Should the bank maintain property during foreclosure process?

I have received some inquiries from association boards as to laws that require the Bank to maintain property while they are going through the foreclosure process.

I am aware of a law has taken effect in New York State that aims at protecting repossessed homes from becoming eyesores by requiring banks to maintain the properties during the foreclosure process even before they legally own the home. This law allows municipalities to perform maintenance work on the foreclosed properties and bill the lender if the property remains unkempt. Enforcement falls to the municipalities and the average fine for failing to comply ranges from $500 to $1,000 per day depending upon the infraction. Foreclosed homes located within a homeowner’s association are subject to the fines as well. This is something that associations may wish to pursue with the Michigan Legislature or local municipalities as well as through litigation given the current state of economic affairs within the housing and banking industries.

Holiday Parties Hosted by Associations wherein Alcohol is Served

During the holiday season I continually hear from associations that have community facilities which are sometimes used for community events such holiday parties. Sometimes at these events an association will serve alcohol knowing that more members will attend an event which provides alcoholic beverages then would be the case for a dry event. So how can the association limit its exposure in such a case?

The best advice I can give to associations is to avoid selling alcohol as every State has laws that assign liability in cases where an intoxicated guest leaves a social event and causes personal property damage to a third-party. If your association is not selling alcoholic beverages, it will be deemed a “social host.” If your association decides to sell alcohol, however, it will be considered a licensee and you will need to get a liquor license from the State. A social host, on the other hand, is liable for damages suffered because of the intoxication of a person under the age of twenty-one when the social host or its agent willfully and knowingly served alcohol to an underage person. Based on this principle, if your association controls and furnishes alcohol as a social host, your association could be liable only for injuries resulting from the service of alcohol if an individual acting for the association, such as a board member, knowingly and willfully serves alcohol to someone under the age of twenty-one.

If your association decides to run the risk of serving alcohol, it is imperative that you obtain the appropriate insurance. You cannot be one hundred percent sure that someone under twenty-one will not be served alcohol or that a volunteer bartender will always refuse to serve an inebriated member. Therefore, an association should never hold an event with alcohol without liquor liability insurance.

Lastly, hire professionals to serve the alcohol. Professional companies should carry their own liquor license insurance that will give them and your association protection. An additional bonus to hiring professionals is that trained bartenders will have experience in indentifying minors and those who have had too much to drink which will help lower the chances that matters will get out of hand. In short, be very cautious about serving or allowing the serving of alcohol and check with your attorney and insurance agent before allowing any such activity, and request their advice in writing.

The Attorney-Client Privilege

I was contacted by a homeowner who attended an association meeting wherein the homeowners association attorney commented, in some detail, on a pending lawsuit. The homeowner then asked for a definition of the attorney-client privilege, fearing that such privileges had been violated by the attorney.

In short, the attorney-client privilege applies to the client which is, in this case, the condominium association acting through its board of directors. Any discussions by the attorney concerning legal advice should be given strictly to the board of directors in an executive session so that the minutes and any dialogue at that meeting are deemed to be protected by the attorney-client privilege. Once the attorney discusses sensitive issues and legal advice to third parties, including members of the association, he or she has, in effect, breached that attorney-client privilege since the homeowners are not under any fiduciary obligation to maintain confidentiality.

The attorney in this case should be questioned as to why he or she made those statements, particularly if the association is contemplating litigation as he may have clearly breached the attorney-client privilege which may have detrimental effects on the association.

Finding a Real Estate Agent

I have received a number of queries from individuals seeking assistance in finding the right real estate agent when buying and/or selling a home in this market. Sometimes it is more difficult to find out about a real estate agent than other professionals, but here are a few questions you should ask an agent before you hire him or her:

1. First, ask the agent to provide a list of properties they have listed and sold in the last year with contact information. Before you start calling the names, ask the agent if anyone will be “particularly pleased or particularly disappointed.” When you contact these past clients, a main question to ask is what was the asking price and what was the sales price was.

2. If you are a seller, ask if these past properties are similar to yours in price, location and other salient features such as “how long have the homes been on the market.” Obviously, you want someone who specializes in exactly what you are trying to sell.

3. Check into their credentials and performance. Are they licensed? Have there been any disciplinary actions or complaints made against them? Is the agent a “Realtor” and/or a “member of the National Association of Realtors”? Have they have received any awards as such? Have they taken additional classes or training such as a CRS (Certified Residential Specialist) or an ABR (Accredited Buyer’s Representative)? If you are a senior citizen buyer or seller, is the agent an SRES (Seniors Real Estate Specialist) which means that they have completed training aimed at helping buyers and sellers in the 50+ age range.

Keep in mind that a “Realtor” means that he/she is a member of the National Association of Realtors and pledges to support its Code of Ethics. Lastly, make sure that your real estate agent or broker is not a “new kid on the block” but has been in the business at least five (5) years. You can check with the State in that regard. Ultimately, you are looking for someone who is actively engaged in a particular area and price range, and, you want to know what knowledge of those two factors they can demonstrate and what kind of market presence they have.