Matt Drewes Quoted in Two Recent Articles at HOALeader.com: Handling rogue board members; and Proper treatment of meeting minutes.

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:

• “What’s Your Duty When Fellow HOA Board Members Violate Governing Documents?”; published November 2013 at HOALeader.com
  • Publisher: Plain-English Media, LLC (quoting Matthew A. Drewes); Read it now.

• “More HOA Meeting Minute Madness: When Can Minutes Be Changed?”; published November 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 coverage. He has been included in several years of the annual list 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.

Matt Drewes Quoted in Three New Articles at National Community Association Forum

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:

• “7 Tips to Keep HOA Legal Fees in Check”; published August, 2013 at HOALeader.com
  • Publisher: Plain-English Media, LLC (quoting Matthew A. Drewes); Read it now.

• “HOA Owners and Security Cameras: OK or No Way?”; published August, 2013 at HOALeader.com
  • Publisher: Plain-English Media, LLC (quoting Matthew A. Drewes); Read it now.

• “Smart Rules for your HOA Meetings Open Forum”; published August, 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, 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.

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

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.

Matt Drewes Quoted in Several Articles at HOALeader.com: Dealing with renters; Associations issuing speeding tickets?; Getting an inactive association back on track

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:

• “Smart HOAs Get Tenants on Their Side”; published March 8, 2013 at HOALeader.com
  • Publisher: Plain-English Media, LLC (quoting Matthew A. Drewes); Read it now

 

•  “Restarting Your HOA? Where to Begin”; published March 2013 at HOALeader.com
  • Publisher: Plain-English Media, LLC (quoting Matthew A. Drewes); Read it now

• “Court Says HOA Can Issue Speeding Tickets; What’s next, Undercover Ops?”; published March 2013 at HOALeader.com
  • Publisher: Plain-English Media, LLC (quoting Matthew A. Drewes); Read it now

• “Getting Tenants Invested in Your HOA”; published March 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, 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.

Minnesota Supreme Court Reverses Court of Appeals; Gives Advice On How to Preserve Claims and Avoid Spoliation (An Update on Miller v. Lankow)

On February 25, 2010, I first wrote about the case of Miller v. Lankow.  At the time, I explained why the Minnesota Court of Court of Appeals’ decision that upheld the district court’s dismissal of the plaintiff’s case seemed extreme and inconsistent with existing law.  (Read that post here).  The Minnesota Supreme Court apparently agreed, and on August 3, 2011 it reversed the dismissal and sent the case back to the district court for further proceedings.  (Read the Minnesota Supreme Court’s Opinion here).

Without going into too much detail, the facts of the case involve a property owner who discovered water intrusion problems, which the seller claimed to have fixed, were still causing problems and resulted in mold and other damage.  The buyer provided notice to the seller and the contractors who were involved that he had discovered these defects and that he would pursue legal action if the parties did not reach a resolution.  Several parties attended an inspection at the property where they had the opportunity to view some of the damage.   The contractors and former owners knew they might be sued, but they did not request the ability to conduct further investigation into the cause or extent of the damage.  The owner later repaired the damage without telling the defendants exactly when he planned to start.

After the owner sued the property sellers and contractors for construction defects, water intrusion, fraud and a seller’s failure to disclose defects, the defendants claimed they were not given a sufficient opportunity to inspect the cause and extent of the damage.  They asked the district court to exclude the evidence the plaintiff gathered because they claimed they did not have a similar opportunity to review the same evidence before it was removed and destroyed.  The district court agreed, ordering that the plaintiff may not use any evidence of the defects and damage that the defendants did not see, which was a sanction for “spoliation” (i.e., destroying evidence).  Without this evidence, the plaintiff had no case, and the district court concluded that the case must be dismissed.  The plaintiff appealed to the Minnesota Court of Appeals, which held that the district court had not abused its discretion by sanctioning the plaintiff and dismissing the case.

The concern the Court of Appeals’ decision raised for me was the notion that, even if the defendants have notice of the claim of damage and the potential for litigation, the plaintiff might still have to wait to make repairs to his home while the defendants seemed to be in no particular hurry to investigate the claims against them.  Sometimes, particularly where water intrusion is at issue, prompt repairs are necessary to avoid further property damage and even personal injury.

