Wrestlemania was this past weekend, and Linda McMahon is rumored to be stepping down as the head of the Small Business Administration. I have a rule that when those two things happen in the same week, it is time to link back to my favorite blog post: How Your Small Business is Like Professional Wrestling.
My son and I are still watching wrestling. And there are even more lessons you can learn from wrestling. Here are more to add to the list:
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I recently presented a national webinar explaining interest rate swaps, caps and floors. I had the pleasure of presenting with Chrys A. Carey, counsel with Morrison and Foerster in Washington D.C. I have written before on the growing interest in these hedge agreements. Chrys and I and a number of the “attendees” of the webinar agreed that hedge agreements such as interest rate swaps and forward swaps are becoming more a part of commercial real estate transactions.
Chrys and I brought different perspectives to our presentation. While I am involved with the borrower or lender, Chrys has much more knowledge with the regulatory side of hedge providers and traders under the Commodity Exchange Act and the Dodd-Frank Act Regulations. Despite these different perspectives, our overlap in experience brought up some interesting discussions. Some of those are:
Associations and Unit Owners frequently disagree over who is responsible to pay for repairs to certain items. Sometimes it is easy to figure out. The Association needs to pay for repairs to the community swimming pool, and the Unit Owner needs to fix the stove. Whenever the item to be repaired gets close to the boundary of the Unit, however, the answer to this question becomes more difficult. I came across an interesting case, Winchester Condominium Association v. Auria, where the question was who is responsible to pay for re-wiring a wall outlet: the Unit Owner or the Association?
In this case, the Association required all of the Unit Owners to replace aluminum wiring in the outlets of their Units. The Unit Owners were informed that the replacement was required for safety reasons and for the Association to maintain property insurance. [Note: I have done this a few times for dryer vents, pans under hot water heaters and fireplace insulation.] Every Unit Owner made arrangements to have the wiring in their outlets replaced. Every Unit Owner, that is, except for one.
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Soon community associations will have to deal with snow and ice, and the problems that come with it. In this article I want to discuss salt and other deicers. Many unit owners are certain that one type of salt will ruin their sidewalks. Other units owners believe that any kind of ice melt will harm concrete. Associations get complaints about ice in the winter, and then about spalling sidewalks in the spring. Which deicers are best, and which are asking for problems? Although most of my posts contain mostly legal advice, for this article I got to use my background as a chemical engineer too.
There are four main kinds of ice melt that are used. They are sodium chloride (rock salt), calcium chloride, magnesium chloride and calcium magnesium acetate (CMA). The truth is that all ice melt works in basically the same way. Magnesium chloride, calcium chloride and CMA all absorb water. In doing so, they produce a chemical reaction with the water that produces heat. The heat produced melts the ice. The melting ice dissolves the deicer, and then carries it onto the rest of the surface. Sodium chloride is a little different in that it actually lowers the temperature in which water freezes. So instead of freezing at 32 degrees, water with salt dissolved in it doesn’t freeze until it is 25 degrees. Try it at home – science is fun!
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… no matter how much they want to. Many planned community and condominium declarations have a confession of judgment paragraph. These are usually towards the back and written in all caps (just like my father-in-law sending an email). They seem to permit associations to bypass all of the demand letters and District Justice courtrooms, and just enter a judgment against the Unit Owner. But what looks good on paper doesn’t always work in practice. Pennsylvania Courts just re-affirmed the long-time rule that Associations cannot confess judgment against Unit Owners.
Residential condominium or homeowner association assessments are a “consumer credit transaction.” This means that the assessments are used to pay for goods or services that are primarily for personal family or household use. Pennsylvania law says that a person cannot enter a confessed judgment against another for a debt that comes from a consumer credit transaction. In the case that I read, the Association and the Unit Owner entered into a payment plan. When the Unit Owner stopped making payments, the Association entered a confessed judgment against him. The Court struck the confessed judgment on its own – it did not even wait for the Unit Owner to make a request.
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One of the most important pieces of advice I give builders and developers is to “get it in writing.” It turns out that when you get it in writing is also critical. A big national builder found itself in Court with a home buyer because the builder did not put its arbitration clause in the Agreement of Sale. The builder used a form purchase agreement which referenced the builder’s limited warranty. Months later, at the settlement table, the builder finally gave the buyers the limited warranty. The limited warranty contained a requirement to arbitrate all disputes. When the buyers later had problems with their home, they went directly to Court instead of to arbitration. The Pennsylvania Superior Court said the arbitration clause was not enforceable because it was not provided at the time of the Agreement of Sale. The only mention of arbitration was provided months later, after the Agreement of Sale was signed.
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Lots of Association board members worry whether the Association is required to enact rules to control dangerous dogs. In McMahon v. Pleasant Valley West Association, the Commonwealth Court ruled that an Association does not have a duty to force a unit owner to maintain, control or confine their dogs on the dog owner’s property. The Association also does not have a duty to prevent dogs from harming other unit owners. Because they have no duty to control the dog, or to protect unit owners from harm caused by the dog, the Association was not responsible for injuries to the unit owner. The Court noted that there was no “special relationship” between the Association and the dog owner or the victim of the dog attack. The Court noted that the Association did not act to “provide any additional protections against an attack by the … dogs over and above the protections provided in the dog law….”
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In the summer of 2017, property tax assessments and assessment appeals were a big topic of discussion. That is because 2017 marked the countywide reassessment for all properties. The County Tax Assessment Appeal Board heard tens of thousands of assessment appeals. Some of the appeals resulted in substantial savings for the property owners.
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We have written a few articles about the changes to the Tax Code. The change that many professionals are trying to figure out is the 20% deduction for individuals using a pass-through business entity such as a partnership, LLC, “S” corporation or sole proprietorship. Code Section 199A is not just a minor change in already settled law. It is a brand new concept. Even the AICPA has requested – twice – that the IRS and Department of the Treasury provide guidance on the pass-through deduction.
There are a couple of key concepts that are building blocks to understanding Section 199A. Some of these are:
Of course, this exclusion has an exception. If a business would otherwise be disqualified, but the taxpayer has a taxable income less than $207,500.00 for an individual ($415,000.00 for taxpayers filing a joint return), then the taxpayer may be eligible for the deduction. In this case the deduction is phased out depending on how close the income is to that threshold amount.
But even this confusing definition has different qualifiers. For example, qualified business income excludes net capital gain. This means that the higher the ratio of net capital gain to taxable income, the lower the pass-through deduction. The deduction favors companies with employees because 50% of the W-2 wages paid could be deductible. On the other hand, if a company has few employees, but creates income through its depreciable assets (such as landlords), they can deduct up to 2.5% of the unadjusted basis of the property.
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I have written a number of articles about whether a condominium or homeowner association (or apartment owner) needs to allow emotional support animals. Delta airlines new policy related to service and emotional support animals created some controversy and was heavily reported in national news. As service and emotional support animals become more commonplace, questions keep coming up, and so associations need to be reminded of what to do when a resident wants to keep a support animal.
To review, there are two federal laws to follow: the Americans With Disabilities Act (“ADA”) and the Fair Housing Act (“FHA”). The ADA says that a service dog is permitted in all public places. A service dog is an animal that is specially trained to perform a task that is directly related to a person’s disability. Under the FHA, providers of housing – like a landlord of condominium association – need to provide reasonable accommodations for assistance animals. Unlike a service dog, an “assistance animal” does not need to be specially trained to perform a task. They can provide only emotional support for a person with a disability. The definition of assistance animal or emotional support animal is much broader than a service animal under the ADA.
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