I recently had the honor of attending Tony Robbins' Date With Destiny in Scottsdale. I've been a few times before, of course, but this time was a little different. Robbins presented some new content, that, well, just makes alot of sense and is also pretty amusing. At least to me...
Back in the day, we were all part of hunter-gatherer societies. The men were the hunters, the women were the gatherers. Men generally went out with a spear, or a club, took care of business, and drug the carcass back to the cave, and were done. Someone else dealt with it then. So men are wired to go out, solve a problem, take care of business, and be done. We do lots of things that way.
Women, being the gatherers, would go out into the meadows, find the ripe berries, roots, leaves, whatever, and bring them back to the cave. But then they also needed to share the information about where the berries were located with the other gatherers in the tribe; "Go out to the second meadow past the stream, by the big rock, and then there is this bush, about 30 paces past the little ant hill, and then you want the berries from the bush on the left, not the right, and be sure to get the ones that are just the right shade of red ..." you get the idea.
So women are wired to go out and observe all sorts of things, and make sure they have every detail, and then bring the information back and share it with everyone.
In both cases, high degrees of each skill, male and female, related directly to the prosperity, and even survival, of the clan. The best hunters, the best gatherers, led to the strongest and most successful tribes. So, ladies and gents, we are genetically wired to be this way. Men are not hairy women, and women are not hairless men who can multitask. We are very different.
What does this mean -- how can this information be useful today?
Gentlemen, how often does your woman come home and want to share every ridiculous detail of what she went through to find a parking place at the mall? And ladies, how often does your man communicate with you in monosyllables, how often, when you want to tell a story, is he searching for some point to it, when you have none? And how often does he yearn to just fix some problem you have? That's what we do: Women give meadow reports and men want to fix problems.
Gentlemen, two things: The Meadow Report does not have any point; and, she doesn't care whether you remember it or not. She needs to share it with you. You must listen to it, but she expects no action from you as a result (usually -- your mileage may vary).
Ladies, we men sometimes forget that you are delivering a Meadow Report and we will try, in vain, to solve some problem we perceive you have; understand it is how we are wired. We are here to solve problems, break through, and have peace. We are not designed to listen. Your survival depended on listening and sharing; our survival depended on hunting down and killing things.
The vestiges of these behaviors still affect us today. Understanding a little more of why we do what we do (thank you Tony Robbins) can help us live happier, more understanding lives.
--PLH
Wednesday, December 23, 2009
Lis Pendens Sanction Illumination
On December 15, 2009, the Arizona Court of Appeals published its opinion in Lebaron Properties, LLC v. Kaufman, which sheds new light on statutory sanctions and that may presage the final outcome in the pending appellate matter of Galeb-Miller Development v. Markham Contracting, mentioned in two previous blog posts. The briefest summary of the facts pertinent to the disposition of this most recent appeal is this: Kaufman, a Scottsdale attorney, represented five defendants in a lawsuit over a busted realty contract. Before filing an answer and counterclaim on behalf of his defending clients (a violation of the Court of Appeals “choate claim” rule established in Santa Fe v. Bartschi discussed elsewhere on this blog), and, apparently without consulting the defendants, Kaufman filed a lis pendens describing the busted-contract land in the Maricopa County Records, and then refused to quash it upon demand from Lebaron.
Lebaron sued under A.R.S. §33-420, seeking $25 thousand in damages since Kaufman represented five defendants in the dispute – the statutory threshold $5 thousand per violation, multiplied by five. The trial judge found that only Kaufman was “to blame,” as there was no evidence that the defendants were in league with the attorney in his decision to file the lis pendens. Nonetheless, the trial judge interpreted the statute to mean that 5 defendants X $5,000 per “violation” entitled Lebaron to $25,000 in statutory damages. Kaufman appealed.
The Court of Appeals disposed of the argument that everyone named in the caption of the lawsuit leading to the lis pendens is per se a “violator”; it cited to the statutory language that a violator must be, at some level, a person “who causes” the filing, meaning an active participant in the lis pendens filing, at least to the extent of knowing (or having reason to know) of one’s attorney’s intended recording of the lien against the other camp’s property. In short, merely being a party to a lawsuit that precipitated the lis pendens lien is not, alone, a sufficient showing of a principal’s scienter (intent or knowledge of wrongdoing). So the Court reasoned that 1 X 1 X 1=1 (single violator, single instrument recorded, single landowner means only one statutory damages award is appropriate).
Hmm. If that’s going to be the Court of Appeal’s perspective, then how will that view affect the Motion for Reconsideration now before another panel of that court in the long-running saga of Galeb-Miller Development v. Markham Contracting? I notice that one of the parties filed a “Supplemental Citation of Authority” with the Court of Appeals on December 18, three days after Kaufman’s slip opinion was issued. I’m guessing that the party doing that filing is reminding the court that the conservative approach – dictated by “episodes” of groundless filing, instead of numbers of lien instruments recorded by the wrongdoer – should determine the size of the statutory damages. (See the August 17th post here for further details.) In other words, your honors if a number of groundless liens contemporaneously are recorded, kindly ignore that, so long as it’s all part of the same episode of groundless liens being impressed against the land of a single owner.
--MNW
Lebaron sued under A.R.S. §33-420, seeking $25 thousand in damages since Kaufman represented five defendants in the dispute – the statutory threshold $5 thousand per violation, multiplied by five. The trial judge found that only Kaufman was “to blame,” as there was no evidence that the defendants were in league with the attorney in his decision to file the lis pendens. Nonetheless, the trial judge interpreted the statute to mean that 5 defendants X $5,000 per “violation” entitled Lebaron to $25,000 in statutory damages. Kaufman appealed.
The Court of Appeals disposed of the argument that everyone named in the caption of the lawsuit leading to the lis pendens is per se a “violator”; it cited to the statutory language that a violator must be, at some level, a person “who causes” the filing, meaning an active participant in the lis pendens filing, at least to the extent of knowing (or having reason to know) of one’s attorney’s intended recording of the lien against the other camp’s property. In short, merely being a party to a lawsuit that precipitated the lis pendens lien is not, alone, a sufficient showing of a principal’s scienter (intent or knowledge of wrongdoing). So the Court reasoned that 1 X 1 X 1=1 (single violator, single instrument recorded, single landowner means only one statutory damages award is appropriate).
Hmm. If that’s going to be the Court of Appeal’s perspective, then how will that view affect the Motion for Reconsideration now before another panel of that court in the long-running saga of Galeb-Miller Development v. Markham Contracting? I notice that one of the parties filed a “Supplemental Citation of Authority” with the Court of Appeals on December 18, three days after Kaufman’s slip opinion was issued. I’m guessing that the party doing that filing is reminding the court that the conservative approach – dictated by “episodes” of groundless filing, instead of numbers of lien instruments recorded by the wrongdoer – should determine the size of the statutory damages. (See the August 17th post here for further details.) In other words, your honors if a number of groundless liens contemporaneously are recorded, kindly ignore that, so long as it’s all part of the same episode of groundless liens being impressed against the land of a single owner.
--MNW
Saturday, December 5, 2009
Co-Housing - Part 5: Matters of Stakeholder Governance
Neighbors in the U.S. decided to take community-based matters into their own hands beginning in the 1900s (one of the first POAs being in Kansas City, in 1905), when they realized that governments, no matter how well-intentioned, can’t handle the variety and number of grievances owners have against their fellow owners in a subdivision or condominium project. Sounded like a good idea; but eventually, POAs (my initial-ism for property owners’ associations, a generic term for the several types of organizations of property owners) began to feature, in too many instances, direction by little tin gods who behaved in more draconian fashion than any government bound to recognize its citizens’ constitutional rights. POAs lately are not turning out to rule with sensitivity and benevolence as they initially were envisioned to do. John Uhri of Indiana heard enough of their narratives to start a blog called “Neighbor Revolution,” in which he writes, plaintively enough: “We want to get to know our other neighbors better and turn into a true community. We’d rather have our neighbors stop by and say they wished we’d cut our grass more often instead of sending out a HOA bully to do the job. Is this possible? I don’t know. But I think we should try.”
Amen, John. I got nauseated, as legal counsel, sending demand letters to owners over placement of basketball hoops and holiday-season lights on their buildings and grounds, so I stopped representing POAs decades ago; and I’ve never missed a moment of the bickering. This landscape of micromanagerial silliness is not susceptible to repair by state government. The most Arizona’s legislature has been able to do is to safeguard persons expressing their patriotism to fly certain flags and to post certain political-and-candidate affinity signs. And that legislative effort was agonizing enough. Time to wipe clean the slate of overbearing self-governance in a new environment of co-housing. But how shall you proceed afresh?
First, I think that a new community, especially one that comes on-line in haste, should begin the organization of mass behavior through a constitutional convention. Seriously. I mean in town-hall fashion, the folks committed to purchase their dwelling units – but hold the land on that sale, please - should sit down together and decide what matters to them as a community. What really matters, I mean; not micromanagement of the operation of the project in perpetuity. And a part of that community effort entails doing the same thing, repeatedly, minimally each seven years after the original constitution is adopted. One of the stupidest parts of current POA self-governance is the notion that a development (or public taste) is immutable, and that the neighbors will always hold onto the same “community values.” (Query: Would you rather have the skateboarder using those noisy ramps in his/her parents’ driveway – or in the street?) Truly, later “generations” of owners bring different expectations for the form and appearance of their dwellings and the overall project, and are stuck with the declaration of restrictions from 30 years past that never can be amended or terminated without a unanimous vote of the 48 subdivision lot owners - as if that’s ever going to occur. (You remember the CCRs containing the clauses about the garage or carriage-house that can’t be built until the primary dwelling is erected, coupled with far less kinder restrictions on the races of people who can and can’t live in them.)
But in new co-housing projects with aggregated amenities, the owners begin their engagement with the community under the assumption that cooperation and distinctiveness are themselves virtues, not the ingredients of a recipe for continual contention. And since a property devised co-housing constitution is an organic document, the project is not undergirded by mutual distrust but by respect. Additionally, since the co-housing project may feature movable dwelling units, if there is discord sufficient to fry the “good vibrations” of the community, the folks finding themselves on the “outs,” as they say, can pick up and leave with less difficulty, headed for a more empathetic community of kindred spirits. Here’s a few suggestions on how to prevent that from happening – inserts for the new constitutions.
• Encourage youth to address the periodic community meetings (conventions); they are both more intuitive than adults and less subtle in means of their expression, thus increasing the odds that the truth will be spoken in these meetings,
• Allow the constitution to be amended by something far less than 100% affirmative vote but something more than a simple majority of the voting community members (2/3rds),
• Articulate a dispute resolution process as between individual dwellers; what about this, assuming the instance of a community established via a land trust and having a sole Trustee charged with the daily administration of the land trust:
a. In the first stage, the disputants meet face to face, in an unsupervised conciliation meeting. Conciliation occurs when the parties agree on concessions each to be made to the other’s point of view, sometimes achieved by a change in behavior of a party, and at other times by specific actions of one or both parties to the dispute. If the concessions are sufficiently substantial, the dispute ends there. Accordingly, the most efficient means to curtail expending personal or community resources is to train community members in conciliation processes at the outset of the community.
b. During the second stage, the parties meet in a mediation setting with a neutral person from outside the community. The objective at this stage is to identify the divide between issues that are resolvable and irresolvable without further processes. If sufficient issues are mediated to a reasonably satisfactory result, the next stage of the disputant’s conversation may be a. above or c. below.
c. At the third stage, remaining disputes following steps a. and b. above (if there is no further conciliation process) are arbitrated by a neutral unaffiliated with the community. At the conclusion of this stage, one party has prevailed in its position concerning each issue not earlier resolved; and the arbitrator’s decision is binding, by prior agreement of the parties to the arbitration.
(The fourth stage described in d. below is not technically a dispute resolution step; instead, it is “aftermath adjustment” of the attitude of the non-prevailing party in the arbitration.)
d. In the aftermath phase, a party still aggrieved (due to an adverse outcome on an issue) may elect to meet with the Trustee of the land trust or her representative, likely a member of the community, to discuss the terms under which the griever will sell back to the Trustee her ownership interest in the community. This meeting does not address the merits of the disputants’ positions in the now-resolved dispute, nor the decision of the arbitrator. The sole issue is allowing the griever the opportunity to depart the community – hopefully with some dignity – since the non-prevailing person feels unable to continue her daily interactions with her former adversary (ies) or other persons aligned with the adversary’s viewpoint in the recently-resolved dispute. There would need to be a time limit upon the exercise of this prerogative by the grieving party. (Whether the Trustee would be bound by the same time limit is a decision point; if a disgruntled community dweller spends all her time “poisoning the community well,” this might be form the basis for the Trustee’s requesting purchase of the griever’s property interest for the sake of deescalating conflict.) This is a meeting for economic discussions only pertaining to the value of the griever’s property interest and the terms and timing of that interests’ acquisition by the Trustee.
Above, I chucked in a reference to a land trust. In a future post, I’ll address that and other possible models of co-housing ownership that are pragmatic, not utopian.
-MNW
Amen, John. I got nauseated, as legal counsel, sending demand letters to owners over placement of basketball hoops and holiday-season lights on their buildings and grounds, so I stopped representing POAs decades ago; and I’ve never missed a moment of the bickering. This landscape of micromanagerial silliness is not susceptible to repair by state government. The most Arizona’s legislature has been able to do is to safeguard persons expressing their patriotism to fly certain flags and to post certain political-and-candidate affinity signs. And that legislative effort was agonizing enough. Time to wipe clean the slate of overbearing self-governance in a new environment of co-housing. But how shall you proceed afresh?
First, I think that a new community, especially one that comes on-line in haste, should begin the organization of mass behavior through a constitutional convention. Seriously. I mean in town-hall fashion, the folks committed to purchase their dwelling units – but hold the land on that sale, please - should sit down together and decide what matters to them as a community. What really matters, I mean; not micromanagement of the operation of the project in perpetuity. And a part of that community effort entails doing the same thing, repeatedly, minimally each seven years after the original constitution is adopted. One of the stupidest parts of current POA self-governance is the notion that a development (or public taste) is immutable, and that the neighbors will always hold onto the same “community values.” (Query: Would you rather have the skateboarder using those noisy ramps in his/her parents’ driveway – or in the street?) Truly, later “generations” of owners bring different expectations for the form and appearance of their dwellings and the overall project, and are stuck with the declaration of restrictions from 30 years past that never can be amended or terminated without a unanimous vote of the 48 subdivision lot owners - as if that’s ever going to occur. (You remember the CCRs containing the clauses about the garage or carriage-house that can’t be built until the primary dwelling is erected, coupled with far less kinder restrictions on the races of people who can and can’t live in them.)
But in new co-housing projects with aggregated amenities, the owners begin their engagement with the community under the assumption that cooperation and distinctiveness are themselves virtues, not the ingredients of a recipe for continual contention. And since a property devised co-housing constitution is an organic document, the project is not undergirded by mutual distrust but by respect. Additionally, since the co-housing project may feature movable dwelling units, if there is discord sufficient to fry the “good vibrations” of the community, the folks finding themselves on the “outs,” as they say, can pick up and leave with less difficulty, headed for a more empathetic community of kindred spirits. Here’s a few suggestions on how to prevent that from happening – inserts for the new constitutions.
• Encourage youth to address the periodic community meetings (conventions); they are both more intuitive than adults and less subtle in means of their expression, thus increasing the odds that the truth will be spoken in these meetings,
• Allow the constitution to be amended by something far less than 100% affirmative vote but something more than a simple majority of the voting community members (2/3rds),
• Articulate a dispute resolution process as between individual dwellers; what about this, assuming the instance of a community established via a land trust and having a sole Trustee charged with the daily administration of the land trust:
a. In the first stage, the disputants meet face to face, in an unsupervised conciliation meeting. Conciliation occurs when the parties agree on concessions each to be made to the other’s point of view, sometimes achieved by a change in behavior of a party, and at other times by specific actions of one or both parties to the dispute. If the concessions are sufficiently substantial, the dispute ends there. Accordingly, the most efficient means to curtail expending personal or community resources is to train community members in conciliation processes at the outset of the community.
b. During the second stage, the parties meet in a mediation setting with a neutral person from outside the community. The objective at this stage is to identify the divide between issues that are resolvable and irresolvable without further processes. If sufficient issues are mediated to a reasonably satisfactory result, the next stage of the disputant’s conversation may be a. above or c. below.
c. At the third stage, remaining disputes following steps a. and b. above (if there is no further conciliation process) are arbitrated by a neutral unaffiliated with the community. At the conclusion of this stage, one party has prevailed in its position concerning each issue not earlier resolved; and the arbitrator’s decision is binding, by prior agreement of the parties to the arbitration.
(The fourth stage described in d. below is not technically a dispute resolution step; instead, it is “aftermath adjustment” of the attitude of the non-prevailing party in the arbitration.)
d. In the aftermath phase, a party still aggrieved (due to an adverse outcome on an issue) may elect to meet with the Trustee of the land trust or her representative, likely a member of the community, to discuss the terms under which the griever will sell back to the Trustee her ownership interest in the community. This meeting does not address the merits of the disputants’ positions in the now-resolved dispute, nor the decision of the arbitrator. The sole issue is allowing the griever the opportunity to depart the community – hopefully with some dignity – since the non-prevailing person feels unable to continue her daily interactions with her former adversary (ies) or other persons aligned with the adversary’s viewpoint in the recently-resolved dispute. There would need to be a time limit upon the exercise of this prerogative by the grieving party. (Whether the Trustee would be bound by the same time limit is a decision point; if a disgruntled community dweller spends all her time “poisoning the community well,” this might be form the basis for the Trustee’s requesting purchase of the griever’s property interest for the sake of deescalating conflict.) This is a meeting for economic discussions only pertaining to the value of the griever’s property interest and the terms and timing of that interests’ acquisition by the Trustee.
Above, I chucked in a reference to a land trust. In a future post, I’ll address that and other possible models of co-housing ownership that are pragmatic, not utopian.
-MNW
Tuesday, December 1, 2009
Co-Housing, Part 4: Matters of Sharing
If less is more, than what can the co-housing dweller shed in the way of individually-controlled amenities? Take this inventory: How would you survive, if you had to share some of these with your neighbors, while getting something of value in return? Imagine sacrificing exclusive control of these items of luxury:
Swimming pool
Recreation room
3-Vehicle Garage
Boundary walls
Storage closet
Front lawn
Driveway
Any reason an owner has to have a 20 X 40 foot pool all his/her own? Surely it isn’t a burning desire to sweep/brush/resurface cool deck/chemically treat the soup. Of course, privacy is lost when you have to share, unless you alone among the inhabitants swims at middle of the night-type hours. But who in a conventional single family subdivision demands, or feels comfortable, skinny-dipping in their private yards today? Common green spaces save on gas or electricity (grass/shrubbery maintenance power), water and perhaps fertilizer, compared to segregating their use on a per-unit basis. Cement driveways leading to each garage or dwelling entrance add little to the aesthetic experience of a development. Garages have become storage units in their own right, and they add building mass in a project – so consider this: does every owner need a 2-3 car garage? If storage units can be aggregated in a single building in a co-housing project, garages can resume the scale they occupied in the 1950s – a “side” building, rather than a bookend rivaling the mass of the main structure. In fact, the need for multi-car garages may be impacted by aggregating parking areas in co-housing development.
What kind of recreation facilities can be aggregated in co-housing environments? This hardly is new from the perspective of multifamily or attached housing developments, but why does the concept need to be uniquely a trait of attached housing? A multi-purpose building, with flexible design and ample storage space incorporated in its design, can be used alternatively for meetings, receptions and parties, card games, physical workouts, crafts, fire – pits and barbeque islands, and manual-arts workshops – even, perhaps, day-care/child-sitting (why would you prefer leaving your child at the school campus instead of inside your community, unless you don’t like the folks in your community?). The roof of the structure could be incorporated into the community garden space or solar power collection points for the project, and the structure, like the pool and the storage unit building (and so on) could be maintained by a single owner with the accompanying economies of scale.
I suspect most Americans today use much of our interior living space for storage of personal effects, or “stuff.” Achieving efficiencies in living space invites adoption of an attitude of inventorying our personal property requirements, and possibly shedding some less useful trappings of our affluence. My hunch is that this is related to reducing our familial carbon footprint.
-MNW
Swimming pool
Recreation room
3-Vehicle Garage
Boundary walls
Storage closet
Front lawn
Driveway
Any reason an owner has to have a 20 X 40 foot pool all his/her own? Surely it isn’t a burning desire to sweep/brush/resurface cool deck/chemically treat the soup. Of course, privacy is lost when you have to share, unless you alone among the inhabitants swims at middle of the night-type hours. But who in a conventional single family subdivision demands, or feels comfortable, skinny-dipping in their private yards today? Common green spaces save on gas or electricity (grass/shrubbery maintenance power), water and perhaps fertilizer, compared to segregating their use on a per-unit basis. Cement driveways leading to each garage or dwelling entrance add little to the aesthetic experience of a development. Garages have become storage units in their own right, and they add building mass in a project – so consider this: does every owner need a 2-3 car garage? If storage units can be aggregated in a single building in a co-housing project, garages can resume the scale they occupied in the 1950s – a “side” building, rather than a bookend rivaling the mass of the main structure. In fact, the need for multi-car garages may be impacted by aggregating parking areas in co-housing development.
What kind of recreation facilities can be aggregated in co-housing environments? This hardly is new from the perspective of multifamily or attached housing developments, but why does the concept need to be uniquely a trait of attached housing? A multi-purpose building, with flexible design and ample storage space incorporated in its design, can be used alternatively for meetings, receptions and parties, card games, physical workouts, crafts, fire – pits and barbeque islands, and manual-arts workshops – even, perhaps, day-care/child-sitting (why would you prefer leaving your child at the school campus instead of inside your community, unless you don’t like the folks in your community?). The roof of the structure could be incorporated into the community garden space or solar power collection points for the project, and the structure, like the pool and the storage unit building (and so on) could be maintained by a single owner with the accompanying economies of scale.
I suspect most Americans today use much of our interior living space for storage of personal effects, or “stuff.” Achieving efficiencies in living space invites adoption of an attitude of inventorying our personal property requirements, and possibly shedding some less useful trappings of our affluence. My hunch is that this is related to reducing our familial carbon footprint.
-MNW
Wednesday, November 25, 2009
Co-Housing, Part Two - Matters of ‘Turf’
Conventional, permanent, single-family housing presumes the fact of defined space. The Postal Service needs a street number to deliver the occupant’s mail. The County Assessor needs a parcel number so that it values, then computes and bills, your property taxes. Fire and police responders require an address in case of a call for help. But none of these aids to identification is truly critical except to aid in imposing taxes. As long as they are logical and sequential, street address numbers can be arbitrarily assigned without separate parcel ownership. Valuation for tax purposes admittedly does require distinguishing among parcels by character of improvements and parcel size, unless ad valorem tax systems were “flat tax”-based, tied to the fact of ownership alone.
Subdivision regulations came about, I guess, as a deterrent to unprincipled sales of lots lacking legal access and suitable urban infrastructure (by a particular community’s standards). Early Massachusetts subdivision regulations originated responding to concerns about the impact of public and private street development. Boston had regulations as early as the 1890s. The advent of these regulations standardized residential development in communities. It probably impaired the growth of “intentional communities,” where dwellers desired to share living quarters and yards in loose alliances. Momentum toward government control peaked in the 1950s. The Civil Rights movement spawned a number of campaigns for individual rights, and by the 1960s, professional planners and public officials became more critical of subdivision regulation as a concept encouraging development uniformity. The notion of PRD (planned residential development) and PUD (planned unit development) zones allowed deviation from formulaic subdivision standards such as setbacks, street widths and density measures.
By the 1990s, principles that added concern for native habitats and pedestrian “scale” led to phenomena such as conservation subdivision design, with its attendant clustered housing units and minimal quantities of impervious surface materials used in road and driveway improvements or of heavily compacted soils. These type developments tend to feature narrower streets, fewer visible utilities lines and retention of the land’s character and history, preserved mainly through conservation easements. “Traditional Neighborhood Developments” are another phenomenon of fairly recent vintage; these are useful both for the development of new neighborhoods and the revitalization or extension of existing neighborhoods, which are structured upon a fine network of interconnecting, pedestrian-oriented streets and other public spaces. These developments offer a mixture of housing types and prices, prominently-sited civic or community buildings, and stores/offices/workplaces, to provide a balanced mix of activities. Religious institutions and pre-school/elementary school facilities are encouraged to complete the sense of an “urban village.” A Traditional Neighborhood Development has a recognizable center and clearly defined edges; their optimum size is a quarter mile from its center to edge. Seaside, Florida, one of the earliest TNDs, is an often-cited illustration of this concept, since Robert Davis is considered the “guru” of the New Urbanism.
What all of these innovations in subdivision treatment have in common, however, is that they are all still subdivisions. Even if density reaches the clustered scale of condominium housing, there remains “one owner, one lot,” as the organizing principle. That organizational scheme, I contend, is no longer purposeful. If you don’t need to own a lot to have the exclusive right as owner to occupy some three-dimensional “footprint,” well, don’t. Save some money. Avoid some headaches. Stay flexible; optimize your mobility.
So, is the medieval times’ premise of living within the fiefdom of the local lord (of the land) desirable? With the advent of political democracies, why not? Wasn’t the haste to have private ownership of a parcel of one’s own intended to eliminate the vassal’s continued obligatory fealty to the lord, because the vassal had no alternative but to become a nomad? We’re evolved in America, having eliminated slavery, so a return to protracted occupancy of another’s land isn’t that daunting - especially if one’s annual expenses are significantly trimmed that way. In a conventional leasing mode, the objective of the owner is to cause the renter to pay the owner’s mortgage and other expenses, creating cash flow enabling that owner-landlord to leverage the income stream into additional loans with which to acquire yet more property, and so on. In Europe, according to some sources, a significant percentage of the population are tenants and are nonplussed by the idea that relatively few own relatively most of the realty. The few pay taxes on the land and to insure it and to keep it weed and pest-free, coupled with principal and interest on the amount borrowed.
If fewer folks own most of the land, that eliminates the need for conventions like subdivision ordinances and lot boundaries. How does someone describe where she lives, in that event? Legal descriptions still identify a two, or even three, dimensional occupancy “space.” But instead of cutting a larger parcel into smaller lots or tracts, how about just living under an easement regime? What I mean is this: suppose you have a 5 –acre parcel, and you want to afford 5 persons/groups occupancy of portions of that parcel. If you don’t desire to have separate road networks leading each occupant in and out of his or her “turf,” you can establish a single, main road that all occupants use in common. In a subdivision, this would be a “common area tract.” But it’s no different in effect if you simply grant a non-exclusive easement to the dweller on each slice of turf. The slices of turf are defined by a set of exclusive easements (one each describing the slice allocated to each unique occupant, excluding all others).
What is compelling about this concept is that the easements can be granted in “gross,” meaning just for the lifetime of the grantee occupying the turf (person who has the occupancy right). The easement is documented and filed in the public records (perfecting, in a manner of speaking, the right to occupy and use the turf). The easement recites that the grantee’s death or his/her abandonment of the easement (e.g., by moving away) will terminate the grant forever. This entitles the owner of the fee title interest to grant a subsequent easement in gross to the next occupant of the identical (or maybe different, depending on what’s going on with the balance of the owner’s parcel) turf.
Unconventional? You betcha. Affordable for the occupant? Sure. All that needs to occur is an attitude adjustment – shunning the sense of inadequacy felt because you don’t live on land you own outright. The present state of the economy and the savings realized ought to help salve those wounds, especially for those who have taken a beating in their credit scores.
--MNW
Subdivision regulations came about, I guess, as a deterrent to unprincipled sales of lots lacking legal access and suitable urban infrastructure (by a particular community’s standards). Early Massachusetts subdivision regulations originated responding to concerns about the impact of public and private street development. Boston had regulations as early as the 1890s. The advent of these regulations standardized residential development in communities. It probably impaired the growth of “intentional communities,” where dwellers desired to share living quarters and yards in loose alliances. Momentum toward government control peaked in the 1950s. The Civil Rights movement spawned a number of campaigns for individual rights, and by the 1960s, professional planners and public officials became more critical of subdivision regulation as a concept encouraging development uniformity. The notion of PRD (planned residential development) and PUD (planned unit development) zones allowed deviation from formulaic subdivision standards such as setbacks, street widths and density measures.
By the 1990s, principles that added concern for native habitats and pedestrian “scale” led to phenomena such as conservation subdivision design, with its attendant clustered housing units and minimal quantities of impervious surface materials used in road and driveway improvements or of heavily compacted soils. These type developments tend to feature narrower streets, fewer visible utilities lines and retention of the land’s character and history, preserved mainly through conservation easements. “Traditional Neighborhood Developments” are another phenomenon of fairly recent vintage; these are useful both for the development of new neighborhoods and the revitalization or extension of existing neighborhoods, which are structured upon a fine network of interconnecting, pedestrian-oriented streets and other public spaces. These developments offer a mixture of housing types and prices, prominently-sited civic or community buildings, and stores/offices/workplaces, to provide a balanced mix of activities. Religious institutions and pre-school/elementary school facilities are encouraged to complete the sense of an “urban village.” A Traditional Neighborhood Development has a recognizable center and clearly defined edges; their optimum size is a quarter mile from its center to edge. Seaside, Florida, one of the earliest TNDs, is an often-cited illustration of this concept, since Robert Davis is considered the “guru” of the New Urbanism.
What all of these innovations in subdivision treatment have in common, however, is that they are all still subdivisions. Even if density reaches the clustered scale of condominium housing, there remains “one owner, one lot,” as the organizing principle. That organizational scheme, I contend, is no longer purposeful. If you don’t need to own a lot to have the exclusive right as owner to occupy some three-dimensional “footprint,” well, don’t. Save some money. Avoid some headaches. Stay flexible; optimize your mobility.
So, is the medieval times’ premise of living within the fiefdom of the local lord (of the land) desirable? With the advent of political democracies, why not? Wasn’t the haste to have private ownership of a parcel of one’s own intended to eliminate the vassal’s continued obligatory fealty to the lord, because the vassal had no alternative but to become a nomad? We’re evolved in America, having eliminated slavery, so a return to protracted occupancy of another’s land isn’t that daunting - especially if one’s annual expenses are significantly trimmed that way. In a conventional leasing mode, the objective of the owner is to cause the renter to pay the owner’s mortgage and other expenses, creating cash flow enabling that owner-landlord to leverage the income stream into additional loans with which to acquire yet more property, and so on. In Europe, according to some sources, a significant percentage of the population are tenants and are nonplussed by the idea that relatively few own relatively most of the realty. The few pay taxes on the land and to insure it and to keep it weed and pest-free, coupled with principal and interest on the amount borrowed.
If fewer folks own most of the land, that eliminates the need for conventions like subdivision ordinances and lot boundaries. How does someone describe where she lives, in that event? Legal descriptions still identify a two, or even three, dimensional occupancy “space.” But instead of cutting a larger parcel into smaller lots or tracts, how about just living under an easement regime? What I mean is this: suppose you have a 5 –acre parcel, and you want to afford 5 persons/groups occupancy of portions of that parcel. If you don’t desire to have separate road networks leading each occupant in and out of his or her “turf,” you can establish a single, main road that all occupants use in common. In a subdivision, this would be a “common area tract.” But it’s no different in effect if you simply grant a non-exclusive easement to the dweller on each slice of turf. The slices of turf are defined by a set of exclusive easements (one each describing the slice allocated to each unique occupant, excluding all others).
What is compelling about this concept is that the easements can be granted in “gross,” meaning just for the lifetime of the grantee occupying the turf (person who has the occupancy right). The easement is documented and filed in the public records (perfecting, in a manner of speaking, the right to occupy and use the turf). The easement recites that the grantee’s death or his/her abandonment of the easement (e.g., by moving away) will terminate the grant forever. This entitles the owner of the fee title interest to grant a subsequent easement in gross to the next occupant of the identical (or maybe different, depending on what’s going on with the balance of the owner’s parcel) turf.
Unconventional? You betcha. Affordable for the occupant? Sure. All that needs to occur is an attitude adjustment – shunning the sense of inadequacy felt because you don’t live on land you own outright. The present state of the economy and the savings realized ought to help salve those wounds, especially for those who have taken a beating in their credit scores.
--MNW
Monday, November 23, 2009
Tiny Bit ‘O Sanity for Thanksgiving
This blog’s August 3, 2009 post knocked the passage of Senate Bill 1271 on a variety of grounds, and predicting that the courts would have a field day sorting out the resulting mess. The House of Representatives passed SB 1004, the anti-deficiency debacle repair, on November 23rd. SB 1004 included the repeal and replacement of revised ARS §33-814, essentially returning the statute to its original status prior to the passage of SB 1271. With this fix, Arizona will continue to operate as a deed of trust state with the protections of homeowners that have been in existence since 1971. SB 1004 has an emergency clause, and it will go into effect upon Governor Brewer's signature. Which will not come a moment too soon, the way we see it.
--MNW
--MNW
Wednesday, November 18, 2009
Will we have to license our homes?
This is an interesting notion. You have to have a license for your car, supposedly for safety, more I think it is so authorities can track and control vehicles, and so they have another revenue source. Nothing in car licensing, though, keeps you from selling your car, if you want. Of course, the value of your car might be lower if it could not be licensed for some reason.
Now comes the Cap and Trade bill. This bill, purportedly crafted to address global warming (don't get me started), is really more of a way to force a massive wealth transfer from developed nations to undeveloped nations, and at the same time make properly positioned people very wealthy (through brokering of carbon credits, among other things.)
Oh, and they also have control in it. All kinds of control. The most interesting control is that they want to require all homes to be "labeled" with a sticker that indicates the efficiency rating of your home. And if it is not high enough, you can't sell your home until it is improved to meet the requirement.
Now if that won't destroy what's left of the housing market...
In effect, this bill prevents you from selling your home without the permission of the EPA administrator. A whole new industry will spring up, people licensed to rate your home for the licensing, people who fix up your home to meet the new standards (which can tighten each year), and on it goes, another huge government program.
The Act itself contains annual required increases in energy efficiency for private and commercial residences and buildings. However, the administrator can set higher standards. The Building Retrofit Program mandates a national program to increase the efficiency of all homes across America. You won’t be able to sell your home unless you retrofit it to comply.
There are provisions for grants of several thousand dollars to comply with the retrofit requirements if you meet certain energy efficiency levels. And the State can set additional requirements on who qualifies. This means that mostly it will be the middle class who suffers, as usual. And the housing market, which means everyone.
The Congressional Budget Office (supposedly non-partisan) estimates that in just a few years the average cost to every family of four will be $6,800 per year. No one is excluded. However, once the lower classes feel the pinch in their wallets, you can be sure these voters get a tax refund (even if they pay no taxes at all) to offset this new cost.
The Congressional Budget Office (supposedly non-partisan) estimates that in just a few years the average cost to every family of four will be $6,800 per year. No one is excluded. However, once the lower classes feel the pinch in their wallets, you can be sure these voters get a tax refund (even if they pay no taxes at all) to offset this new cost.
The Congressional Budget Office (supposedly non-partisan) estimates that in just a few years the average cost to every family of four will be $6,800 per year. Of course, this will be offset by tax refunds and such. I didn't get one of those this year, did you?
Want to read it for yourself? The bill is here.
-PLH
Now comes the Cap and Trade bill. This bill, purportedly crafted to address global warming (don't get me started), is really more of a way to force a massive wealth transfer from developed nations to undeveloped nations, and at the same time make properly positioned people very wealthy (through brokering of carbon credits, among other things.)
Oh, and they also have control in it. All kinds of control. The most interesting control is that they want to require all homes to be "labeled" with a sticker that indicates the efficiency rating of your home. And if it is not high enough, you can't sell your home until it is improved to meet the requirement.
Now if that won't destroy what's left of the housing market...
In effect, this bill prevents you from selling your home without the permission of the EPA administrator. A whole new industry will spring up, people licensed to rate your home for the licensing, people who fix up your home to meet the new standards (which can tighten each year), and on it goes, another huge government program.
The Act itself contains annual required increases in energy efficiency for private and commercial residences and buildings. However, the administrator can set higher standards. The Building Retrofit Program mandates a national program to increase the efficiency of all homes across America. You won’t be able to sell your home unless you retrofit it to comply.
There are provisions for grants of several thousand dollars to comply with the retrofit requirements if you meet certain energy efficiency levels. And the State can set additional requirements on who qualifies. This means that mostly it will be the middle class who suffers, as usual. And the housing market, which means everyone.
The Congressional Budget Office (supposedly non-partisan) estimates that in just a few years the average cost to every family of four will be $6,800 per year. No one is excluded. However, once the lower classes feel the pinch in their wallets, you can be sure these voters get a tax refund (even if they pay no taxes at all) to offset this new cost.
The Congressional Budget Office (supposedly non-partisan) estimates that in just a few years the average cost to every family of four will be $6,800 per year. No one is excluded. However, once the lower classes feel the pinch in their wallets, you can be sure these voters get a tax refund (even if they pay no taxes at all) to offset this new cost.
The Congressional Budget Office (supposedly non-partisan) estimates that in just a few years the average cost to every family of four will be $6,800 per year. Of course, this will be offset by tax refunds and such. I didn't get one of those this year, did you?
Want to read it for yourself? The bill is here.
-PLH
Tuesday, November 10, 2009
Co-Housing, Part 3: Matters of Containment
Once you decide you can stomach living on turf defined as an easement, without any ownership rights, and you’re still determined how to live affordably and sustainably, then your next challenge is to overcome your aversion to the boxcar lifestyle. One of my daughters, a writer with considerable imagination, had to put away the Gertrude Chandler Warner series called the “Boxcar Children Mysteries,” because she found the thought of living in a caboose too distressing. Too dingy, too bound to echo, too, well, industrial. Cold steel – nasty – but are you sure about that? Before you make up your mind, take a look at the series on the shipping container-built house built in St. Petersburg on Bob Vila’s Web site. It shows a remarkable transformation of ugly steel containers into a strong, weather-proof homestead.
There are many forms of building materials available in the new community of dwellers but for now, let’s focus on a single base material: Cargo storage containers, sometimes known as shipping containers or ISOs; for short, I’m going to call them ISOs. Using ISOs is not an innovation in building construction. There are books available about their use in construction, like Jure Kotnik’s Container Architecture (2008) or Lori Ryker’s Off the Grid: Modern Homes + Alternative Energy (2005) (available in preview format at Google Books). Earlier this year, the American Institute of Architects awarded a Texas architectural firm a prize for use of ISOs in the residential development of a “retreat.” Here are the properties of ISOs that render them highly desirable building materials:
1. Availability: There are hundreds of thousands of ISOs sitting idly throughout the country; estimates are as high as 700,000 units simply being stored, empty, in 2009.
2. Affordability: An ISO with the dimensions of 10 X 20 feet may be purchased, as of the date of completion of this article, for as little as $1,000 per unit.
3. Strength: ISOs are made essentially of corrugated metal, which makes them unlikely targets for destruction, absent a “direct hit” by a substantially-heavier object; they are far more likely to withstand hurricane force winds or tornados than any other form of “temporary” housing construction or by frame constructed, permanent houses.
4. Rectilinear shape: ISOs are boxes; with such configuration, boxes can be stacked in multiple tiers, or turned on their sides or ends, rendering them adaptable for rectilinear design.
5. Weight: ISOs are heavy, but lack the weight of a structure made of block; therefore, they can be transported, in a state ready for final, exterior assembly, on an 18-wheeled trailer truck.
6. Configure-ability: ISOs are metal and therefore may be cut with a torch to the configuration of fenestration, doors or integration with other ISO units or other materials by a dwelling’s designer, without compromising the strength of the remainder of the structure.
7. Barn Door Adaptability: The end doors of ISOs can be maintained for security purposes while permitting, in an open position, fenestration or other decorative forms.
8. Height Potential: ISOs can be stacked, evidenced by their classic use on railroad flatbed cars. Yet the ISOs can be carefully anchored due to their design feature that incorporates big holes for marrying posts in one end. Stacked units can be moved into position in developments quickly, using cranes.
9. Attachment to utilities sources: Because the floors of an ISO are very strong, they can be set in place upon posts, elevating them above ground level, which permits them to be “wired and plumbed” with minimal cost (avoiding saw cutting a slab) to utilities connections installed beneath the base of the floor without weakening the floor; this feature permits, in raised position, ISOs to be used in areas with surface drainage challenges (consider their application in the 9th Ward neighborhoods in New Orleans, Louisiana, where they could be erected above-grade in areas of lower mean elevations and still withstand the wind and “storm surge” dilemmas that area faces.
10. Integration with sustainability technologies: By standing an ISO-based structure on piers, wiring, plumbing and solar-powered apparatus configuration are all made easier beneath the dwelling unit. The walls are sufficiently strong to support solar panel integration where roof placement is inconvenient.