The Minnesota Supreme Court agreed that legitimate concerns about destroying evidence before others have had a chance to inspect it must be weighed against the reasonableness of asking the party in control of the evidence to maintain it.  The Supreme Court held that, as has always been the case, the party with custody of evidence has a “duty” to preserve relevant evidence to permit other parties to inspect the evidence for use in litigation.  It also remains true that  party who breaches this duty may be sanctioned for spoliation, whether or not the breach was committed intentionally or in bad faith.

But a custodial party’s duty to preserve evidence is not boundless.

*     *     *

[T]he duty to preserve evidence must be tempered by allowing custodial parties to dispose of or remediate evidence when the situation reasonably requires it.

The Court identified a three-factor test for evaluating a case of spoliation:

“(1) the degree of fault of the party who altered or destroyed the evidence; (2) the degree of prejudice suffered by the opposing party; and (3) whether there is a lesser sanction that will avoid substantial unfairness to the opposing party and, where the offending party is seriously at fault, will serve to deter such conduct by others in the future.”

(citing Schmid v. Milwaukee Electric Tool Corp., 13 F.3d 76, 79 (3d Cir. 1994)).  “[S]anctions are not appropriate when the custodial party has a legitimate need to destroy evidence, and it appears from the totality of the circumstances that noncustodial parties have received sufficient notice to protect themselves by taking steps to inspect or preserve the evidence and nevertheless do nothing.”

The Court went on to offer recommendations to avoid a sanction for spoliation.  Ideally, an owner will call a meeting or send a letter “indicating the time and nature of any action likely to lead to destruction of the evidence, and offering a full and fair opportunity to inspect.”  Obviously, any notice of the meeting or of an offer to inspect should be in writing.

People might be amazed to realize that this issue is just one hurdle to sustaining a successful case for construction defects.  There also are notice requirements under certain statutory warranties (as well as other requirements to satisfy prior to commencing suit), as well as statutes of limitation which differ from claim to claim and the little-known statute of repose.  There also are agreements by which a party may have reduced the time during which it has to raise a claim for construction defects.  To help navigate the issues that exist, parties should consult with an attorney knowledgeable in the area of construction and construction defects.  At Thomsen Nybeck, we know these issues, and we can help.  Find out more at www.tn-law.com or call us at 952.835.7000.

Entry by Matt Drewes.  Matt Drewes is a Shareholder with Thomsen Nybeck.  He is the head of the firm’s nine-member Community Association Representation Group and co-leads the firm’s construction litigation group.  Matt practices in the areas of business and real estate litigation, construction litigation, community association law, debtor/creditor law, insurance and employment.  He has been quoted in articles appearing in the Minneapolis StarTribune, Minnesota Lawyer, and on websites such as Yahoo!Finance.com, Bankrate.com and HOALeader.com, and has been included in Minneapolis/St. Paul Magazine’s list of Rising Stars for several years.  He can be reached at mdrewes@tn-law.com.

Minnesota Court of Appeals Holds Buyer Was Earnest About Real Estate Purchase Even Though It Didn’t Pay the Earnest Money Due Under the Purchase Agreement

In the case BOB Acres, LLC v. Schumacher Farms, LLC, decided on April 5, 2011, the Minnesota Court of Appeals held that, as long as the parties to a real estate purchase agreement clearly express the intent to buy and sell real property, the fact that the buyer did not provide the earnest money stated in the contract did not render the contract invalid.  Read it here.  It may at first seem remarkable that the Court of Appeals would hold that a party that did not provide the earnest money specified in the purchase agreement might still be able to enforce the agreement, but there were several factors involved.

The earnest money was a fairly nominal amount ($500 earnest money on a $70,000 contract for the purchase of 25 acres of undeveloped land).  This suggests that the earnest money was not a significant factor in the seller’s decision to sell the property to the buyer, but rather earnest money is provided simply to show the buyer’s good-faith intentions.

