Published on: May 29, 2018
CONDO CYBER THREATS
Although condominium association boards are becoming more aware of cyber-threats, cyber-security has not become a top priority for most, according to a survey conducted by the Foundation for Community Association Research (FCAR). Less than half (about 40 percent) of the board members and 46 percent of the managers responding to the survey rated their concern about cybersecurity threats as “strong” or “very strong.” The issue registers more powerfully with association attorneys (53 percent cited it as a major concern) and most strongly with insurance professionals, 82 percent of whom said it was a strong or very strong concern.
Association boards may be less concerned about cybersecurity than industry professionals because relatively few associations have experienced cyber-security breaches. Only 9 percent of survey respondents said their associations or associations they represent have experienced the problem first-hand in the past year, and those that did report breaches said the impact had been minimal.
More than half (56 percent) said their associations have policies in place for collecting, storing and protecting member information, but 44 percent said the boards receive no training in technology use and cybersecurity. Nearly 70 percent of the managers said their associations have no policies in place restricting the use of social media, despite the inherent cybersecurity risks those platforms create.
The Foundation said in a press statement that it collected responses from 600 board members, managers and industry professionals “to identify the risks and liabilities associated with using technology to conduct association business.” The survey result will be used, the Foundation said, “to establish a baseline of awareness that will be used to develop tools to educate community association leaders about cybersecurity issues arising from social media, community websites, and third-party payment portals.”
EMPTYING THE NEST
Two decades ago, when parents talked about their “empty nest” they were probably speaking ruefully about children who had grown up and moved away. Today, they are more likely speaking with some annoyance about grown children who are still living at home.
More than 22 percent of millennials (aged 24-36) are living with one or both parents today, according to a Zillow study. That’s up from about 13 percent in 2005. Of the 12 million young adults still living at home, 28 percent are college graduates and approximately 12 percent are unemployed.
Zillow blames high rents primarily for the reversal of the empty-nest trend. The number of millennials living at home is highest in the highest-rent areas of the country. In Los Angeles, Miami, and New York, where rents eat more than 35 percent of median income, 30 percent of millennials are living at home. Austin, Texas, which claims the lowest rental burden (27.3 of median income) also has the smallest share of millennials at home – 13.9 percent.
“As rents outpaced incomes over the past decade, young people turned to their families in large numbers to ease the housing cost crunch,” Aaron Terrazas, senior economist at Zillow, said in a press statement.
Or maybe they simply prefer living at home. That seems to explain the recent court battle between 30-year-old Michael Rotondo and his parents, who have filed suit to evict him from their home.
The Rotondos went to court after their son ignored less controversial approaches, including a letter offering him $1,100 to help him find a place of his own. The letter also hints at the parents’ increasing frustration, noting, “There are jobs available even for those with a poor work history like you. Get one – you have to work!”
The New York State judge who heard the case was not at all sympathetic to the son, describing as “outrageous” his argument that as a family member, he should be given special treatment, including a six-month extension of the eviction deadline as “outrageous.
“I want you out of that household!” the judge told him. Rotondo said he intends to appeal the order.
DEMAND HIGH – LABOR LOW
This is a good time to be in the business of renovating homes or financing their renovation. The nation’s housing stock is aging – nearly two-thirds of it is more than 25 years old, much of it in need of substantial renovations and repairs, according to a recent study by Land Gorilla.
Baby boomers will continue to drive demand in this area over the next decade, the study notes, but “Gen Xers are also beginning to enter their prime remodeling years.”
But increasing demand for remodeling services is running up against a shortage of labor in the construction industry.
More than 90 percent of the remodelers responding to a National Association of Home Builders (NAHB) survey reported that they had encountered shortages of labor available to do carpentry work, and 40 percent described the shortage as “serious.”
Remodelers have been reporting labor problems since 2013, when the NAHB began this annual survey, but this year’s survey reflects “a worsening trend,” an association press release notes. Trades that have been reporting problems continue to report them, the association notes, but trades that had reported adequate labor supplies “have now become a concern.” Nearly all of the remodelers reported a need for weatherization workers in the 2017 survey compared with 20 percent in 2013; 54 percent reported a need for HVAC workers in the recent survey, compared with only 12 percent in 2013. For all 12 of the trades covered by the survey, the number of remodelers reporting labor challenges increased by more than 10 percentage points between 2016 and 2017, the NAHB reports.
