary if the roof system is performing properly. Moreover, depending upon the severity of the winter, clearing snow and ice from your roofs can quickly sap an association’s resources.

The association should examine the roof and fascia where an ice dam has formed to determine whether roofing materials were properly installed. If corrections are necessary to the shingles, underlayment, ice/water shield, or if a drip edge must be installed, the association should take steps to address these areas.

B. Interior.
A unit owner’s responsibility for making interior repairs or alterations to eliminate ice dams may depend on the type of community involved. In a condominium, unless the declaration states otherwise, the common elements include all portions of the association not contained within the unfinished interior surface of the owners’ units. This means the attics usually are part of the common elements. As such, the association will in most cases have the responsibility to maintain not only the roofs of a condominium, but also the attics. The association should, in such cases, evaluate and address any bypass air or ventilation issues.

In a townhome association, the attics usually are part of the unit. This means if a unit owner observes that he or she has ice dams, that owner may need to conduct his or her own investigation into any possible internal issues that are causing ice dams. If multiple owners have the same problems, however, it may be best to pursue the investigation and any alterations jointly, or with the association managing the process. This will maximize efficiency and perhaps lower the overall cost of the work. In addition, the association may have an interest in doing this work or ensuring that the alterations are consistent throughout all units because the building exterior will be affected if the ice dams return.

Who Gets the Bill?
Ice dams may generate several costs. First, there is the short-term need to remove the snow and ice that creates the ice dam itself, as well as the water that pools behind it. Longer term, the cause must be investigated. If leaks have occurred, the roof should be evaluated. Then there are the repairs that are necessary in light of this investigation. What follows are some thoughts about where to look for the money to pay for these things.

A. Insurance.
If an ice dam causes damage to the interior of a structure, this often will constitute an insured loss. Pursuant to most applicable policies, and certainly under Chapter 515B of Minnesota Statutes (also known as the Minnesota Common Interest Ownership Act, or MCIOA), the association’s insurance policy is to provide primary coverage for the loss. However, the association usually is entitled to allocate the deductible under its own policy against the owners whose units are involved in the claim or whose actions or inactions resulted in the loss. Ideally, owners will have HOA policies in place with loss assessment coverage, which will cover the association’s deductible if necessary. There may be reasons not to submit an insurance claim, however, such as avoiding an increase in insurance rates, or because the association intends to pursue the builder or contractor who is responsible for the conditions causing the ice dams.

B. Builder or Contractor.
If ice dams exist in a newer association, or if they began shortly after recent renovations or a re-roofing project, it is quite possible they’re a result of defective construction practices, and an express or implied warranty may cover the condition. As mentioned above, providing written notice to the builder and any applicable subcontractors is one step in preserving the right to obtain a recovery for the defect. However, there are several statutes of limitations that apply to claims for defective construction and breach of warranty. In addition, depending on the nature of your claims or the provisions of applicable purchase documents and governing documents, you may have to navigate potential restrictions or limitations on your ability to pursue a recovery. If you have any doubt whether you have a right to pursue a claim for recovery from your association’s builder or from your contractor, you should still pursue a full evaluation of the situation. Options may still exist even if you did not provide prompt written notice, or if the contractor has gone out of business or filed for bankruptcy, so you should never assume you have no chance at recovery. Of course, the earlier you pursue a complete evaluation, the better.

C. Common Expense: Shared vs. Allocated.
If insurance coverage is unavailable for performing necessary alterations or to correct deficiencies in the roof system, and recovery from the applicable builder is unavailable or unsuccessful, the association and the affected unit owner(s) must explore the proper solution. Associations may, and often do, choose to treat exterior work such as removing snow and ice, investigating the cause and fixing roofing issues, as a common expense borne equally by all owners. Note however, that if the association is governed by MCIOA, it is authorized by statute to allocate the cost of any work to fewer than all the units if only those units are benefitted by the work, as long as this is not prohibited by the declaration. Also, unless the association’s declaration requires otherwise, MCIOA associations that are performing work on limited common elements must allocate the cost of work on such areas to the unit(s) to which the limited common element is allocated. Note that, depending on your association’s declaration, limited common elements may include attics and/or roofs, meaning the cost of all necessary work might be allocated back to the benefited unit owner(s) if the association has reacted reasonably upon receiving notice of the problem.

This does not mean the association may pass along to owners the cost of obtaining an opinion regarding the association’s obligations, and the proper characterization of the area to be addressed (e.g., limited common element, common element, or a portion of a unit). This is not generally a cost directly attributable to maintenance, repair or replacement, and in most cases will not reasonably be considered a cost of enforcing the governing documents. There is no “one size fits all” approach, but this usually is a cost the association must bear as a common expense. Furthermore, if a party receives notice that snow on the roofs is turning into ice dams, that party risks liability for problems that it should have taken steps to avoid, but didn’t. For this reason, the association and its owners should cooperate as much as possible in diagnosing and eliminating the cause of ice dams, keeping in mind that both have something to lose if the problem is not promptly and permanently resolved.

Matt Drewes contributed this post, which is taken from an article appearing in the September/October issue of Minnesota Community Living magazine.  Matt is a Shareholder with Thomsen Nybeck.  He is the head of the firm’s nine-member Community Association Representation Group and the firm’s Creditors’ Remedies Group. and practices in the areas of business and real estate litigation and transactions, employment law, construction litigation, community association law, debtor/creditor law and insurance.  He has been included in Minneapolis/St. Paul Magazine’s list of Rising Stars for several years, and has been quoted on issues involving construction litigation, community associations and real property issues in the Minneapolis Star Tribune, Minnesota Lawyer, Habitat Magazine, Minnesota Community Living Magazine, Yahoo!Finance.com, MSN.com, Bankrate.com, and elsewhere.  He can be reached at mdrewes@tn-law.com or by phone at 952.835.7000.

%d bloggers like this: