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KASS: Lawsuit pay-out may be part of townhouse buy

Q:     I am in the process of purchasing a townhouse in a PUD development.

Before placing an offer, I was told there was a lawsuit of $250,000 against the HOA regarding some owners who had put up their own money to put up a seawall to help protect the development from damage. We were told by my agent and the seller’s agent that the lawsuit was settled and that all owners would have to pay $5,000 each.

Now, my loan is two weeks away from closing and I found out that the lawsuit has, in fact, not been settled. My question is what if only half the owners pay their $5,000, how does the plaintiffs collect their remaining settlement. Would the owners who paid the $5,000 still be on the hook for any interest and penalties accrued until the settlement was paid. Also, in your opinion, would this be a risky purchase given the false information provided on the lawsuit and possible future pitfalls. Gary.

 

A:     Gary. I really need to know more about the lawsuit. In general, however, if there is a judgment against a condominium association, each owner becomes personally obligated to pay his/her percentage share of the judgment. As everyone knows (or should know) the association owns nothing; each owner has a percentage interest in the association. How you vote – and what you pay in condo fees – is based on that percentage. There are, however, many associations where it is “one unit, one vote.”

So in your case, assuming there is a judgment (or a settlement of the lawsuit) you – as the owner – may be obligated to pay the $5000.

If the seller told you the lawsuit had been settled, then I suggest the seller should make the payment. You really need to get more information; if the lawsuit has not been settled, it is possible that each unit may be obligated to pay more than $5000.

Frankly, I would seriously consider walking away. You were provided misleading information by the seller’s agent. But you should talk with a lawyer immediately; that misrepresentation may not be sufficient grounds to cancel the contract and I don’t want you to lose your earnest money deposit.

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Q: I have a problem with my real estate contract. I am selling my uncle’s house in Washington, DC, using his durable power of attorney because he has dementia. I signed a contract with the buyer (real estate developer) and closing was scheduled for June 30. The closing never happened because the title company refused to accept the POA. Apparently, it is missing language for real estate transactions in DC. Now the buyer wants me to go to court and get a guardianship. I don’t want to do that. My contract with the broker also expires this month. I wish to withdraw from and be released from the contract but the buyer’s attorney is threatening to sue and file an action requesting appointment of a trustee to convey title. If I had known from the start the POA was no good, I would have not signed any contracts. Do they have a case? Andrew.

 

A:       Andrew, normally, I don’t identify the state where the questions I receive come from. This column cannot provide specific legal advice, so I try to keep my answers general. However, since I practice law here in Washington – and since I want to lecture a bit – I left the location in the question.

In the District, because of a law that I personally participated in, powers of attorneys for the sale of real estate need specific language at the top of the document putting the person signing that POA on notice that the house can be sold. Over the years, I have represented too many eldery citizens who signed a POA not knowing it would allow the recipient the right to sell the house. Accordingly, I insisted on this language when our local legislature authorized powers of attorney many years ago.

Why do I bring this up? To make the point that real estate law can be complex, and sellers especially should consult with legal counsel throughout the entire process.

Yes, the buyer has a good case. Your POA does not have the magic language needed and the title company was correct in refusing to accept it.

If your uncle was competent to sign a new POA, that would be the easiest way to resolve this problem. But if he is not competent, you should have gone to the local probate court to seek appointment as a guardian and conservator. If you had been appointed, you would be able to sign all contracts and the sale would have sailed through.

I am surprised, however, that your real estate agent did not advise you of the legal requirements for a POA. Although in general, real estate agents are not required to provide legal advice, he/she may have some exposure. Talk with your attorney.

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