Published on: August 4, 2020


Citing evidence that the fledgling economic recovery has stumbled as the coronavirus epidemic has resurged, the Federal Reserve left interest rates unchanged at its July policy meeting. Fed Chairman Jerome Powell doubled down on the Central Bank’s vow to do all within its power to combat what he termed “the biggest shock to the U.S. economy in living memory.” Noting that the ongoing public health crisis “will weigh heavily” on near-term economic activity “and pose considerable risks to the economic outlook over the medium term,” Powell said policy makers “are not even thinking about raising rates….We are in this until we are well through it,” he added.

Reflecting the devastating economic impacts of the pandemic, US gross domestic product (GDP) shrank by 33 percent in the first quarter, the steepest annual contraction rate in the nation’s history.

The skies appeared to be brightening in the second quarter, with back-to-back monthly employment gains in May and June. But then states that had moved quickly to ease their business lockdowns saw an explosion in their infection and hospitalization rates. Some states that had reopened more cautiously and seemed to have the virus under control also began to see their numbers climb again, prompting some health policy experts to suggest the need for a nationwide lockdown to corral the epidemic. The unemployment claims total increased for the week ending July 18th, reversing 15 consecutive weekly declines. The employment report for July, scheduled for release August 7th, is expected to reflect the impact of those setbacks.

“[Since] the virus started to take off again in key states,” the economic gains recorded in the second quarter “have [faded] rapidly,” Nariman Behravesh, chief economist at HIS Markit, told NPR. “Our view is, we’re not going to get to the pre-pandemic levels of economic activity until sometime in 2022.”


The housing market hasn’t been immune from the effects of the pandemic but it has proven to be remarkably resilient. Sales of existing homes increased by more than 20 percent in June compared with May, reaching a seasonally adjusted annual rate of 4.72 million units – the largest month-over-month increase since the National Association of Realtors (NAR) began compiling this data in 1967. New home sales and home construction starts also soared in June.

Lawrence Yun

“The housing market is hot, red hot,” Lawrence Yun, the NAR’s chief economist, said in a press statement. Yun and other analysts are predicting that pent-up demand and record-low interest rates will continue to power the market despite the resurgence in infection rates in many areas of the country.

That improving trend has not been reflected in the condominium market, however. While existing home sales rose overall, condo sales declined by more than 30 percent in June compared with May. Condo prices also declined by 1.4 percent year-over year, compared with a 2.6 percent increase for single-family homes. Analysts suggest that the sheltering-in-place experience has made many prospective buyers put a premium on space, making condos relatively less appealing than detached dwellings.

“People are spending more time at home and less time at the office or school, and that means buyers want more space and private yards,” Taylor Marr, an economist for Redfin, suggested in a recent report. “And because of concerns about the virus, they aren’t as interested in shared amenities like elevators, community pools and gyms, which have traditionally been benefits of condo living,” he noted. But affordability remains a strong draw for condominiums, he said, especially for first-time buyers. “That factor is motivating some buyers to jump back into the condo market,” he noted, “particularly those who have found that purchasing a condo is just as affordable as renting an apartment.”


U.S. businesses have filed more than 700 suits against insurers that have rejected their claims for business interruption coverage. That is about five times the number of coverage suits resulting from Hurricanes Sandy, Irma, Ike and Harvey combined. The volume of pandemic-related litigation “is a big deal,” Tom Baker, a professor at the University of Pennsylvania, said at a seminar on the issue. “They exceed the norm by two or three times all the natural catastrophes,” he noted. “And it’s not slowing down.”

One reason for the disparity, Baker said, is the sheer scope of the pandemic compared with other disasters. Hurricanes affect a single state or several states in one region; the pandemic has affected businesses worldwide. Another difference, he suggested: Hurricane coverage disputes generally have involved questions about the value of the loss. The pandemic disputes stem from the insurers’ argument that companies have not suffered the physical property damage required to trigger business interruption coverage. When the question is how much damage a company has suffered, compromise is possible, Baker noted. “When the answer is, ‘your claim is denied,’ the next step is litigation.”

Most of that litigation is still working its way through the courts. In what is believed to be the first U.S. court ruling on the coverage question (Gavrilides Management Co. et al. vs. Michigan Insurance Co.), a Michigan District court sided with insurers, rejecting the argument of the restaurant plaintiffs that a government order prohibiting dine-in service caused a physical loss because it barred public entry to the property. “That argument is simply nonsense,” the judge said. “There has to be something that physically alters the integrity of the property.”

Although the decision applies only to Michigan, insurance industry experts say the court’s analysis “is consistent with the approach of the majority of states.”

A New York District Court Judge adopted the same pro-insurer reasoning in Social Life Magazine v. Sentinel Ins. Co., rejecting a request from a magazine publisher for a preliminary injunction requiring insurers to pay for losses resulting from a governmental COVID closure mandate. “[The virus] damages lungs; it doesn’t damage printing presses,” the judge in this case said.