The Court also noted that the failure of a party to perform a material provision of the agreement could be a breach that permits the non-breaching party to discontinue performance, but the seller did not raise any objection to buyer’s failure to tender the earnest money until it had already announced that it no longer wished to be bound by the purchase agreement.  This resulted in a waiver by the seller of any right to object to certain breaches of the agreement by buyer, which might have allowed it not to go through with the sale if it hadn’t waived its rights.  The Court of Appeals explained that there is a difference between the issue of contract formation and contract performance.  As far as contract formation is concerned, the Court cited to a treatise on contract law (but apparently found no prior Minnesota case law on point) to hold that a promise is sufficient consideration for a promise.  In other words:  the buyer’s promise to buy the property (presumably for the purchase price stated in the agreement) was sufficient consideration for the seller’s promise to sell the property; the modest earnest money payment was simply incidental to the agreement.

Thomsen Nybeck represents both buyers and sellers, as well as lenders and other parties involved in real estate transactions of all types and sizes.  If you have a question about your next deal, contact one of our attorneys for advice about how to ensure you get the deal you intend.

Matt Drewes contributed to this post.  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, Yahoo!Finance.com, Bankrate.com, and elsewhere.  He can be reached at mdrewes@tn-law.com or by phone at 952.835.7000.

Matt Drewes Quoted In Articles Published at Bankrate.com and Yahoo! Finance:

Matt Drewes recently contributed quotes for the following articles published at www.bankrate.com, a national web-based publication focused on educating the public about real estate, mortgage, insurance, tax, investment and other money issues, as well as Yahoo! Finance and Cincinnati.com:

• “How should you title your home?” Posted under Real Estate on March 19, 2010, by G. M. Filisko (read it at Bankrate.com here, Yahoo! Finance here, or Cincinnati.com here; and

• “7 choices for underwater condo owner” Posted under Mortgage on March 22, 2010, by Holden Lewis (read it here).

Matt Drewes is a Shareholder with Thomsen Nybeck.  He is the head of the firm’s 10-member Community Association Representation Group and co-leads the firm’s construction litigation group.  Matt practices in the areas of business and real estate litigation, construction litigation, community association law, debtor/creditor law, insurance and employment, and has been included in Minneapolis/St. Paul Magazine’s list of Rising Stars for several years.  He can be reached at mdrewes@tn-law.com.

Minnesota Senate Contemplating Two-Year Moratorium on Foreclosures

On Wednesday, February 24, 2010 the Health, Housing and Family Security Committee of the Minnesota Senate passed a bill that, if agreed upon by both houses and Governor Pawlenty, would allow owners or renters of residential property to stop a mortgage foreclosure for up to two years. You can read the proposed legislation, dubbed SF2242, here. If passed, the bill would allow owners or even tenants living in residential property to place a hold on any attempted foreclosure of their home by providing a notice of their intended application for the moratorium. The bill’s application is limited only to mortgages on residential property signed before the law becomes effective. An applying owner or tenant would then be permitted to stay in the property as long as they meet certain criteria.

Criteria Required of Applicant for Moratorium

Stay Home.

Owners who request this hold on foreclosure proceedings must continue to live in their property and maintain it as their homestead. Renters must continue to live in the property.

Sum 41.

An owner or tenant must continue to make payments to the foreclosing party or the party claiming rights under the foreclosure, but never more than 41% of that person’s “documented and verified monthly gross income.” This payment obligation is not automatic, however, and must be triggered by the party that has commenced foreclosure by giving notice to the person applying for the moratorium

Dissolving the Stay

A stay imposed on a foreclosing party may be dissolved, but only under certain circumstances and after the foreclosing party has first given 30 days’ notice to the resident of the property, and then obtained a court order permitting the party to proceed. To justify dissolving the stay, the foreclosing party must show that “the public interest is served by granting [an] order” doing so, and that the resident has failed to fulfill the above residency and payment requirements or that the owner has violated one of several conditions.

The conditions that a tenant must continue to satisfy are: obey the terms of his or her lease; ensure that he or she is not causing damage to the property or permitting a nuisance to exist in the premises and is not otherwise disturbing nearby residents; avoid conviction for using the unit for any illegal purpose; and permit the foreclosing party reasonable access to the property for inspection and showing to parties who might be interested in buying the property or the foreclosing party’s mortgage, or providing new financing on the property. An owner would have to follow these same guidelines except there would be no lease terms to follow, and it appears an owner is not required to make the property available for inspection by the foreclosing party.