11. Insulation properties: Some existing ISOs, being originally designed for refrigeration, are manufactured with heavy insulation in place, which enables the structure’s interior to withstand extremes of temperature throughout the year without substantial additional expense to the contractor.
You might think, yeah, but how do they appear to the city officials in the community where I live? I’ve been in touch with planning departments in two counties in Florida on the subject of building container-based residences. The planning department’s responses are the same. These are manufactured housing products under our zoning code’s definitions; manufactured housing is accepted housing stock in residentially-zoned districts; so comply with the building codes, and go forth with your project. There’s no apparent prejudice within the bureaucracy. So basic resistance to container projects may come not from a government but from an HOA, if there were restrictive covenants that dictated what types of materials can (and cannot) be used in construction. That means the consumer may not be able to live in a planned community that has a few remaining vacant lots. On the other hand, how do you suppose HOAs in the busted subdivisions populating Nevada, Arizona, Florida and elsewhere will react to the opportunity to see build-out achieved? I imagine there are some boards of directors that will be only too obliging to amend the covenants, conditions and restrictions to permit construction of alternative-materials dwellings.
-MNW
There are many forms of building materials available in the new community of dwellers but for now, let’s focus on a single base material: Cargo storage containers, sometimes known as shipping containers or ISOs; for short, I’m going to call them ISOs. Using ISOs is not an innovation in building construction. There are books available about their use in construction, like Jure Kotnik’s Container Architecture (2008) or Lori Ryker’s Off the Grid: Modern Homes + Alternative Energy (2005) (available in preview format at Google Books). Earlier this year, the American Institute of Architects awarded a Texas architectural firm a prize for use of ISOs in the residential development of a “retreat.” Here are the properties of ISOs that render them highly desirable building materials:
1. Availability: There are hundreds of thousands of ISOs sitting idly throughout the country; estimates are as high as 700,000 units simply being stored, empty, in 2009.
2. Affordability: An ISO with the dimensions of 10 X 20 feet may be purchased, as of the date of completion of this article, for as little as $1,000 per unit.
3. Strength: ISOs are made essentially of corrugated metal, which makes them unlikely targets for destruction, absent a “direct hit” by a substantially-heavier object; they are far more likely to withstand hurricane force winds or tornados than any other form of “temporary” housing construction or by frame constructed, permanent houses.
4. Rectilinear shape: ISOs are boxes; with such configuration, boxes can be stacked in multiple tiers, or turned on their sides or ends, rendering them adaptable for rectilinear design.
5. Weight: ISOs are heavy, but lack the weight of a structure made of block; therefore, they can be transported, in a state ready for final, exterior assembly, on an 18-wheeled trailer truck.
6. Configure-ability: ISOs are metal and therefore may be cut with a torch to the configuration of fenestration, doors or integration with other ISO units or other materials by a dwelling’s designer, without compromising the strength of the remainder of the structure.
7. Barn Door Adaptability: The end doors of ISOs can be maintained for security purposes while permitting, in an open position, fenestration or other decorative forms.
8. Height Potential: ISOs can be stacked, evidenced by their classic use on railroad flatbed cars. Yet the ISOs can be carefully anchored due to their design feature that incorporates big holes for marrying posts in one end. Stacked units can be moved into position in developments quickly, using cranes.
9. Attachment to utilities sources: Because the floors of an ISO are very strong, they can be set in place upon posts, elevating them above ground level, which permits them to be “wired and plumbed” with minimal cost (avoiding saw cutting a slab) to utilities connections installed beneath the base of the floor without weakening the floor; this feature permits, in raised position, ISOs to be used in areas with surface drainage challenges (consider their application in the 9th Ward neighborhoods in New Orleans, Louisiana, where they could be erected above-grade in areas of lower mean elevations and still withstand the wind and “storm surge” dilemmas that area faces.
10. Integration with sustainability technologies: By standing an ISO-based structure on piers, wiring, plumbing and solar-powered apparatus configuration are all made easier beneath the dwelling unit. The walls are sufficiently strong to support solar panel integration where roof placement is inconvenient.
11. Insulation properties: Some existing ISOs, being originally designed for refrigeration, are manufactured with heavy insulation in place, which enables the structure’s interior to withstand extremes of temperature throughout the year without substantial additional expense to the contractor.
You might think, yeah, but how do they appear to the city officials in the community where I live? I’ve been in touch with planning departments in two counties in Florida on the subject of building container-based residences. The planning department’s responses are the same. These are manufactured housing products under our zoning code’s definitions; manufactured housing is accepted housing stock in residentially-zoned districts; so comply with the building codes, and go forth with your project. There’s no apparent prejudice within the bureaucracy. So basic resistance to container projects may come not from a government but from an HOA, if there were restrictive covenants that dictated what types of materials can (and cannot) be used in construction. That means the consumer may not be able to live in a planned community that has a few remaining vacant lots. On the other hand, how do you suppose HOAs in the busted subdivisions populating Nevada, Arizona, Florida and elsewhere will react to the opportunity to see build-out achieved? I imagine there are some boards of directors that will be only too obliging to amend the covenants, conditions and restrictions to permit construction of alternative-materials dwellings.
-MNW
Friday, November 6, 2009
Co-Housing, Part Two - Matters of ‘Turf’
Conventional, permanent, single-family housing presumes the fact of defined space. The Postal Service needs a street number to deliver the occupant’s mail. The County Assessor needs a parcel number so that it values, then computes and bills, your property taxes. Fire and police responders require an address in case of a call for help. But none of these aids to identification is truly critical except to aid in imposing taxes. As long as they are logical and sequential, street address numbers can be arbitrarily assigned without separate parcel ownership. Valuation for tax purposes admittedly does require distinguishing among parcels by character of improvements and parcel size, unless ad valorem tax systems were “flat tax”-based, tied to the fact of ownership alone.
Subdivision regulations came about, I guess, as a deterrent to unprincipled sales of lots lacking legal access and suitable urban infrastructure (by a particular community’s standards). Early Massachusetts subdivision regulations originated responding to concerns about the impact of public and private street development. Boston had regulations as early as the 1890s. The advent of these regulations standardized residential development in communities. It probably impaired the growth of “intentional communities,” where dwellers desired to share living quarters and yards in loose alliances. Momentum toward government control peaked in the 1950s. The Civil Rights movement spawned a number of campaigns for individual rights, and by the 1960s, professional planners and public officials became more critical of subdivision regulation as a concept encouraging development uniformity. The notion of PRD (planned residential development) and PUD (planned unit development) zones allowed deviation from formulaic subdivision standards such as setbacks, street widths and density measures.
By the 1990s, principles that added concern for native habitats and pedestrian “scale” led to phenomena such as conservation subdivision design, with its attendant clustered housing units and minimal quantities of impervious surface materials used in road and driveway improvements or of heavily compacted soils. These type developments tend to feature narrower streets, fewer visible utilities lines and retention of the land’s character and history, preserved mainly through conservation easements. “Traditional Neighborhood Developments” are another phenomenon of fairly recent vintage; these are useful both for the development of new neighborhoods and the revitalization or extension of existing neighborhoods, which are structured upon a fine network of interconnecting, pedestrian-oriented streets and other public spaces. These developments offer a mixture of housing types and prices, prominently-sited civic or community buildings, and stores/offices/workplaces, to provide a balanced mix of activities. Religious institutions and pre-school/elementary school facilities are encouraged to complete the sense of an “urban village.” A Traditional Neighborhood Development has a recognizable center and clearly defined edges; their optimum size is a quarter mile from its center to edge. Seaside, Florida, one of the earliest TNDs, is an often-cited illustration of this concept, since Robert Davis is considered the “guru” of the New Urbanism.
What all of these innovations in subdivision treatment have in common, however, is that they are all still subdivisions. Even if density reaches the clustered scale of condominium housing, there remains “one owner, one lot,” as the organizing principle. That organizational scheme, I contend, is no longer purposeful. If you don’t need to own a lot to have the exclusive right as owner to occupy some three-dimensional “footprint,” well, don’t. Save some money. Avoid some headaches. Stay flexible; optimize your mobility.
So, is the medieval times’ premise of living within the fiefdom of the local lord (of the land) desirable? With the advent of political democracies, why not? Wasn’t the haste to have private ownership of a parcel of one’s own intended to eliminate the vassal’s continued obligatory fealty to the lord, because the vassal had no alternative but to become a nomad? We’re evolved in America, having eliminated slavery, so a return to protracted occupancy of another’s land isn’t that daunting - especially if one’s annual expenses are significantly trimmed that way. In a conventional leasing mode, the objective of the owner is to cause the renter to pay the owner’s mortgage and other expenses, creating cash flow enabling that owner-landlord to leverage the income stream into additional loans with which to acquire yet more property, and so on. In Europe, according to some sources, a significant percentage of the population are tenants and are nonplussed by the idea that relatively few own relatively most of the realty. The few pay taxes on the land and to insure it and to keep it weed and pest-free, coupled with principal and interest on the amount borrowed.
If fewer folks own most of the land, that eliminates the need for conventions like subdivision ordinances and lot boundaries. How does someone describe where she lives, in that event? Legal descriptions still identify a two, or even three, dimensional occupancy “space.” But instead of cutting a larger parcel into smaller lots or tracts, how about just living under an easement regime? What I mean is this: suppose you have a 5 –acre parcel, and you want to afford 5 persons/groups occupancy of portions of that parcel. If you don’t desire to have separate road networks leading each occupant in and out of his or her “turf,” you can establish a single, main road that all occupants use in common. In a subdivision, this would be a “common area tract.” But it’s no different in effect if you simply grant a non-exclusive easement to the dweller on each slice of turf. The slices of turf are defined by a set of exclusive easements (one each describing the slice allocated to each unique occupant, excluding all others).
What is compelling about this concept is that the easements can be granted in “gross,” meaning just for the lifetime of the grantee occupying the turf (person who has the occupancy right). The easement is documented and filed in the public records (perfecting, in a manner of speaking, the right to occupy and use the turf). The easement recites that the grantee’s death or his/her abandonment of the easement (e.g., by moving away) will terminate the grant forever. This entitles the owner of the fee title interest to grant a subsequent easement in gross to the next occupant of the identical (or maybe different, depending on what’s going on with the balance of the owner’s parcel) turf.
Unconventional? You betcha. Affordable for the occupant? Sure. All that needs to occur is an attitude adjustment – shunning the sense of inadequacy felt because you don’t live on land you own outright. The present state of the economy and the savings realized ought to help salve those wounds, especially for those who have taken a beating in their credit scores.
-MNW
Subdivision regulations came about, I guess, as a deterrent to unprincipled sales of lots lacking legal access and suitable urban infrastructure (by a particular community’s standards). Early Massachusetts subdivision regulations originated responding to concerns about the impact of public and private street development. Boston had regulations as early as the 1890s. The advent of these regulations standardized residential development in communities. It probably impaired the growth of “intentional communities,” where dwellers desired to share living quarters and yards in loose alliances. Momentum toward government control peaked in the 1950s. The Civil Rights movement spawned a number of campaigns for individual rights, and by the 1960s, professional planners and public officials became more critical of subdivision regulation as a concept encouraging development uniformity. The notion of PRD (planned residential development) and PUD (planned unit development) zones allowed deviation from formulaic subdivision standards such as setbacks, street widths and density measures.
By the 1990s, principles that added concern for native habitats and pedestrian “scale” led to phenomena such as conservation subdivision design, with its attendant clustered housing units and minimal quantities of impervious surface materials used in road and driveway improvements or of heavily compacted soils. These type developments tend to feature narrower streets, fewer visible utilities lines and retention of the land’s character and history, preserved mainly through conservation easements. “Traditional Neighborhood Developments” are another phenomenon of fairly recent vintage; these are useful both for the development of new neighborhoods and the revitalization or extension of existing neighborhoods, which are structured upon a fine network of interconnecting, pedestrian-oriented streets and other public spaces. These developments offer a mixture of housing types and prices, prominently-sited civic or community buildings, and stores/offices/workplaces, to provide a balanced mix of activities. Religious institutions and pre-school/elementary school facilities are encouraged to complete the sense of an “urban village.” A Traditional Neighborhood Development has a recognizable center and clearly defined edges; their optimum size is a quarter mile from its center to edge. Seaside, Florida, one of the earliest TNDs, is an often-cited illustration of this concept, since Robert Davis is considered the “guru” of the New Urbanism.
What all of these innovations in subdivision treatment have in common, however, is that they are all still subdivisions. Even if density reaches the clustered scale of condominium housing, there remains “one owner, one lot,” as the organizing principle. That organizational scheme, I contend, is no longer purposeful. If you don’t need to own a lot to have the exclusive right as owner to occupy some three-dimensional “footprint,” well, don’t. Save some money. Avoid some headaches. Stay flexible; optimize your mobility.
So, is the medieval times’ premise of living within the fiefdom of the local lord (of the land) desirable? With the advent of political democracies, why not? Wasn’t the haste to have private ownership of a parcel of one’s own intended to eliminate the vassal’s continued obligatory fealty to the lord, because the vassal had no alternative but to become a nomad? We’re evolved in America, having eliminated slavery, so a return to protracted occupancy of another’s land isn’t that daunting - especially if one’s annual expenses are significantly trimmed that way. In a conventional leasing mode, the objective of the owner is to cause the renter to pay the owner’s mortgage and other expenses, creating cash flow enabling that owner-landlord to leverage the income stream into additional loans with which to acquire yet more property, and so on. In Europe, according to some sources, a significant percentage of the population are tenants and are nonplussed by the idea that relatively few own relatively most of the realty. The few pay taxes on the land and to insure it and to keep it weed and pest-free, coupled with principal and interest on the amount borrowed.