HUD’s plan to abandon the disparate impact standard for resolving fair housing complaints has drawn rare criticism from financial and housing industry executives, who usually champion proposals to streamline or eliminate regulations, but who are questioning both the impact and the timing of this one. HUD’s proposal to overturn the Obama-era legal theory would make it more difficult for plaintiffs to advance housing discrimination claims and easier for lenders and housing providers to defend them.

Housing advocates say the plan undercuts decades of efforts to attack housing discrimination. HUD contends that the plan creates a clearer legal standard consistent with a 2015 Supreme Court ruling that upheld the disparate impact concept, but suggested that liability under the standard should be limited.

Industry executives, who have chafed at some disparate impact decisions in the past, say the timing of HUD’s rule, following nationwide protests for racial justice triggered by the death of George Floyd, is terrible.

Bank of America Corp., Quicken Loans and the National Association of Mortgage Brokers, among others, have all urged HUD to reconsider its proposed rule change. “Given the recent protests and events, and the recognition of where we are as a country, we would respectfully offer that the time is not right to issue a new rule,” Bank of America Vice Chairman Anne Finucane wrote in a letter to HUD Secretary Ben Carson.

Vince Malta, president of the National Association of Realtors, echoed that concern. “While there is debate…as to whether additional clarity is needed” on the standard for disparate impact claims, he acknowledged, “there is broad consensus across the country that now is not the time to issue a regulation that could hinder further progress toward addressing ongoing systemic racism.”


To the list of trends the pandemic has triggered or exacerbated, add migration from cities to suburbs. Redfin reports that an increasing number of prospective home buyers living in urban areas are seeking homes in less densely populated, more affordable suburban communities. A survey conducted in April and May found that 27 percent of respondents were seeking homes in communities smaller than the one in which they are currently living, compared with 25.2 percent in the second quarter of 2019. Page views of homes in towns with fewer than 50,000 residents increased by 87 percent compared with last year, Redfin reported, and were more than triple the number of views of homes in cities with more than 1 million residents. New York, San Francisco, Los Angeles and Washington D.C. led the net outflow rankings. Boston was eighth on the list, but its annual increase in the number of residents looking for homes elsewhere was relatively small (about 2 percent.) Phoenix, Sacramento, La Vegas, Atlanta and Austin were the leading targets for out-of-state residents exploring homes in other communities.

“While there has been a huge increase in the number of people looking online at homes in small towns,” Redfin economist Taylor Marr observed, whether this will translate into a large number of people actually relocating from one area of the country to another “remains to be seen. The pandemic and work-from-home opportunities that come with it have accelerated migration patterns that were already in place toward relatively affordable parts of the country,” he noted. “But for many people, the lure of large homes in wide open spaces will be a passing dream fueled by coronavirus-induced isolation,” that may fade after the pandemic ends.


A new study has doubled the estimate of properties that are at risk of flood damage.

The federal budget deficit soared in the year ending in June, while the net worth of U.S. households posted a record decline in the first quarter.

More than 40 percent of the people who bought homes between January and May of this year ended up in bidding wars, reflecting the combined impacts of increased demand and limited inventories.

The more experience companies have with remote working arrangements, the less they are liking them.

Lower mortgage rates are making home loans more affordable for buyers but tighter lending standards are making it harder for them to qualify.



Saying something doesn’t make it so. That logic underpinned this decision by an Alaska Appeals Court (Black v. Whitestone Estates) holding that an association board was not required to follow owners’ instructions on how their payments should be applied.

The plaintiffs (collectively, the Blacks) objected to the $100 per month fee assessed to all owners to pay for driveway maintenance and snow removal in this 10-unit condominium community. They proposed that the fee should be based on the size of the driveway, requiring owners with longer drives to pay more and allowing the Blacks to pay proportionately less. When owners voted to reject that proposal in 2004, the Blacks protested by reducing the fee they were paying. They followed that formula from 2005 until 2014. Informing the board then that they were ending their protest, the Blacks sent a check for $3,800, to cover what they said were the amounts they should have paid (at the $100 monthly rate) between 2010 and 2014. From that point on, they paid the $100 monthly fee, instructing the board to apply those funds to the current assessments.

Ignoring the Blacks’ instructions, the board applied their lump sum payment to the oldest debts first (beginning in 2005). After initially accepting their monthly $100 payments, the board began returning those checks without cashing them.

The association sued the Blacks, demanding payment of $4,714.08 in unpaid assessments and fees, interest on those amounts plus attorney’s fees. The Blacks contended that they had paid in full the debt incurred between 2010 and 2014; the statute of limitations, they said, precluded collection of the earlier debt (between 2007 and 2010). The Blacks also advanced several counter claims, primary among them, a contention that Whitestone had improperly amassed surplus funds the association was required to distribute to owners.