Impact on Mortgage Lenders

If passed, such legislation obviously could have a substantial impact on the mortgage industry. Although many lenders have taken a hit on properties that are now worth less than the balance of the loan secured by the mortgage, this prevents mortgagees from recovering what money they were able to recoup for up to two years. On the other hand, the law requires that the resident of the property provide monthly payments to the foreclosing mortgage holder (but not more than 41% of the person’s gross income). If the payments aren’t made, the foreclosure may proceed. Perhaps the cash flow generated by this requirement will offset those circumstances where the property cannot be recovered and sold.

Impact on Housing Industry

What may be interesting to track, if this bill were in fact made into law, is whether it has a positive impact on housing prices. Presumably this law has the potential to allow more people to remain in their homes longer, perhaps until the market rebounds and they can sell their homes and pay off their loans, or perhaps until they find better jobs. Meanwhile, if the inventory on the housing market is reduced as a result of this suspension in certain foreclosures, housing prices previously driven down by markets saturated with bank-owned properties sold at fire-sale prices could start to rebound.

Impact on Common Interest Communities

Notably absent from the moratorium is any reference to the same moratorium applying to community associations. There is no provision in the bill requiring that an owner invoking this moratorium must remain current on his or her community association assessments. This may create interesting dynamics for community associations with owners in default whose units’ values are “upside down” in comparison to the amount they owe on the property. These community associations, which might in the past have opted not to foreclose on properties with no equity remaining after the mortgage lender is paid (meaning there is no value left to satisfy the associations’ liens), might now want to start foreclosing on these units again.

If the association sees a unit in its community may not be foreclosed on for two years while a substantial backlog in assessments is due may now be forced to take action to force the hand of the owner and/or the mortgagee. For example, if the association learns of a moratorium on a foreclosure where the unit owner is in default on assessments, it can foreclose on the unit itself, and force the owner out of the unit much sooner than the two years permitted by statute. By removing the owner from the unit, the owner now has violated a term of statute, and the moratorium is lifted. The foreclosing mortgagee may now resume its own proceedings to take possession of the unit and sell the premises.

Regardless what your opinions are about the interference with government on the marketplace, this bill must be recognized as having a potentially significant, and not always positive, effect on the various players involved. It will be interesting to see whether Governor Pawlenty would sign such a bill, and what those effects would then prove to be in real-world application

Entry by Matt Drewes.  Matt is a Shareholder with Thomsen Nybeck.  He is the head of the firm’s 10-member Community Association Representation Group and co-leads the firm’s construction litigation group.  Matt practices in the areas of business and real estate litigation, construction litigation, community association law, debtor/creditor law, insurance and employment, and has been included in Minneapolis/St. Paul Magazine’s list of Rising Stars for several years.  He can be reached at mdrewes@tn-law.com.

Hard Lesson For Property Owner: Fixing Your Leak Risks Sinking Your Case.

The Minnesota Court of Appeals dealt a heavy blow to property owners on December 22, 2009. 

The case is Miller v. Lankow, 776 N.W.2d 731 (Minn. Ct. App. 2009).  In it, the Court of Appeals held that Miller’s claims of defective construction and fraudulent efforts to conceal those defects should be dismissed because he fixed the damage to his home. 

The issue is called spoliation (that’s not a typo, but the concept is akin to “spoiling” evidence).  The goal in preventing spoliation is to ensure that parties in litigation are not hindered in their ability to respond to someone else’s claims by being denied the ability to investigate evidence in another’s sole possession or control.  For example, in a construction defect case, such as Miller, spoliation can arise when the property owner repairs damage without first telling the responsible party about the potential claim the owner has against that party. 

At about the time this case was decided, I addressed this very subject in an interview with www.HOAleader.com when they called me to talk about construction defect issues in common interest communities.  It’s a pay site, but you can read a free version of the article here.  The rule is simple, if you’re going to fix your problem (a reasonable desire, especially when the problem is a water leak), you must first alert the parties allegedly responsible for the damage. 