If fewer folks own most of the land, that eliminates the need for conventions like subdivision ordinances and lot boundaries. How does someone describe where she lives, in that event? Legal descriptions still identify a two, or even three, dimensional occupancy “space.” But instead of cutting a larger parcel into smaller lots or tracts, how about just living under an easement regime? What I mean is this: suppose you have a 5 –acre parcel, and you want to afford 5 persons/groups occupancy of portions of that parcel. If you don’t desire to have separate road networks leading each occupant in and out of his or her “turf,” you can establish a single, main road that all occupants use in common. In a subdivision, this would be a “common area tract.” But it’s no different in effect if you simply grant a non-exclusive easement to the dweller on each slice of turf. The slices of turf are defined by a set of exclusive easements (one each describing the slice allocated to each unique occupant, excluding all others).
What is compelling about this concept is that the easements can be granted in “gross,” meaning just for the lifetime of the grantee occupying the turf (person who has the occupancy right). The easement is documented and filed in the public records (perfecting, in a manner of speaking, the right to occupy and use the turf). The easement recites that the grantee’s death or his/her abandonment of the easement (e.g., by moving away) will terminate the grant forever. This entitles the owner of the fee title interest to grant a subsequent easement in gross to the next occupant of the identical (or maybe different, depending on what’s going on with the balance of the owner’s parcel) turf.
Unconventional? You betcha. Affordable for the occupant? Sure. All that needs to occur is an attitude adjustment – shunning the sense of inadequacy felt because you don’t live on land you own outright. The present state of the economy and the savings realized ought to help salve those wounds, especially for those who have taken a beating in their credit scores.
-MNW
Wednesday, November 4, 2009
Short sales, foreclosures, and IRS tax liens
- I owe more than my house is worth, and the IRS has also put liens on it. Can I still do a short sale?
- I want to bid on a house at a foreclosure auction, and it has IRS liens, do they disappear like all the other liens?
These, and other similar questions, are very important to consider if you are buying or selling your home in a short sale transaction, or bidding for a home at auction.
In general, the priority of a lien against real property follows the rule of “first in time, first in right”. What this means is that when you get a mortgage and then later get a home equity line of credit and then later get a home improvement loan, generally they will be paid off in that order. First, the mortgage gets paid, then the equity line, then (if any money is left) the improvement loan.
There are some exceptions. One is called a mechanic’s lien, which is not usually from a mechanic at all, but rather comes from a workman or contractor who is doing work for you. The “mechanic” has a number of interesting rules he must follow, and then they can “perfect” the lien; and the date of the lien is related to when work was started, not when he sent you the bill. So even though it might have been recorded after another lien, the priority is established earlier, when the work was started.
Another exception is property taxes. In Arizona and many other states, the statutes are written so that the property taxes for the specific property become a lien on January 1st of each year; however they also are granted first position, ahead of all other liens (There may be some esoteric exceptions.) Further, there is no recording requirement, but there is for all other liens.
What about an IRS tax lien? It is no different than any other lien, in that it must follow the “first in time, first in right” rule, however there are some notification requirements, and the IRS has some rights.
First, the IRS must be notified if a foreclosure proceeding is going to wipe out their lien. Then, after it is wiped out, they have 120 days to come back and buy the property themselves (They must reimburse what was paid for it). This is in the case of a foreclosure. What about a short sale? In a short sale, the IRS will sometimes release the lien so the short sale can proceed, especially if they can see that there is insufficient equity in the property to get anything. There is no advantage to them, to hold up the sale, and they would be wiped out in a foreclosure anyway.
So how do you get them to release the lien? Paperwork, of course. The instructions are on IRS form 783.
Disclaimer: I am not an attorney, although I think I saw one once. Consult with your attorney and CPA before making any important decisions relating to your finances.
-PLH
- I want to bid on a house at a foreclosure auction, and it has IRS liens, do they disappear like all the other liens?
These, and other similar questions, are very important to consider if you are buying or selling your home in a short sale transaction, or bidding for a home at auction.
In general, the priority of a lien against real property follows the rule of “first in time, first in right”. What this means is that when you get a mortgage and then later get a home equity line of credit and then later get a home improvement loan, generally they will be paid off in that order. First, the mortgage gets paid, then the equity line, then (if any money is left) the improvement loan.
There are some exceptions. One is called a mechanic’s lien, which is not usually from a mechanic at all, but rather comes from a workman or contractor who is doing work for you. The “mechanic” has a number of interesting rules he must follow, and then they can “perfect” the lien; and the date of the lien is related to when work was started, not when he sent you the bill. So even though it might have been recorded after another lien, the priority is established earlier, when the work was started.
Another exception is property taxes. In Arizona and many other states, the statutes are written so that the property taxes for the specific property become a lien on January 1st of each year; however they also are granted first position, ahead of all other liens (There may be some esoteric exceptions.) Further, there is no recording requirement, but there is for all other liens.
What about an IRS tax lien? It is no different than any other lien, in that it must follow the “first in time, first in right” rule, however there are some notification requirements, and the IRS has some rights.
First, the IRS must be notified if a foreclosure proceeding is going to wipe out their lien. Then, after it is wiped out, they have 120 days to come back and buy the property themselves (They must reimburse what was paid for it). This is in the case of a foreclosure. What about a short sale? In a short sale, the IRS will sometimes release the lien so the short sale can proceed, especially if they can see that there is insufficient equity in the property to get anything. There is no advantage to them, to hold up the sale, and they would be wiped out in a foreclosure anyway.
So how do you get them to release the lien? Paperwork, of course. The instructions are on IRS form 783.
Disclaimer: I am not an attorney, although I think I saw one once. Consult with your attorney and CPA before making any important decisions relating to your finances.
-PLH
Tuesday, October 20, 2009
Inflation? Deflation? What's happening?
Are we poised for inflation, or hyperinflation? Or will the opposite happen?
On the inflationary side, we have what appears to be massive expansion of the money supply by the Fed, a weak dollar, and rising gold prices.
On the deflationary side, we have higher unemployment, and a mentality in the populace of saving vs. spending. People are downsizing and contracting, and spending less.
Robert Prechter, of Elliott Wave fame, says: “An increase in money supply is only inflationary if it is used to RAISE the total amount of credit. This is NOT happening, as both bank credit and consumer credit levels are contracting for the first time since World War II.”
Let’s think about what is happening in the housing markets: We have the highest rate of foreclosures and delinquent mortgages in history. Even “A” paper, prime 30-year mortgages, are in foreclosure or delinquent. In fact, by sheer volume, there are more troubled prime loans than there are subprime (mostly because there are lots more prime loans). A much higher percentage of subprime loans are in trouble, however.
When a home goes to foreclosure (data as of 9/2009), the bank recovers about 30% of the loan principal. In a short sale, they recover closer to 60%. However, in either case, it is a massive loss for the institution, nationwide in the area of Four Trillion dollars.
When a bank agrees to a short sale, or forecloses, money is destroyed. When the markets fall, money is destroyed. The Fed, pumping money into the system as hard as they can, is not making a dent in the money supply – the bailouts are perhaps offsetting less than 20% of the destruction of money.
So is inflation likely? Probably not. If Prechter is correct (and he often is), then the Fed’s action is not increasing credit. In fact, the only lender in the housing market is the government – 85% of loans are FHA or VA. There are almost no conventional lenders anymore. They are all out of business. And, the bank regulators are insisting that banks specifically NOT loan on real estate. Credit is contracting, and will likely continue to do so for the foreseeable future. The future of real estate, particularly commercial real estate, is in cash.
A friend of mine who invests in commercial properties, recently told me that a building owner he knew had signed a lease in which, in return for the lease agreement, would make certain tenant improvements. This is common in commercial leasing. However, he does not have the cash to make the improvements, and no financing is available to make them! This sort of financing was easy to get and considered a normal way of doing business just a few years ago.
You have no doubt heard that the recovery is underway, and that the housing market is coming back. The truth is, we have a small dip right now in mortgage resets, but the bulk of the option ARM and other bad loans will reset in the next two years. The foreclosure and short sale situation we have right now is a fraction of what we are likely to see in the next year or two. Almost 10% of Americans are at least one payment late on their mortgage. The average American family does not have more than two months of buffer in the bank in case of job loss, and many will miss a house payment if they are unemployed for just two weeks (and miss one paycheck).
Business and commercial defaults are rising, and will be a huge contributing factor to the destruction of money, along with credit card losses. The credit card industry itself will change dramatically over the one to three years. It will be hard, and expensive, to get and own credit cards.
Inflation seems impossible to me, with all these circumstances. I am on the side of the fence with Prechter, Smorch, and the other Elliott Wave guys who think we are in for a protracted period of deflation. There is no credit; only cash works today. Still, I do own some gold. Just in case.
Patrick Harvey
On the inflationary side, we have what appears to be massive expansion of the money supply by the Fed, a weak dollar, and rising gold prices.
On the deflationary side, we have higher unemployment, and a mentality in the populace of saving vs. spending. People are downsizing and contracting, and spending less.
Robert Prechter, of Elliott Wave fame, says: “An increase in money supply is only inflationary if it is used to RAISE the total amount of credit. This is NOT happening, as both bank credit and consumer credit levels are contracting for the first time since World War II.”
Let’s think about what is happening in the housing markets: We have the highest rate of foreclosures and delinquent mortgages in history. Even “A” paper, prime 30-year mortgages, are in foreclosure or delinquent. In fact, by sheer volume, there are more troubled prime loans than there are subprime (mostly because there are lots more prime loans). A much higher percentage of subprime loans are in trouble, however.
When a home goes to foreclosure (data as of 9/2009), the bank recovers about 30% of the loan principal. In a short sale, they recover closer to 60%. However, in either case, it is a massive loss for the institution, nationwide in the area of Four Trillion dollars.
When a bank agrees to a short sale, or forecloses, money is destroyed. When the markets fall, money is destroyed. The Fed, pumping money into the system as hard as they can, is not making a dent in the money supply – the bailouts are perhaps offsetting less than 20% of the destruction of money.
So is inflation likely? Probably not. If Prechter is correct (and he often is), then the Fed’s action is not increasing credit. In fact, the only lender in the housing market is the government – 85% of loans are FHA or VA. There are almost no conventional lenders anymore. They are all out of business. And, the bank regulators are insisting that banks specifically NOT loan on real estate. Credit is contracting, and will likely continue to do so for the foreseeable future. The future of real estate, particularly commercial real estate, is in cash.
A friend of mine who invests in commercial properties, recently told me that a building owner he knew had signed a lease in which, in return for the lease agreement, would make certain tenant improvements. This is common in commercial leasing. However, he does not have the cash to make the improvements, and no financing is available to make them! This sort of financing was easy to get and considered a normal way of doing business just a few years ago.
You have no doubt heard that the recovery is underway, and that the housing market is coming back. The truth is, we have a small dip right now in mortgage resets, but the bulk of the option ARM and other bad loans will reset in the next two years. The foreclosure and short sale situation we have right now is a fraction of what we are likely to see in the next year or two. Almost 10% of Americans are at least one payment late on their mortgage. The average American family does not have more than two months of buffer in the bank in case of job loss, and many will miss a house payment if they are unemployed for just two weeks (and miss one paycheck).
Business and commercial defaults are rising, and will be a huge contributing factor to the destruction of money, along with credit card losses. The credit card industry itself will change dramatically over the one to three years. It will be hard, and expensive, to get and own credit cards.
Inflation seems impossible to me, with all these circumstances. I am on the side of the fence with Prechter, Smorch, and the other Elliott Wave guys who think we are in for a protracted period of deflation. There is no credit; only cash works today. Still, I do own some gold. Just in case.
Patrick Harvey
Thursday, October 15, 2009
Co-Housing: Part One – Matters of Style
Query: ‘So, you’re arguing that everyone in detached housing ought to be mobile, right? Doesn’t that conjure up the North Shore Oahu crowd in the 1960s, living along the beach, or the movie-conjured, white-trash, trailer-court life styles?’
No, I’m not saying folks should be eager to pull up stakes and move their homes on 24 hours’ notice, or that a highly transient society is the optimal way to build neighborhoods. Of course, I’m not too sure that a lot of the communities built in the last 10 years in the conurbations feel like a neighborhood; and what do we mean by a “neighborhood,” anyway?
Recall the conversation between author John Steinbeck and the fellow with kids in the trailer court described in Travels with Charley. Steinbeck asks the man how he feels about raising his children without “roots.” The man replies: “What roots are in a housing development of hundreds and thousands of small dwellings almost exactly alike?” Then, for emphasis:
“Who’s got permanence? Factory closes down, you move on. Good times and things opening up, you move on where it’s better. You got roots and you sit and starve.” (See pages 78-79, Penguin Classics edition, 1997)
In a neighborhood of the idyllic type, the rooted would not “sit and starve,” because the neighbors wouldn’t let you starve, not if they could prevent it. Since I don’t exchange 1,000 words in a single year with more than twenty percent of my neighbors, my principal residence isn’t located in some idyllic gathering of family-minded, look-out-for-each-other folks. We are civil to one another, mostly, and we keep to ourselves, by and large, now that the common bond of young children was erased by the departure of ours from our street. Our back yards have six foot-high, block walls anchored at the common boundaries. I know the people in my office environment or in my classroom better than I do the folks along my street where I’ve lived 21 years. I don’t know my neighbor’s kids’ names or ages, for the most part. (Genders, well, those I’ve got figured out; it’s how they dress for school.)
This is no sorrowful reverie on the loss of community. The point is that home ownership in the conventional sense of an 8,000 square foot lot with a 2,000 square foot, 3-bedroom house built upon a concrete foundation with a two-car garage may no longer be purposeful, if our culture truly values sustainability and affordability. There’s no apparent justification for building from bricks, block, mortar and other “immovable” materials under the guise of creating “roots” in a village. At least where I live, the expense of ownership isn’t outweighed by a set of treasured friendships. When the market values went stratospheric in 2006 and early 2007, the profit-takers in our neighborhood grabbed the cash and fled somewhere else, sans a forwarding address. You move on where it’s better, the father said.
