Legal/Legislative Update – December 17, 2013

Published on: December 17, 2013

RECOVERY MODE. Home owners are recovering equity at the fastest pace on record, erasing the negative equity that has prevented many from selling their existing homes and purchasing another. But they are missing more payments on home equity lines of credit – a disturbing trend.

COSTLY RULES. Standard & Poor’s is predicting: a)That the new mortgage rules set to take effect in January will increase mortgage origination costs for lenders; and b) that lenders will probably pass most of the increase on to borrowers. …

NOT SO FAST. Reports that interest is waning in using eminent domain as a tool to help underwater borrowers avoid foreclosure may have been wishful thinking on the part of those who oppose the idea. At least 15 cities and counties are actively considering the strategy, according to a recent study by the Urban Institute.

THEY’RE BACK. The subprime mortgage lenders who contributed (hugely) to the collapse of the financial markets and the “Great Recession” resulting from it have largely recovered, even if many consumers haven’t, and are once again making high-risk loans to weak borrowers. “Some experts fear they won’t know where to stop,” an article in HuffPost warned.

ENERGY STAR. Massachusetts is number one in energy efficiency, holding that position on the “State Energy Efficiency Scorecard” for the third consecutive year, thanks largely to the 2008 state law requiring utilities to invest in energy-saving techniques. California ranked second because of its strict requirements for reducing greenhouse gas emissions.

MERIT PAY? Nearly 40 percent of the top 500 highest paid CEOs were fired from their positions and/or headed firms that were bailed out, declared bankruptcy, were ‘busted’ for fraud or some combination of all of the above, a study by the Institute for Policy Studies reveals.

 

LEGAL BRIEFS

SMOKE ENDERS. Condominium attorneys, this firm’s included, regularly advise community association clients looking to restrict or ban smoking inside owners’ units, to do by amending the declarations or condo bylaws through a vote of owners rather than through a regulation enacted by the board. The board’s authority to enact rules is limited to common areas; and while boards can enforce the anti-nuisance bylaws common in most condominiums, smoking is not universally defined as a legal nuisance, making the nuisance provision, as a result, and an unreliable hook on which to hang the enforcement of a no-smoking policy. A recent decision by a Maryland appeals court (Schuman v. Greenbelt Homes, Inc.,) illustrates the problem.

An owner, David Schuman, began complaining about his neighbor’s smoking when the neighbor (Popovic) moved into a unit adjacent to his in 1995. Sealing the cracks between the units seemed to resolve the problem until 2008, when, after renovating his unit, Schuman began complaining again about smelling smoke. Still dissatisfied after two years of “discussions” with the Popovics and the association’s board, Schumann sued Popovic for creating a nuisance and the board for failing to prohibit it. Popovic ultimately agreed to an injunction prohibiting smoking inside his unit (which he had ceased doing because his wife had become ill), but he continued smoking on the patio outside. When a trial court refused to enjoin that behavior, Schuman sued his neighbor and the association once again.

The appeals court rejected his central argument that the smoking amounted to a nuisance that the board was required to prohibit. The court noted that there are three types of nuisances:

  • Legal nuisance – A “substantial and unreasonable” interference with the use of property that “would be offensive or inconvenient to the normal person.”
  • Nuisance per se ─ An act that by its nature constitutes unreasonable interference all the time under all circumstances.
  • Nuisance in fact ─ An interference that rises to nuisance level because of the particular circumstances or environment in which it occurs.

Popovic’s smoking, the court concluded, did not qualify as a nuisance under any of those definitions. For one thing, the court noted, the condominium was not smoke-free; because smoking was permitted on the patios, Schuman could not argue that the act would be “substantially inconvenient or offensive” to all persons at all times. Nor had Schuman established that the smoking interfered “substantially” with his enjoyment and use of his unit or that he suffered any specific health problems as a result of the second-hand smoke. Also undermining Schuman’s claim, the court found, was its history: After tolerating smoking by both of his neighbors inside their unit for more than two decades, he was now arguing that cigarettes smoked occasionally on the outside patio were intolerable.

Other courts might rule differently on these issues, the appeals court acknowledged, noting, “This opinion does not pretend to be the final word on liability for secondhand smoke in multi-unit residential housing.”

But the message for condominium associations is clear: Courts will not necessarily agree that smoking is a nuisance that a board has the authority and the obligation to prohibit. If a community wants to ban smoking, it should amend its bylaws. If it wants to end up locked in an endless and expensive legal battle, enforcement of the nuisance provision is the way to go.

 

WORTH QUOTING:

“Some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world. This opinion, which has never been confirmed by the facts, expresses a crude and naïve trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system. Meanwhile, the excluded are still waiting.” ─ Pope Francis, delivering a critique of modern capitalism in the first major published message of his Papacy.