ON THE LEVEL: Jack Capitano: The lawyer who litigates land conflicts

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Jack Capitano graduated magna cum laude from Campbell University School of Law in 1995. Having spent 12 years at K&L Gates, the father of two boys recently joined Horack Talley in Charlotte. Capitano concentrates on real estate and landlord-tenant issues, as well as general commercial litigation. He represents commercial landlords throughout the state in litigation and negotiation, and handles other real estate related issues that include liens, condemnations, foreclosures and bankruptcy.  On the residential side, Capitano handles fair-housing claims and frequently lectures on the subject. He recently sat down for an interview with The Mecklenburg Times to discuss trends in the industry.

Could you give a breakdown of the work you do? Primarily, it’s mostly real estate litigation and the transactional things that are associated with that, such as lease amendments. I represent lots of commercial landlords and developers. There are lots and lots of disputes with tenants, and you also have disputes between tenants. There are arguments over things in the lease, including common-area maintenance expenses. A lot of times now companies come in and market themselves to tenants by saying they can save them money. They give the tenants arguments about why something shouldn’t be allowed under the lease. That often results in litigation.

Why did you enter this field? I was doing a different type of litigation in 2002 at an insurance defense firm and Kennedy Covington (now K&L Gates) was looking for someone to come in and be an in-house litigator in the real estate department. I really like what I’m doing. I like the clients, the developers and the attorneys that I work with in this area. It’s a neat subset of the law.

What are some trends you see in commercial real estate here in Charlotte? It seems to be coming back. Occupancy and rental rates are increasing. They’re actually building again in the office sector, which is great. Retail is coming around, but I don’t know if new development in building is going to be as fast as office and industrial. But, it’s recovering.

What are some problems developers face when trying to build in Charlotte? You can fight over land a million different ways. There are disputes over the purchase agreement and whether you actually close, there may be zoning issues or things in the chain of title, such as recorded declarations that give others the right to object to a proposed use. There are certain covenants running with the land that are on file with the register of deeds that affect the land. You’re charged with knowing that when you buy property that those things bind you. People fight over those all the time. Once you start building and tenant-up a property, there are fights there. Then you have bankruptcy issues from tenants that go bad and foreclosure issues.

What are typical cases you see for residential properties? I get involved in residential through fair-housing issues. There is a state and a federal fair housing act that are very similar. They govern every aspect of housing transactions from buying land to renting. I’ve represented a number of landlords and tenants on those issues. The biggest fair-housing issue is probably a lack of knowledge on both the part of the landlord and the tenant.  The acts prohibit any kind of discrimination in the terms or conditions of housing based on certain protected categories that include race, gender and handicapped conditions. Most of the time it’s that folks don’t realize it’s a fair-housing issue. There’s a lot of ignorance about the act and I think a lot of alleged violations by landlords stem from that. I’ve seen allegations that say an apartment complex is, for instance, not renting apartments in the back of the complex to women. The alleged reason behind it is for safety purposes. But that’s a fair-housing violation; you’re discriminating against that person based on her gender. A lot of times it wouldn’t occur to a landlord that it involves fair housing, they think they’re just making a safety or business decision.

On the other side, there are probably a lot of tenants who don’t know their rights and don’t realize they can help themselves a lot by relying on the Fair Housing Act. I’ve seen cases where people are wheelchair-bound and their chairs are accidently tearing up the apartment by putting holes in the walls due to maneuverability. The landlord doesn’t have to sit back and allow that.  You can have in your lease that if you damage the apartment we can evict you. But tenants don’t realize they can make that into a fair-housing issue and ask the landlord for reasonable accommodations. Once the tenant asks for something like that and says it is related to their condition, then the landlord is obligated to work on the issue, within reason. Fair housing is a really powerful tool for tenants. State and federal agencies will bring the case for you – you don’t have to hire a lawyer or spend money. They get the parties together for conciliation and try to resolve the matter. If that doesn’t work, then they can bring a lawsuit to enforce it.