I uncouple the idea of conventional, permanent detached housing from the concept of community. Community exists, I think, when people value getting to know other people in close proximity for however long the opportunity exists to experience them. Whether there’s 20 feet or 2 feet between the walls of their respective dwellings and whether you own your own parcel of land seem mostly irrelevant, nuisance issues aside, to caring to know one’s neighbors.
Prefabricated dwellings are an option that combines affordability with the potential for mobility. They are still the tiny minority of residences in metropolitan Phoenix because large-scale conventional builders were efficient, when building, which reduced the cost advantage for manufactured housing. That, of course, was “back in the day.” How will those builders fare when the target population can’t get a loan from a conventional lender large enough for the balance of the price, and haven’t got enough savings to make a down payment?
There are four leading types of manufactured homes in circulation today: Modular (site assembled, pre-built sections called modules); panelized (walls with windows, doors, wiring and siding assembled at the home site); pre-cut (kit, log and dome-style houses); and classic mobile homes, built on a steel undercarriage and pulled to the home site where the wheels and axles are removed. There are many price points for manufactured homes from about $90 thousand northward, and some manufacturers are working on increased sustainability and energy efficiency to afford the homeowner some return on investment. Here’s the real issue: durability.
Manufactured homes still suffer from the “first two of the Three Little Pigs” stigma. That suffering isn’t completely undeserved; just watching footage of tornado strikes convinces most of us how devastating the destruction to a manufactured home can be. The industry has a response to the public’s skepticism, as follows: Most manufactured homes are built to withstand sustained winds in the range of 70 miles per hour. Above this range, a manufactured home will sustain damage. Only in the case of severe weather, such as a tornado, is the public likely to experience winds in excess of 70 miles per hour. Meteorologists estimate that approximately 40 percent of all tornadoes have winds exceeding 112 miles per hour. Tornadoes can have winds in excess of 200 miles per hour, in extreme cases. Current building codes and practices, for either manufactured homes or site-built homes, do not require dwellings to withstand winds exceeding 110 miles per hour. So, a direct hit from a Category F2 (and higher) tornado will bring about severe damage or destruction of any home in its path. A tornado's deadly force, like that of a hurricane, does not selectively discriminate between site-built and manufactured homes.
Yeah, maybe. The last proposition is almost certainly true, despite appearances; the difference, it seems to me, is anchorage. If the home is truly attached to the foundation and is made of heavy - enough materials, then gravity will save the superstructure from all but the most savage wind storms or storm (water) surges. But a manufactured home doesn’t have weighty materials, because they can be hauled long distances on an 18-wheeled tractor-trailer. So its walls are more susceptible to being ripped apart, especially when the walls are fastened with something weaker than mortar.
Which is why the manufactured home industry (and the site-built residential construction industry, for that matter), needs to turn its attention to employing new materials light enough to haul to a final-assembly site that are still relatively indestructible. Steel boxes known as “shipping containers” come to mind. There’s a few to be had, cheaply, in every port community in this nation, and in a lot of other U.S. cities. Now, there’s some stylin’; more next time.
-MNW
No, I’m not saying folks should be eager to pull up stakes and move their homes on 24 hours’ notice, or that a highly transient society is the optimal way to build neighborhoods. Of course, I’m not too sure that a lot of the communities built in the last 10 years in the conurbations feel like a neighborhood; and what do we mean by a “neighborhood,” anyway?
Recall the conversation between author John Steinbeck and the fellow with kids in the trailer court described in Travels with Charley. Steinbeck asks the man how he feels about raising his children without “roots.” The man replies: “What roots are in a housing development of hundreds and thousands of small dwellings almost exactly alike?” Then, for emphasis:
“Who’s got permanence? Factory closes down, you move on. Good times and things opening up, you move on where it’s better. You got roots and you sit and starve.” (See pages 78-79, Penguin Classics edition, 1997)
In a neighborhood of the idyllic type, the rooted would not “sit and starve,” because the neighbors wouldn’t let you starve, not if they could prevent it. Since I don’t exchange 1,000 words in a single year with more than twenty percent of my neighbors, my principal residence isn’t located in some idyllic gathering of family-minded, look-out-for-each-other folks. We are civil to one another, mostly, and we keep to ourselves, by and large, now that the common bond of young children was erased by the departure of ours from our street. Our back yards have six foot-high, block walls anchored at the common boundaries. I know the people in my office environment or in my classroom better than I do the folks along my street where I’ve lived 21 years. I don’t know my neighbor’s kids’ names or ages, for the most part. (Genders, well, those I’ve got figured out; it’s how they dress for school.)
This is no sorrowful reverie on the loss of community. The point is that home ownership in the conventional sense of an 8,000 square foot lot with a 2,000 square foot, 3-bedroom house built upon a concrete foundation with a two-car garage may no longer be purposeful, if our culture truly values sustainability and affordability. There’s no apparent justification for building from bricks, block, mortar and other “immovable” materials under the guise of creating “roots” in a village. At least where I live, the expense of ownership isn’t outweighed by a set of treasured friendships. When the market values went stratospheric in 2006 and early 2007, the profit-takers in our neighborhood grabbed the cash and fled somewhere else, sans a forwarding address. You move on where it’s better, the father said.
I uncouple the idea of conventional, permanent detached housing from the concept of community. Community exists, I think, when people value getting to know other people in close proximity for however long the opportunity exists to experience them. Whether there’s 20 feet or 2 feet between the walls of their respective dwellings and whether you own your own parcel of land seem mostly irrelevant, nuisance issues aside, to caring to know one’s neighbors.
Prefabricated dwellings are an option that combines affordability with the potential for mobility. They are still the tiny minority of residences in metropolitan Phoenix because large-scale conventional builders were efficient, when building, which reduced the cost advantage for manufactured housing. That, of course, was “back in the day.” How will those builders fare when the target population can’t get a loan from a conventional lender large enough for the balance of the price, and haven’t got enough savings to make a down payment?
There are four leading types of manufactured homes in circulation today: Modular (site assembled, pre-built sections called modules); panelized (walls with windows, doors, wiring and siding assembled at the home site); pre-cut (kit, log and dome-style houses); and classic mobile homes, built on a steel undercarriage and pulled to the home site where the wheels and axles are removed. There are many price points for manufactured homes from about $90 thousand northward, and some manufacturers are working on increased sustainability and energy efficiency to afford the homeowner some return on investment. Here’s the real issue: durability.
Manufactured homes still suffer from the “first two of the Three Little Pigs” stigma. That suffering isn’t completely undeserved; just watching footage of tornado strikes convinces most of us how devastating the destruction to a manufactured home can be. The industry has a response to the public’s skepticism, as follows: Most manufactured homes are built to withstand sustained winds in the range of 70 miles per hour. Above this range, a manufactured home will sustain damage. Only in the case of severe weather, such as a tornado, is the public likely to experience winds in excess of 70 miles per hour. Meteorologists estimate that approximately 40 percent of all tornadoes have winds exceeding 112 miles per hour. Tornadoes can have winds in excess of 200 miles per hour, in extreme cases. Current building codes and practices, for either manufactured homes or site-built homes, do not require dwellings to withstand winds exceeding 110 miles per hour. So, a direct hit from a Category F2 (and higher) tornado will bring about severe damage or destruction of any home in its path. A tornado's deadly force, like that of a hurricane, does not selectively discriminate between site-built and manufactured homes.
Yeah, maybe. The last proposition is almost certainly true, despite appearances; the difference, it seems to me, is anchorage. If the home is truly attached to the foundation and is made of heavy - enough materials, then gravity will save the superstructure from all but the most savage wind storms or storm (water) surges. But a manufactured home doesn’t have weighty materials, because they can be hauled long distances on an 18-wheeled tractor-trailer. So its walls are more susceptible to being ripped apart, especially when the walls are fastened with something weaker than mortar.
Which is why the manufactured home industry (and the site-built residential construction industry, for that matter), needs to turn its attention to employing new materials light enough to haul to a final-assembly site that are still relatively indestructible. Steel boxes known as “shipping containers” come to mind. There’s a few to be had, cheaply, in every port community in this nation, and in a lot of other U.S. cities. Now, there’s some stylin’; more next time.
-MNW
Monday, October 12, 2009
Co-Housing: Forward – Residential Life in Community
A few weeks back, I announced my intention to write on how I suppose residential communities might be organized in the next 100 years. Two things prompted me to fuss around with this. First, an abstraction: What is the impact of tens of thousands of foreclosures and even more “short sale” workouts, with their accompanying credit reporting, going to have on the slice of the public for whom money will remain “an object?” While banks have to lend money to someone – at least hypothetically so – will credit be extended to dwellers with abysmal credit scores affected by losing their equity and their residences? Like in the good old days, where 5% down payment seemed an excessive consumer contribution?
Second, a concretion: Why can’t renters understand the value of my rental house? I can’t get anyone to offer what the current fair rental value of the house is. Don’t tell me I love the house more than I should - I’m already intent on demolishing it in a few years! But there are dozens of folks who approach the rental of my place (to whom I have not disclosed my “demo” plan) like transients; I sense in our discussions that most of them think they won’t be there for even one year. If they see no benefit in my crib, other than as a place to reside for a little while until their fortunes improve, then why should I have any confidence they won’t just abandon it sometime during the lease term, defying me to pursue them for the remaining rent owed? I’m paranoid about my wee cottage, maybe, but I get this vibe that the attitude toward residences as the “homestead” or “where I’m taking my stand” is eroding in large numbers.
Are single-family, detached subdivisions as lately executed sustainable, as a community concept? Are they desirable? Are they affordable, should economic conditions return to some semblance of normalcy? I wonder. I don’t think defaulting borrowers are going to be permitted to borrow, at low interest rates, big bags of money secured by personal residences for a bunch of years, and perhaps even beyond the turning point where the inventory of available housing shrinks substantially. Not unless “credit scoring” is wiped clean by some lender-industry-wide agreement or governmental edict, or there’s a whopping amount of the buyer’s equity-skin in the game. Well, maybe if there’s some new form of government-backed, guaranty program that ensures the Treasury’s printing presses are hopping.
My hunch is that the concept of “affordable housing” over the next few decades will not be as traditionally defined, in terms of the poverty level index. So what will Mother, Father and the kids be living in 15 years from now? I suspect the face of attached housing may remain about the same; apartments will continue to serve basic roof-top needs, although perhaps less well the mental and physical health needs, of a big segment of the urban populations. It’s the face of single family, detached housing that I think will be altered, perhaps radically so; and here’s how.
First, I think corporate ownership of private (opposed to state/federal) land will grow relative to the volume of individual (family) land ownership. In short, I think big lots with big houses will become the near-exclusive province of the well-to-do, meaning the top 5% of households in the American population. Affordability is one reason, but aggregation in the most highly-urbanized areas will be a second driver of this change. It isn’t popular, maybe it’s even apostasy, to say that suburbia is “toast,” but unless extensive, fixed rail, urban transit systems become the norm in American cities, suburbia likely to get browner as the urban core gets greener.
I’m not predicting the death of conurbation altogether; I just think it’s going to hug transit corridors, while development sprawl radiating outward from transit nodes will lose traction. In the desert southwest, potable water source shrinkage will hasten this inevitable outcome. Urban lands in this scenario become too precious, hence unaffordable, to the great majority of individual American households. When the individual ownership of fee title land is stripped out of new communities, enormous liberation results in the potential for alternate communities. It will change the anthropology of those neighborhoods, too.
One new paradigm is a movement of “purposeful” communities known generically as co-housing. A cohousing community is a type of intentional neighborhood composed of private homes with full kitchens, supplemented by extensive common facilities. A cohousing community is planned, owned and managed by its residents, by groups of people who want more interaction with their neighbors. Common facilities vary but often include a central kitchen and dining room where residents can take turns cooking for a larger segment of the community. Other facilities may include a laundry, pool, child care facilities, offices, internet access facilities, guest rooms, game room, TV room, workshop or gym. Through spatial design and shared social and management activities, cohousing facilitates multi-level interactions among neighbors, for the attendant social and practical benefits. There are also economic and environmental benefits to sharing resources, space and items. But the underlying land of the neighborhood isn’t something that requires parceling out among the dwelling occupants. A corporation, either controlled by the original developer or the association controlled by the dwellers, can own the land.
Second, mobility becomes a by-product of liberating dwellers from the burden of land ownership. The wave of foreclosures and short sales arose from the fact that property values and loan balances were “upside down,” right? But if land value were the main cost component peaking and troughing, and the improvements costs appreciated or depreciated comparatively modestly (assuming enduring construction materials), then two propositions arise. One is that the likelihood of devastating economic circumstances driven by a housing inventory glut and sinking prices diminishes significantly. Another is that future buyers may serially nest in myriad neighborhoods, using the identical dwelling. What kinds of communities enable that phenomenon?
-MNW
Second, a concretion: Why can’t renters understand the value of my rental house? I can’t get anyone to offer what the current fair rental value of the house is. Don’t tell me I love the house more than I should - I’m already intent on demolishing it in a few years! But there are dozens of folks who approach the rental of my place (to whom I have not disclosed my “demo” plan) like transients; I sense in our discussions that most of them think they won’t be there for even one year. If they see no benefit in my crib, other than as a place to reside for a little while until their fortunes improve, then why should I have any confidence they won’t just abandon it sometime during the lease term, defying me to pursue them for the remaining rent owed? I’m paranoid about my wee cottage, maybe, but I get this vibe that the attitude toward residences as the “homestead” or “where I’m taking my stand” is eroding in large numbers.
