Nothing lasts forever. This is especially true of the legal rights and remedies we think that we have. Sometimes, they slip away with time. Other times, they’re taken from us. Either way, they are lost forever as these two cases illustrate.
Two Case Studies
BAD THINGS MAY COME TO THOSE WHO WAIT
Trillium Ridge Condominium Association v. Trillium Links and Village (NC)
Associations that delay pursuing claims they may have can lose them. Trillium Ridge owners took over control of the Board of Directors from the declarant/developer in February of 2007. A few months after taking over, the new directors discovered the flashing installed on the buildings was defective. Rather than replace it immediately and pursue a claim against the developer for the costs, the board decided to save some money and caulk the defective flashing instead. After a few years, the quick fix failed, and the board sued the developer for damages. The developer argued that any claims the Association had were all barred by the statute of limitations. The developer argued that the Association’s decision to caulk the flashing was proof they were aware of the problem more than three (3) years prior to filing the lawsuit, but had failed to pursue it. The court agreed with the developer and dismissed the lawsuit.
Lessons to Learn:
1. Statutes of limitations and statutes of repose are unforgiving and act to bar otherwise valid claims. While it can be very difficult to tell when the clock started on your claim, that does not keep it from running.
2. If your association is dealing with significant problems for which you believe your declarant/developer (or someone else) may be responsible, be prepared to pursue that claim promptly. At the very least, find out how much time you have before it’s lost.
3. Talk to your attorney sooner rather than later to avoid losing your rights.
I NEVER PROMISED YOU A ROSE GARDEN
Mancuso v. Burton Farm Development Company, LLC (NC)
Sometimes it is hard to tell the difference between sales “puffing” and a binding promise. In its marketing materials, Burton Farm Development Company (“BFDC”) “promised” potential purchasers that it would construct various recreational facilities including a clubhouse, swimming pool, tennis court and a marina. The marina was discussed openly with potential buyers in the community as construction progressed. However, the 2006 recorded plat of the community did not reflect the construction of a marina. In addition, the recorded Declaration of Covenants, Conditions and Restrictions expressly stated that the developer’s master plan was “subject to continuous revision and change by Declarant, in its discretion.” Sales contracts signed with purchasers referenced a property report that mentioned parks and walking trails but no marina.
In 2011, Mr. Mancuso insisted that BFDC construct the promised marina. BFDC announced it had no obligation to build a marina and that constructing one at the time made “no economic sense.” Mr. Mancuso was shocked. He sued BFDC, asserting that the developer had a contractual obligation to construct a marina because the contract to purchase incorporated the Declaration, the master plan showed the marina, and the developer’s marketing materials and statements established an implied promise to build it. Mr. Mancuso was shocked again when the Court of Appeals sided with BFDC. The court noted that the property report which was incorporated into the purchase agreement listed only two planned recreational facilities – parks and walking trails – and that even those items were not guaranteed because the developer had the sole discretion to revise the published plans. According to the court, BFDC’s property report, marketing materials, and oral representations did not create any express or implied contract to build a marina.
Lessons to Learn:
1. Buyer beware! Marketing materials and oral representations are likely not enough to create binding obligations.
2. Owners (and association boards of directors) should not assume that the declarant/developer must complete a community as it was originally planned or proposed.
3. Read the “official” documents to learn what must be provided and what can be changed or removed entirely (see the Note below).
4. If it’s important to you, ask your attorney to help you get a binding, contractual commitment for it before you buy. If the declarant/developer won’t give you that, don’t count on it.
Note: The North Carolina Condominium Act offers purchasers some protection on Sections 4-118 and 4-119.
§ 47C-4-118. Labeling of promotional material.
If any improvement contemplated in a condominium is labeled “NEED NOT BE BUILT” on a plat or plan, or is to be located within a portion of the condominium with respect to which the declarant has reserved a development right, no promotional material may be displayed or delivered to prospective purchasers which describes or portrays that improvement unless the description or portrayal of the improvement in the promotional material is conspicuously labeled or identified as “NEED NOT BE BUILT”.
§ 47C-4-119. Declarant’s obligation to complete.
(a) The declarant shall complete all improvements labeled “MUST BE BUILT” on plats or plans prepared pursuant to G.S. 47C-2-109.
Unfortunately there are NO similar requirements or protections in the North Carolina Planned Community Act. Nor do they exist in the South Carolina Horizontal Property Act which governs SC condominiums. South Carolina has no statute equivalent to the Planned Community Act.
Please feel free to call or email Steve Sellers with an questions about this post.