RETURNS AND INVESTMENT
One appeal of on-line shopping is the ease with which purchases can be returned – either via mail or to a brick and mortar stores. That’s a convenience for shoppers, but an increasingly painful financial headache for the owners of retail malls, who base rents paid by retailers partly on the revenue they report. And deductions for on-line purchases returned to brick and mortar stores are slashing those figures dramatically.
“We are getting dinged by internet returns,” David Simon, chief executive officer of Simon Property Group, Inc., the nation’s largest mall owner, told analysts in a recent conference call. While he didn’t quantify the losses, he described them as “material,” according to recent Bloomberg News report. “It needs to be addressed in future leases,” he noted.
Exacerbating the problem: as struggling retail giants cut back on mall space, owners are bringing in smaller retailers to fill those gaps. And these “newer, more entrepreneurial independent owner-operators can be more casual [than the larger, well-known companies] in terms of responsibly reporting,” Burt Flickinger, managing director of Strategic Resource Group, told Bloomberg.
The problem is growing and will continue to grow as on-line sales represent an increasing proportion of retail transactions. “The mall business has become obsessed with sales per square foot as an absolute measure of success,” Daniel Hurwitz, CEO of retail real-estate consultant Raider Hill Advisors, told Bloomberg. “The reporting of sales has become less pure because there are so many moving parts with online return,” he added. “As an industry, it would be prudent to come up with a way to deal with this.”
The novelist Charles Dickens wrote “A Tale of Two Cities.” Recent studies describe a tale of two very different economies. A study by the New York Federal Reserve found that while homeowner equity has been increasing steadily since the housing market collapsed seven years ago, the equity gains have been lopsided, with most household wealth today concentrated in the hands of older, more affluent homeowners, who are both better-positioned to tap their equity and less likely to need it. The study found that nearly 30 percent of the borrowers drawing equity from their homes last year were over 60 compared with 13 percent in 2006. “An increased amount of available home equity should make the household balance sheet more resilient in the event of a financial shock, though that may not be an option for lower-credit-score borrowers,” Andrew Haughwout, senior vice president at the New York Fed, said in a press statement.
Another Fed study reports a similar dichotomy in perceptions of financial well-being, with higher income, better-educated whites more upbeat about their current and future economic prospects than minorities and whites with lower education levels.
This year’s survey “is a story of overall improvement consistent with the national economic expansion,” the report said. “It is also a complex story of variation among different groups in the country and remaining areas of economic vulnerability.”
Although 77 percent of the white adults responding to the survey said they were either living comfortably or “doing ok,” only 65 percent of Blacks and 66 percent of Hispanics shared that optimistic view. Better-educated respondents generally reported higher levels of financial comfort, but these results, too, were split along racial lines; 87 percent of whites with a bachelor’s degree or higher said they were doing well, compared with 79 percent of Blacks and 78 percent of Hispanics with the same education.
Student loan debt continues to weigh heavily on Americans. Twenty percent of adults with student debt said they were behind on their payments, but, again, first-generation college students, Black and Hispanic borrowers were more likely to be behind than whites.
The survey found a different split in responses to questions about the opioid epidemic, with whites more than twice as likely as Blacks or Hispanics to say they knew someone who had been affected personally by it.
IN CASE YOU MISSED THIS
Banks are moving out of the mortgage lending business and non-bank lenders (primarily independent mortgage companies) are filling the gap. Non-banks are now originating more than half of all mortgage loans, according to the Consumer Financial Protection Board.
Fewer than 20 percent of prospective first-time buyers think they can afford most of the homes in their markets, a recent survey found. A separate poll found that it isn’t just first-time buyers who fear they can’t afford the down payment required to buy a home; 22 percent of existing home owners, and 28 percent of owners 65 and older, shared that concern
Wondering when the next recession will strike? Half of the 100 real estate experts and economists surveyed by Zillow expect it to arrive early in 2020; nearly 60 percent of the economists surveyed by the Wall Street Journal agree.