Not Even Close

Siding entirely with the association in a decision it said “wasn’t a close call,” and rejecting the Blacks’ request for reconsideration, the trial court awarded the association $11,518.20 for unpaid assessments, late fees, and interest, and $125,533.96 for attorney’s fees and costs. The Blacks appealed.

The Appeals Court considered four questions, agreeing with the lower court on all of them:

  • Whether the association was required to follow the Blacks’ payment directives
  • Whether the excess funds in an association account constituted a surplus, which should have been refunded to owners, rather than a “reserve” designated for future expenses.
  • Whether the court erred by refusing to dismiss the association’s claim for declaratory relief.
  • Whether the attorneys’ fees awarded to the association were “unreasonable.”

On the key question – whether the association was bound by the Blacks’ payment instructions – the court focused on the wording of the declaration, which stated that “any payments…may be applied first to interest, late charges, collection costs, fines, and fees, and then to the oldest balance due” for common area assessments.

The Blacks argued that the conditional term, “may,” meant the association had the flexibility to allocate payments only in the absence of instructions from the owner. The court disagreed. The declaration’s use of the word “any” indicates, rather, that Whitestone’s authority extends over all payments, even those accompanied by payment directives, the court said. The Blacks’ interpretation would make this declaration’s grant of authority “meaningless,” the court said, reducing the declaration to “[a mere restatement] of the default rule that a creditor may apply a payment as it wishes, absent direction from the debtor.” The more reasonable interpretation, the court said, was that “the declaration granted Whitestone the authority to disregard the Blacks’ directives and apply their payments to their earliest accrued debts first.” The Blacks’ payment directives, thus, were not binding, the court said, and “their debts were not beyond the statute of limitations.”

Surplus or Reserves

The Blacks fared no better on their contention that funds remaining in a single Whitestone account after association expenses had been paid constituted a surplus that should have been refunded to owners. The Blacks argued that because the association did not maintain a separate reserve account between 2005 and 2015, it did not have any designated reserves.

The Superior Court found that although the association had commingled its funds, the amounts remaining at the end of a budget year met the declaration’s definition of reserves: Funds set aside “to meet unforeseen expenditures or to acquire additional equipment or services for the benefit of…owners.”

Several association witnesses testified credibly, in the Superior Court’s view, that the excess funds were intended to finance “future road maintenance and heavy duty road maintenance.” Two of the five resale certificates the Blacks submitted supported their contention that this was not the case, the Appeals Court agreed, but it found that evidence “not so overwhelming as to leave us with a definite and firm conviction that the superior court made a mistake.”

The Appeals Court also found no flaw in the lower court’s refusal to dismiss the association’s request for a declaratory judgment determining whether the driveways were properly defined as common elements or limited common elements, as the Blacks contended. The Blacks argued that the association had failed to identify a controversy that required a declaratory judgment, and that the termination of their dues dispute rendered any issue that may have existed moot.

The Superior Court agreed with the association that absent a declaratory judgment, the Blacks would have continued to evade their obligation to pay the dues they owed. The Appeals Court also agreed, noting that the plaintiffs continued to threaten legal action over the definition of the driveways even after litigation had begun in the dues collection dispute.

Citing a decision in another case, the court noted: “If a defendant had the power to moot a case by simply disavowing the challenged conduct in the course of litigation, ‘the courts would be compelled to leave the defendant free to return to [their old ways.’” For that reason, the lower court did not err in granting the declaratory judgment the association requested, the Appeals Court concluded.

Nor did the court abuse its discretion in granting attorney’s fees the plaintiffs insisted were unreasonable, the Appeals Court found. The Blacks argued that the fees were several times higher than the amount in dispute, which was true, the court agreed. “But the amount in dispute does not impose an upper limit on the amount the prevailing party may recover in fees,” the court noted.

The Superior Court had no sympathy for the Blacks’ complaint about the legal fees awarded, noting that it was largely because of the way the Blacks had pursued the litigation that the fees were so high. The plaintiffs, the court said, “seemed to be taking affirmative, repeated, consistent steps to maximize the fees Whitestone was having to incur.” Describing the Blacks’ litigation as “non-stop,” “vexatious” and “in bad faith,” the court said, “They seemed intent on litigation regardless of any offer, almost as if [they] were getting enjoyment from raising every possible argument, no matter how strained, [and] no matter how unworthy of litigation.”

The Appeals Court found the lower court’s blistering critique of the Blacks’ conduct to be “supported by the record,” justifying the attorney’s fees the court awarded.


“So I say to you, walk with the wind, brothers and sisters, and let the spirit of peace and the power of everlasting love be your guide.” ─ Congressman John Lewis, from a New York Times op ed published at his request after his death

Marcus, Errico, Emmer & Brooks specializes in condo law, representing clients in Massachusetts, Rhode Island, and New Hampshire.