Are single-family, detached subdivisions as lately executed sustainable, as a community concept? Are they desirable? Are they affordable, should economic conditions return to some semblance of normalcy? I wonder. I don’t think defaulting borrowers are going to be permitted to borrow, at low interest rates, big bags of money secured by personal residences for a bunch of years, and perhaps even beyond the turning point where the inventory of available housing shrinks substantially. Not unless “credit scoring” is wiped clean by some lender-industry-wide agreement or governmental edict, or there’s a whopping amount of the buyer’s equity-skin in the game. Well, maybe if there’s some new form of government-backed, guaranty program that ensures the Treasury’s printing presses are hopping.
My hunch is that the concept of “affordable housing” over the next few decades will not be as traditionally defined, in terms of the poverty level index. So what will Mother, Father and the kids be living in 15 years from now? I suspect the face of attached housing may remain about the same; apartments will continue to serve basic roof-top needs, although perhaps less well the mental and physical health needs, of a big segment of the urban populations. It’s the face of single family, detached housing that I think will be altered, perhaps radically so; and here’s how.
First, I think corporate ownership of private (opposed to state/federal) land will grow relative to the volume of individual (family) land ownership. In short, I think big lots with big houses will become the near-exclusive province of the well-to-do, meaning the top 5% of households in the American population. Affordability is one reason, but aggregation in the most highly-urbanized areas will be a second driver of this change. It isn’t popular, maybe it’s even apostasy, to say that suburbia is “toast,” but unless extensive, fixed rail, urban transit systems become the norm in American cities, suburbia likely to get browner as the urban core gets greener.
I’m not predicting the death of conurbation altogether; I just think it’s going to hug transit corridors, while development sprawl radiating outward from transit nodes will lose traction. In the desert southwest, potable water source shrinkage will hasten this inevitable outcome. Urban lands in this scenario become too precious, hence unaffordable, to the great majority of individual American households. When the individual ownership of fee title land is stripped out of new communities, enormous liberation results in the potential for alternate communities. It will change the anthropology of those neighborhoods, too.
One new paradigm is a movement of “purposeful” communities known generically as co-housing. A cohousing community is a type of intentional neighborhood composed of private homes with full kitchens, supplemented by extensive common facilities. A cohousing community is planned, owned and managed by its residents, by groups of people who want more interaction with their neighbors. Common facilities vary but often include a central kitchen and dining room where residents can take turns cooking for a larger segment of the community. Other facilities may include a laundry, pool, child care facilities, offices, internet access facilities, guest rooms, game room, TV room, workshop or gym. Through spatial design and shared social and management activities, cohousing facilitates multi-level interactions among neighbors, for the attendant social and practical benefits. There are also economic and environmental benefits to sharing resources, space and items. But the underlying land of the neighborhood isn’t something that requires parceling out among the dwelling occupants. A corporation, either controlled by the original developer or the association controlled by the dwellers, can own the land.
Second, mobility becomes a by-product of liberating dwellers from the burden of land ownership. The wave of foreclosures and short sales arose from the fact that property values and loan balances were “upside down,” right? But if land value were the main cost component peaking and troughing, and the improvements costs appreciated or depreciated comparatively modestly (assuming enduring construction materials), then two propositions arise. One is that the likelihood of devastating economic circumstances driven by a housing inventory glut and sinking prices diminishes significantly. Another is that future buyers may serially nest in myriad neighborhoods, using the identical dwelling. What kinds of communities enable that phenomenon?
-MNW
Thursday, September 10, 2009
BUILDING A SUSTAINABLE CROW’S NEST
Dr. Michael Crow, President of ASU, and Ernest Calderon, President of the Arizona Board of Regents, have a lot of fine ideas to bolster higher education in this great state. Affordability is the watch-word of the latest initiatives, and “Amen” to that broad concept. No one appears eager to see further increases in the cost of public education, at least no one wearing the “taxpayer” hat. But-you get what you pay for. That’s my mantra. What I want to “get,” at least as a taxpayer, is value - not merely the appearance of cheaper cost. Value in higher education, I am convinced, is measured by one data point more than any other. It’s called “persistence to graduation.” That’s an edu-word for the percentage of persons who graduate from a 4 year degree program within anything approaching a decent interval. Sometimes it’s referred to as a “graduation rate,” other times by other nomenclature, but the principle is this: Do those who embark on a higher education credential finish in a sufficiently reasonable period that one can say that the effort was justified in its cost?
For a while, perhaps as much as 20 years, it’s been conventional wisdom that the state universities are no longer places where the expression “4-year degree” has any literal meaning. It usually requires 5 years, minimum, to finish such a program of undergraduate studies, and there is a tendency for the undergrad to take as much as 6 academic years to finish all requirements for the degree of bachelor of something or other. This isn’t the forum to debate why that is so (or why, for that matter, graduation rates after 6 academic years of enrollment approach zero percent, although part of the problem is tracking the student’s progress beyond that time frame). That it is a fact, not just in Arizona but in many places, is evidenced by the metric for measuring undergraduate graduation rates: the percentage who graduate in 6 years. You can look that up on the U.S. News & World Report site and elsewhere. The National Center for Educational Statistics earlier this year made this observation: About 58 percent of first-time students seeking a bachelor's degree or its equivalent and attending a 4-year institution full time in 2000-01 completed a bachelor's degree or its equivalent at that institution within 6 years. For public institutions, approximately 58 percent of females seeking a bachelor's degree or its equivalent graduated within 6 years, compared with 51 percent of their male counterparts; for private not-for-profit institutions, 67 percent of females graduated within 6 years, compared with 62 percent of males. At private, for-profit institutions, however, the 6-year graduation rate was higher for males than females (36 vs. 29 percent).
The elite (in their own minds) publics like Berkeley, Michigan (Ann Arbor), UCLA, North Carolina and Virginia have graduation rates over 6-year cohort intervals in the 80-90 percent range. Why is that? Are their students just better equipped for the intellectual challenges posed by higher education than the typical State U? Probably so; but that begs the question whether entry-test scores alone dictate the outcome of persistence to graduation. Of course, the ready answer is “no”; obviously, there’s more to succeeding in getting through a program than native intelligence. There is no measuring stick for sheer grit, for one thing. I’ve watched one of my kids grind half-way through a program that, on test paper, is probably beyond her grasp. We don’t live on paper, thankfully.
So, besides book-smarts and sheer determination, what else determines success in reaching the finish-line? There is plenty of research indicating that a major determinant of success in completing an undergraduate program is driven by engagement in the life of the academic institution, through faculty interactions and through student organizations – together with the quality of student life on the grounds of the institution itself. This militates against the commuter environment, where tires squeal after the last class bell of the day for the driver. The metric used in figuring out the degree of student engagement frequently is “freshman retention” – meaning, how many of the first-year class returns for more. Again, in the elite institutions, the freshman retention rate is in the mid-90s percentile. At the University of Arizona, it runs in the range of 77-78%. It’s about the same percentage at ASU. At NAU, it’s lower. Dr. Crow has admitted that freshmen living on a campus helps to “acculturate” those students to college life, positively impacting their “retention.” (Nov. 7, 2008 story) It’s useful to realize that while student housing represents some additional up-front cost to parents or students surviving on loans, the value proposition is that making new friends and feeling an integral part of the institution sustains velocity toward graduation. This means that the total cost of the student’s education beyond high school could be lower even if housing is a line item in the educational budget. So we need to offer nesting areas for fledglings in these new colleges, if we want to maximize their probability of staying the course.
What we further need, Arizonans, if we are going to justify the additional expense of new campuses with bachelor’s degrees emphases and less emphasis on faculty research, is student engagement and tightly-drawn articulation protocols, so that freshmen retention and graduation rates radically improve, at least to the 85% rate. That’s going to mean that a commuter campus ambience isn’t worth implementing – and that obligatory housing will increase the cost of construction and maintenance of these senior-college campuses, should they come to fruition. President Calderon’s Board of Regents wants to funnel more students through the new campuses using the engine of the community college systems for the initial two to three years of study – about half the period of the current bachelor’s program’s duration. But unless there are specific articulation agreements between the “junior” and “senior” institutions, that make it absolutely clear what course sequence is required to finish in 4 to 6 years with a bachelor’s degree, we’ll have more of the same foundering around that characterizes current public undergraduate programs, no matter how student-focused the faculty is at the new, smaller 4-year colleges. There’s no value proposition here. Arizona requires more college graduates and fewer academic dilettantes. Let’s calibrate the new colleges to make that happen.
Note: The author has three daughters who, among them, hold 5 degrees from institutions of higher learning, going on 6 – a doctorate-level program. His youngest daughter earned an associate of arts degree and a bachelor’s of science degree in 4 years; the trick is, she earned them from institutions 800 miles apart, through two distinct state university systems (neither of them in Arizona). That’s getting after it, friends.
--MNW
For a while, perhaps as much as 20 years, it’s been conventional wisdom that the state universities are no longer places where the expression “4-year degree” has any literal meaning. It usually requires 5 years, minimum, to finish such a program of undergraduate studies, and there is a tendency for the undergrad to take as much as 6 academic years to finish all requirements for the degree of bachelor of something or other. This isn’t the forum to debate why that is so (or why, for that matter, graduation rates after 6 academic years of enrollment approach zero percent, although part of the problem is tracking the student’s progress beyond that time frame). That it is a fact, not just in Arizona but in many places, is evidenced by the metric for measuring undergraduate graduation rates: the percentage who graduate in 6 years. You can look that up on the U.S. News & World Report site and elsewhere. The National Center for Educational Statistics earlier this year made this observation: About 58 percent of first-time students seeking a bachelor's degree or its equivalent and attending a 4-year institution full time in 2000-01 completed a bachelor's degree or its equivalent at that institution within 6 years. For public institutions, approximately 58 percent of females seeking a bachelor's degree or its equivalent graduated within 6 years, compared with 51 percent of their male counterparts; for private not-for-profit institutions, 67 percent of females graduated within 6 years, compared with 62 percent of males. At private, for-profit institutions, however, the 6-year graduation rate was higher for males than females (36 vs. 29 percent).
The elite (in their own minds) publics like Berkeley, Michigan (Ann Arbor), UCLA, North Carolina and Virginia have graduation rates over 6-year cohort intervals in the 80-90 percent range. Why is that? Are their students just better equipped for the intellectual challenges posed by higher education than the typical State U? Probably so; but that begs the question whether entry-test scores alone dictate the outcome of persistence to graduation. Of course, the ready answer is “no”; obviously, there’s more to succeeding in getting through a program than native intelligence. There is no measuring stick for sheer grit, for one thing. I’ve watched one of my kids grind half-way through a program that, on test paper, is probably beyond her grasp. We don’t live on paper, thankfully.
So, besides book-smarts and sheer determination, what else determines success in reaching the finish-line? There is plenty of research indicating that a major determinant of success in completing an undergraduate program is driven by engagement in the life of the academic institution, through faculty interactions and through student organizations – together with the quality of student life on the grounds of the institution itself. This militates against the commuter environment, where tires squeal after the last class bell of the day for the driver. The metric used in figuring out the degree of student engagement frequently is “freshman retention” – meaning, how many of the first-year class returns for more. Again, in the elite institutions, the freshman retention rate is in the mid-90s percentile. At the University of Arizona, it runs in the range of 77-78%. It’s about the same percentage at ASU. At NAU, it’s lower. Dr. Crow has admitted that freshmen living on a campus helps to “acculturate” those students to college life, positively impacting their “retention.” (Nov. 7, 2008 story) It’s useful to realize that while student housing represents some additional up-front cost to parents or students surviving on loans, the value proposition is that making new friends and feeling an integral part of the institution sustains velocity toward graduation. This means that the total cost of the student’s education beyond high school could be lower even if housing is a line item in the educational budget. So we need to offer nesting areas for fledglings in these new colleges, if we want to maximize their probability of staying the course.
What we further need, Arizonans, if we are going to justify the additional expense of new campuses with bachelor’s degrees emphases and less emphasis on faculty research, is student engagement and tightly-drawn articulation protocols, so that freshmen retention and graduation rates radically improve, at least to the 85% rate. That’s going to mean that a commuter campus ambience isn’t worth implementing – and that obligatory housing will increase the cost of construction and maintenance of these senior-college campuses, should they come to fruition. President Calderon’s Board of Regents wants to funnel more students through the new campuses using the engine of the community college systems for the initial two to three years of study – about half the period of the current bachelor’s program’s duration. But unless there are specific articulation agreements between the “junior” and “senior” institutions, that make it absolutely clear what course sequence is required to finish in 4 to 6 years with a bachelor’s degree, we’ll have more of the same foundering around that characterizes current public undergraduate programs, no matter how student-focused the faculty is at the new, smaller 4-year colleges. There’s no value proposition here. Arizona requires more college graduates and fewer academic dilettantes. Let’s calibrate the new colleges to make that happen.
Note: The author has three daughters who, among them, hold 5 degrees from institutions of higher learning, going on 6 – a doctorate-level program. His youngest daughter earned an associate of arts degree and a bachelor’s of science degree in 4 years; the trick is, she earned them from institutions 800 miles apart, through two distinct state university systems (neither of them in Arizona). That’s getting after it, friends.