The Fair Housing Act says that any covered multifamily built after March of 1991 has to meet certain accessibility requirements. I’ve seen more cases coming up where you’ve got somebody like Legal Aid going out and testing apartments to see if it appears they were built correctly and if not, bringing fair-housing claims. I’m not sure what’s driving it. We’ve got cases that go back to something not being built the way it was supposed to be as opposed to current discrimination.

What are your thoughts about the Supreme Court looking at disparate impact versus intentional bias in regard to the Fair Housing Act? The fair housing acts don’t really specify what level of proof you have to show. You’ve got the intentional, meaning, ‘I’m not going to rent to you because you are a woman,’ to a policy that on its face is neutral and doesn’t say anything about gender, but you put some kind of rule that is designed not to rent to women. Sometimes landlords come up with policies that don’t say anything about the protected class, but the whole effect and intent is to not rent to a certain gender or race. Then you’ve got a facially neutral policy where you don’t intend to do anything wrong. But if the impact discriminates against a certain class, then you’ve got an issue. That’s what the disparate impact is all about. It’s where you don’t intend to do anything wrong, but some policy that you have has the effect of discriminating against a protected class.

The cases that are going up to the Supreme Court are about banks and their lending practices for housing. You might have a case where somebody is converting a low-rent apartment complex into a high-rent development. The landlord might renovate it and try to turn it into something where you make a lot more money.  That’s obviously an OK goal in America. But if the impact – and it’s not intended – is to run out one race of people because they can no longer afford it, that’s a case that runs under the disparate-impact theory. The Fair Housing Act doesn’t say whether that’s allowed or not. I think every circuit court has said that disparate impact does apply and that those cases can go forward. But the general consensus is that if the Supreme Court ever gets one of these cases, that they are going to say this theory doesn’t work. It’s not in the Act and we’ve already disproved it in an employment context. The current administration is really pushing HUD to enforce fair-housing laws and pursue aggressive remedies and really push the disparate-impact theory. HUD has come out with its own guidelines saying that disparate impact works and that it is an allowable theory that works under the Fair Housing Act. It looks like there is a case now that probably will go before the Supreme Court. Every case that has come up before, there has probably been tremendous pressure to settle. Because if the Supreme Court decides the theory doesn’t apply, then it goes away everywhere. All these lower courts have found you can use the disparate-impact theory. But once the Supreme Court says no, it’s not available under the Act, then the law changes everywhere.

To what would you attribute the large increase in multifamily development in Charlotte? Certainly a lot of it stems from the recession and people losing housing to foreclosure and others who can’t get financing to buy. They have to live somewhere.  Also, it’s the changing marketplace. You’ve got younger folks who want to be in an urban environment close to downtown and who don’t need or want as much space as their parents had. A lot of the development is catering to them. You also have students and people who don’t want to be in the suburbs and are looking for a different experience. Some people say that Charlotte was underserved in regards to apartments, but they’ve been filling a need. As to whether that need continues and if it turns into an overbuild situation, I guess we’ll see.

What do you see for the future in Charlotte’s residential real estate market? It looks like we’re coming out of the housing crisis. A couple of years ago I’d be driving down the street with my wife and I’d say, “Look, they’re building something.”  There were no cranes, no construction for years. All of a sudden it started coming back and now it’s everywhere. I think most of it is apartments and multifamily going up. We’ll see if they are overbuilding. Some of it may be converted to condos if they overdo the apartments in response to the current need. It looks like people are working on single-family again. Now you see the houses being stripped to their foundations and being built up again. It’s encouraging.

Are there any trends you see in commercial real estate? People are certainly being cautious. I see more office being built now and it’s just responding to a need. It’s all related. It’s the people wanting to work downtown nowadays and not in the suburbs. Office is responding to that. I think there was a lot of office space built closer to the suburbs before the recession and that might be outdated or unusable in the current marketplace. That’s something that will have to be addressed. I think retail is going to come around.

Talking about retail, to what do you attribute the lack of interest in redeveloping Eastland Mall? I assume there is an underlying neighborhood issue. A mall is only as good as the neighborhood that is going to support it and the people that are going to come shopping. I always understood that was part of why Eastland failed, it was the declining neighborhoods around there. I guess Charlotte just changed. You’ve got Carolina Place and people moving south.