The concept of providing notice to the defendants of the alleged defects is not new.  This actually happened in Miller, which is what makes the outcome so shocking.  The defendants in this case knew plaintiff’s allegations, and they knew they were likely to be sued.  But they were in fact rewarded for their apparent refusal to investigate Miller’s clear claims that there were defects, and that the defects were fraudulently concealed.  The notice of the owner’s claims has not historically required notice of the specific work to be performed or of the specific date the work would occur.  The Court of Appeals has now changed this. 

The Court of Appeals held that the owner’s failure to tell the parties of his plans to repair the mold and rot created by ongoing water leaks was cause to deny him the opportunity to present any evidence of those conditions at trial.  The decision to exclude photographs, testimony, and other evidence of the mold and rot present in the walls of Miller’s home was fatal to his claims, and the case was dismissed for lack of evidence.  The dissenting judge leveled a blistering criticism at the majority for enhancing the burden on plaintiffs, particularly under the facts of the Miller case, saying that the majority judges were “simply wrong.”

I do not know whether Miller could have proven his case even with all the evidence at his disposal.  There may have been no defects and no fraud.  The point, however, is that Miller was denied the opportunity to present his evidence.  This case stands now as the perfect example of why we continue to advise clients that a well-crafted letter should be provided to potential defendants in even the most simple construction dispute or case of alleged misrepresentation.  If you own or manage residential or commercial property, and you believe your property suffers from defective construction, faulty repairs, or your seller failed to disclose a problem with the property, contact Thomsen Nybeck to make sure you clear all the hurdles.

Entry by Matt Drewes.  Matt Drewes is a Shareholder with Thomsen Nybeck.  He is the head of the firm’s 10-member Community Association Representation Group and co-leads the firm’s construction litigation group.  Matt practices in the areas of business and real estate litigation, construction litigation, community association law, debtor/creditor law, insurance and employment, and has been included in Minneapolis/St. Paul Magazine’s list of Rising Stars for several years.  He can be reached at mdrewes@tn-law.com.

The Ice Dams Cometh: A Fact of Life in Minnesota or Construction Concern?

With the anticipation of warmer weather in the late winter and early spring, there is the frequent occurrence of warm sun followed by sub-freezing nighttime temperatures.  These weather conditions, which are not unusual in Minnesota, create a habitat for the frequently misunderstood (and too often dismissed) ice dam.  To find out more about what an ice dam is and what causes it to form, read this article by several current and former professors and/or educators.  Although addressing some complex issues regarding building science, the article contains a handy diagram of an ice dam, its causes, and the damage it can mean to your home or building.

As an attorney who has successfully handled numerous construction defect cases regarding numerous issues (including ice dams), I cannot recall a developer, particularly in the common interest community context (townhomes and condominiums) that did not contend that ice dams are:  1) the result of “abnormal” or “extreme” weather conditions; 2) the result of the homeowner’s and/or the association’s failure to maintain its roofs properly; or 3) are completely normal and unpreventable in Minnesota.

As you can see from the article, each of these justifications is invalid:

            Ice dams can be prevented by controlling the heat loss from the home.

*     *     *

The proper new construction practices to prevent ice dams begin with following or exceeding the state code requirements for ceiling/roof insulation levels.

(my emphasis above).  In addition, as the authors note, there are homes in virtually every community that do not suffer from ice dams.  These conditions are predictable and preventable at the time of construction or renovation of a home and its roofing system, as well as after the fact.  In addition, heavy snowfall that plugs the vents on the roof should not result in ice dams in most situations.  While it is considered a temporary solution to remove snow from the roof, it should not be necessary on an ongoing basis.

If you have experienced ice damming in your home or in your common interest community, you should immediately advise your builder or the roofing contractor who installed your roof.  Do so in writing.  If they give you one of the above “explanations”, contact an attorney right away.  Also, you should never perform any repairs or try to address ice dams on your own, and especially without first giving notice to your builder or contractor.  Although it is beyond the scope of this article to list them all, there are several statutes of limitations, warranty periods and other timing considerations that can cause you to lose your rights if you do not act right away.  You can also hurt your chances at recovering for your damaged roof if you repair or alter the conditions or damage without letting your builder or contractor see it first.  Your attorney can help you understand and navigate them.

Entry by Matt Drewes.