The doubling of the standard deduction ─ a key feature of the tax reform bill ─ will reduce the number of taxpayers claiming the mortgage interest deduction by half, according to the Joint Committee on Taxation. The committee estimates that 13.8 million taxpayers will claim the deduction on their 2018 taxes, down from 32.3 million in 2017.
INTENT OF THE SELLER – EFFECT OF THE DEED
Most parents are forced at some point to exclaim, “Because I said so!” to end an exasperating encounter with a determined child. That argument didn’t get very far with a Georgia Appeals Court in this dispute between a developer, who purchased property in a subdivision, and the homeowners’ association that insisted the condominium covenants applied to that land. (Great Water Lanier, LLC v. Summer Crest at Four Seasons).
The disputed property was in the Summer Crest Subdivision, a phased development created in 1994. The declaration specified that the developer (Stonebridge Development Corporation) could make phase 2 ─ consisting of two separate tracts ─ subject to the declaration by recording a plat on or before May of 2004, indicating the intent to annex the property to the subdivision. After that date, 60 percent of owners in the subdivision would have to approve the annexation.
Stonebridge filed a plat within that time limit for tract 1 consisting of about 17 acres, stating that it was subject to the declaration. The plat didn’t reference tract 2, which contained about one-third-of-an acre.
In 2009, Stonebridge conveyed tracts 1 and 2 to Great Water Lanier (Great Water) through a warranty deed accompanied by an owners’ affidavit. Both indicated that the property was free of restrictions and encumbrances, “except as set forth in Exhibit C,” which listed as “permitted exceptions’ (for tract 1 but not tract 2) the covenants for the subdivision. Steve Kelly, the president of Stonebridge, also signed a “statement of intent” asserting that Stonebridge did not intend for the Phase 2 property to be subject to the covenants.
Great Water subsequently sought a declaratory judgment affirming that neither parcel was subject to the declaration; the association countered that the covenants applied to both parcels and demanded payment of unpaid assessments related to them. The trial court ruled that the covenants applied to tract 1 but not to tract 2 and Great Water appealed, arguing primarily that the plain language of the deed and seller’s affidavit supported its position that the covenants did not apply.
The seller would not have included the provision noting “permitted exceptions,” Great Water contended, had he intended to subject the property to encumbrances of some kind. “The use of the word ‘exceptions’ clearly indicates the limitation of the warranty….not an intention to be bound by the covenants.”
Parsing the language of the deed, Great Water cited several terms ─ including “subject” and “matter” ─ that the company claimed were “capable of multiple meanings.” Because the wording of the deed was “inherently ambiguous,” Great Water argued, “consideration of circumstances is critical,” meaning that the court was required to consider the seller’s intent.
The court interpreted both the language of the deed and the applicable law differently. Beginning with a basic precept of real estate law, the court noted that, as a general rule, courts are required to extrapolate the intent of the parties solely from the text of the deed, going outside of those boundaries only if “the deed’s text is so ambiguous that its meaning cannot be determined through application of the ordinary rules of textual construction.” Finding no such ambiguity in this deed, the court said, “we must confine ourselves to the four corners of the document to ascertain the parties’ intent and may not, as Great Water argues, consider the contradictory impact of the [seller’s] Statement of Intent or other extrinsic matters.”
The affidavit accompanying the deed was not determinative, the court said, noting that an affidavit “is not a conveyance, but is simply notice to the world of the contents of the affidavit….The statute does not provide a mechanism for a grantor to cure an encumbrance on land the grantor has conveyed subject to an existing encumbrance,” the court said. The statute also provides no mechanism through which a grantor can modify the terms of an unambiguous deed by simultaneously recording a contradictory statement of intent a statement.”
The trial court’s decision was correct, the court concluded: “Great Water accepted a deed that unambiguously conveyed the [Tract 1] parcel subject to the declaration of covenants, and, by doing so, Great Water voluntarily consented to be bound by such covenants.”
“The next President could be a Democrat and we could see the deregulation pendulum swing back. We need stability; we need responsible lending; and I worry that we don’t self-police ourselves enough.”─ David Stevens, retiring president of the Mortgage Bankers Association, in his last address as head of the trade group.