--MNW
Wednesday, September 2, 2009
Home Ownership: Re-Visioning an American Dream
Tom Sugrue wrote an interesting piece in the WSJ published Saturday, August 15, called “The New American Dream: Renting.” His article is not a prescription but a suggestion that Americans need to return to the notion that there is no disgrace in renting your home. He points out that prior to the Depression Era, few Americans actually owned their own homes, title – wise. It was the explosive growth in the last 50 years of the 20th Century that led to the possibility that any working American could own his own piece of paradise. Sugrue quotes President George W. Bush calling for “an ownership society” of citizens possessing single family bliss. Sugrue’s piece ends with this reflection: “If there's one lesson from the real-estate bust of the last few years, it might be time to downsize the dream, to make it a little more realistic. James Truslow Adams, the historian who coined the phrase "the American dream," one that he defined as "a better, richer, and happier life for all our citizens of every rank" also offered a prescient commentary in the midst of the Great Depression. "That dream," he wrote in 1933, "has always meant more than the accumulation of material goods." Home should be a place to build a household and a life, a respite from the heartless world, not a pot of gold.”
Well, let’s not, in this space, rag on speculators who saw serial, highly leveraged, residential acquisition as the way to sudden and abundant wealth. They have more worries than what a blogger considers their just desserts. Instead, let’s ponder what will become of a 21st Century batch of Americans whose credit ratings are abysmal but who still want to own their own patch of land. Unless the Obama Administration declares a moratorium on bad credit, there’s a gaggle of folks who won’t be financeable for some time except perhaps by rapacious credit card purveyors. And that means there will be a flabby inventory of homes on the market in many SMSAs for a good while. This in turn means that while more homes may be “affordable” in the near future, the universe of potential buyers will take a while to ramp-up, especially if lenders do their “opposing side of the pendulum” over-correction, imposing more stringent underwriting of home loans for some short period of time – well, at least until the temporary insanity cycle resumes in the mortgage-lending community.
Perhaps Americans should contemplate a new housing paradigm, where ownership of a structure they call “home” is divorced from ownership of the land, or a fractional interest in land, upon which the foundation of their residence rests. Land (and infrastructure like curb, gutter, hydrants, sidewalk) cost is a significant component of the total cost of home ownership. If it were possible to have the right to occupy a tract of land with your residence without owning the land itself, in what respects would that be unattractive? Judging by the reluctance of my neighbors in the last couple of weeks to mow their front lawns, I’d guess it’s a phenomenon many could accustom themselves to.
Say you’re wondering, “how would that work?” Or perhaps you’re thinking, “so is he advocating that we all live in mobile home parks?” Nope, I’m not advocating a new era of mobile home fiefdoms. I’m saying that you don’t have to own land in order to use land residentially. There’s no zoning restriction that I know of in the big majority of American communities that requires fee title ownership of an occupied, legally-created and entitled lot. If the opposite were true, there would be no condominium projects, because the owners there own “air space” between the painted, interior surfaces of their walls. The land on which the buildings sit, and the buildings themselves, most times, are common elements that are owned by the condominium owners’ association. This is a very common form of co-housing. Our society needs to take a much closer look at all forms of co-housing, I think, and to develop projects that experiment in new directions with co-housing forms.
An investor will find new incentives to develop co-housing projects of different varieties if it discovers that it can retain title to the land and still generate income from the dwellers on a parcel – without necessarily “renting” anything to those dwellers. Particularly if the dwelling unit is detachable from the moorings of the unit upon the property and transportable elsewhere, retaining the dweller’s continued exclusive ownership (or not, if the dweller decides to sell), a purchaser of a housing unit can still have a long term, perhaps even appreciating, asset without incurring the expense and other burdens of land ownership. (Like mowing your doggone front lawn, for Pete’s sake!) Since lenders already know how to finance the modest acquisition costs of mobile homes or manufactured housing units, this proposal for co-housing featuring the potential for portable dwellings is not impossibly novel or threatening.
I’m going to post in the next few months about alternative forms of co-housing that turn away from fee title ownership divided among the dwellers on a parcel. Some may involve renting land, but others will entail just paying a “parking fee,” with no land ownership incidents or burdens other than those a person voluntarily undertakes. Of course, a paradigm shift will require one to cease thinking of home ownership as a lucrative, or at least steadily appreciating, investment vehicle. This transformation can be achieved, as Sugrue implies:
“Some countries—such as Spain and Italy—have higher rates of home ownership than the U.S., but there, homes are often purchased with the support of extended families and are places to settle for the long term, not to flip to eager buyers or trade up for a McMansion. In France, Germany, and Switzerland, renting is more common than purchasing. There, most people invest their earnings in the stock market or squirrel it away in savings accounts. In those countries, whether you are a renter or an owner, houses have use value, not exchange value.”
Hmmm. Use value - what a concept. France, Germany and Switzerland have fairly high living standards (and by law, grant their workers longer annual leaves than workers in the U.S.); these are not third world countries in their industrial capacities. So perhaps Americans might consider as a society new forms of owning a “piece of the rock” without citizens having their credit standings stoned to pieces. Stay tuned, readers.
-MNW
Well, let’s not, in this space, rag on speculators who saw serial, highly leveraged, residential acquisition as the way to sudden and abundant wealth. They have more worries than what a blogger considers their just desserts. Instead, let’s ponder what will become of a 21st Century batch of Americans whose credit ratings are abysmal but who still want to own their own patch of land. Unless the Obama Administration declares a moratorium on bad credit, there’s a gaggle of folks who won’t be financeable for some time except perhaps by rapacious credit card purveyors. And that means there will be a flabby inventory of homes on the market in many SMSAs for a good while. This in turn means that while more homes may be “affordable” in the near future, the universe of potential buyers will take a while to ramp-up, especially if lenders do their “opposing side of the pendulum” over-correction, imposing more stringent underwriting of home loans for some short period of time – well, at least until the temporary insanity cycle resumes in the mortgage-lending community.
Perhaps Americans should contemplate a new housing paradigm, where ownership of a structure they call “home” is divorced from ownership of the land, or a fractional interest in land, upon which the foundation of their residence rests. Land (and infrastructure like curb, gutter, hydrants, sidewalk) cost is a significant component of the total cost of home ownership. If it were possible to have the right to occupy a tract of land with your residence without owning the land itself, in what respects would that be unattractive? Judging by the reluctance of my neighbors in the last couple of weeks to mow their front lawns, I’d guess it’s a phenomenon many could accustom themselves to.
Say you’re wondering, “how would that work?” Or perhaps you’re thinking, “so is he advocating that we all live in mobile home parks?” Nope, I’m not advocating a new era of mobile home fiefdoms. I’m saying that you don’t have to own land in order to use land residentially. There’s no zoning restriction that I know of in the big majority of American communities that requires fee title ownership of an occupied, legally-created and entitled lot. If the opposite were true, there would be no condominium projects, because the owners there own “air space” between the painted, interior surfaces of their walls. The land on which the buildings sit, and the buildings themselves, most times, are common elements that are owned by the condominium owners’ association. This is a very common form of co-housing. Our society needs to take a much closer look at all forms of co-housing, I think, and to develop projects that experiment in new directions with co-housing forms.
An investor will find new incentives to develop co-housing projects of different varieties if it discovers that it can retain title to the land and still generate income from the dwellers on a parcel – without necessarily “renting” anything to those dwellers. Particularly if the dwelling unit is detachable from the moorings of the unit upon the property and transportable elsewhere, retaining the dweller’s continued exclusive ownership (or not, if the dweller decides to sell), a purchaser of a housing unit can still have a long term, perhaps even appreciating, asset without incurring the expense and other burdens of land ownership. (Like mowing your doggone front lawn, for Pete’s sake!) Since lenders already know how to finance the modest acquisition costs of mobile homes or manufactured housing units, this proposal for co-housing featuring the potential for portable dwellings is not impossibly novel or threatening.
I’m going to post in the next few months about alternative forms of co-housing that turn away from fee title ownership divided among the dwellers on a parcel. Some may involve renting land, but others will entail just paying a “parking fee,” with no land ownership incidents or burdens other than those a person voluntarily undertakes. Of course, a paradigm shift will require one to cease thinking of home ownership as a lucrative, or at least steadily appreciating, investment vehicle. This transformation can be achieved, as Sugrue implies:
“Some countries—such as Spain and Italy—have higher rates of home ownership than the U.S., but there, homes are often purchased with the support of extended families and are places to settle for the long term, not to flip to eager buyers or trade up for a McMansion. In France, Germany, and Switzerland, renting is more common than purchasing. There, most people invest their earnings in the stock market or squirrel it away in savings accounts. In those countries, whether you are a renter or an owner, houses have use value, not exchange value.”
Hmmm. Use value - what a concept. France, Germany and Switzerland have fairly high living standards (and by law, grant their workers longer annual leaves than workers in the U.S.); these are not third world countries in their industrial capacities. So perhaps Americans might consider as a society new forms of owning a “piece of the rock” without citizens having their credit standings stoned to pieces. Stay tuned, readers.
-MNW
Monday, August 31, 2009
Health care, Insurance, other non real estate related
I have been involved in some really heated discussions on Facebook relating to health care and insurance. And of course I had to spend some time thinking about it all, of course after posting lots of stuff that was just off the top of my head. After some considered thought, here are a couple things you might think about.
First - As children we are programmed to be socialists: You can't have that unless you brought enough for everyone. We have to share. And a hundred other similar comments. Is this a bad thing? I think it probably is, because it programs us at an early age in a way that might not be appropriate for survival in a capitalistic society. When we later see that someone has something we like, and they aren't sharing it with us, do we feel resentful? Jealous? "Why didn't they bring enough so I can have one, too?"
Maybe this sort of thing is appropriate when we are talking about cookies, but it is not when we talk about laptops or cars. As an NLP practitioner, I can tell you that the unconscious mind will not make any distinction! So this preschool programming is a bad idea.
Second - Insurance is a socialistic thing. Premiums are gathered from everyone, and the "beneficiaries" get paid for their trouble. We all pay for a small group's misfortune. Perhaps it is a good business decision to buy insurance. More on that in a moment. The other side of insurance is that it is necessarily a profitable business, if run correctly. An insurance company must hold massive amounts of wealth in order to guard against a rainy day. Therefore an insurance company (aside from the "side business" of actually insuring) is really a massive investment vehicle for the insurance company stockholders, who by the virtue of the business model, profit from investing other people's money, without being accountable to them because the customers do not expect to get their money back unless a catastrophe occurs.
Finally, let's talk about health insurance. I think it is a different animal than say, car insurance or homeowner's insurance. Why? because health insurance (for the most part) is not catastrophe insurance, as it is implemented by most employers today.
Car insurance pays when you have an accident. You don't go out looking to get in an accident, and you don't usually spend the insurance company's money trying to not have an accident as you drive around (Insurance companies may invest money doing this, like Geico did when they funded some radar guns in the past). Pretty much we dread getting in accidents, and we dread having our home get damaged, or robbed, or vandalized.
The difference with most health insurance plans is that we are almost encouraged to go to the doctor for the smallest thing. After all, it is just a $10 co-pay. Why not go spend a hundred bucks of insurance company money, it only costs me 10, and who knows, this headache might be a tumor, and besides I need some time away from the office.
I worked in corporate America for many years and this is exactly the attitude many people had, at the several places I worked.
You can see how this entitlement mentality could cost insurers lots and lots -- reflected in increased premiums for everyone.
I'm one of those people who has to be near death to actually go to a doctor. I've been blessed with excellent health, and I see a physician on the average of once or twice a year. And it comes out of my pocket, because my insurance plan has a huge deductible and no co-pay. I go, I pay. And, being self-employed, time away from work is time not making money.
So I think the very nature of most health insurance is different from most other insurance. There are two simple things which can change this. First, we need to de-couple employment and health care. Employers should not offer health care. This should be something a person makes their own decision about and buys on the open market. Second, no co-pays, no prescription drug plans, none of that. Insurance pays, after your deductible, the amount of the loss. Just like home owner's insurance. This puts a dis-incentive in place to be sick. It should be as massively inconvenient to be sick as it is to be in an accident or have your home robbed, if you want to insure against it.
What about the people who cannot afford health insurance? This is a harder question. Today, in the United States, if you show up at an ER, for the most part, you will get treated. Should the government pay for it, should they be involved? I don't think so! Let's look at it another way. If you think that it is the job of the government to provide a health benefit for everyone, then what about a basic housing benefit and a basic food benefit? Is it any different? What is means is that those of us who choose to work and pay taxes will support those people who are either unwilling or unable to work. The government, at least the federal government, has no place doing these things.
Bottom line: We live in a capitalistic society. That means that there will be winners and losers. We should create incentives for people to try and win. Offering things for free, or that other people pay for, is not an incentive. I have no incentive to conserve energy when I stay in a hotel. The price is the same whether I set the thermostat on 60 or 75. Insurance should create an incentive to NOT use it. No co-pays. You go, you pay.
Patrick
First - As children we are programmed to be socialists: You can't have that unless you brought enough for everyone. We have to share. And a hundred other similar comments. Is this a bad thing? I think it probably is, because it programs us at an early age in a way that might not be appropriate for survival in a capitalistic society. When we later see that someone has something we like, and they aren't sharing it with us, do we feel resentful? Jealous? "Why didn't they bring enough so I can have one, too?"
Maybe this sort of thing is appropriate when we are talking about cookies, but it is not when we talk about laptops or cars. As an NLP practitioner, I can tell you that the unconscious mind will not make any distinction! So this preschool programming is a bad idea.
Second - Insurance is a socialistic thing. Premiums are gathered from everyone, and the "beneficiaries" get paid for their trouble. We all pay for a small group's misfortune. Perhaps it is a good business decision to buy insurance. More on that in a moment. The other side of insurance is that it is necessarily a profitable business, if run correctly. An insurance company must hold massive amounts of wealth in order to guard against a rainy day. Therefore an insurance company (aside from the "side business" of actually insuring) is really a massive investment vehicle for the insurance company stockholders, who by the virtue of the business model, profit from investing other people's money, without being accountable to them because the customers do not expect to get their money back unless a catastrophe occurs.
Finally, let's talk about health insurance. I think it is a different animal than say, car insurance or homeowner's insurance. Why? because health insurance (for the most part) is not catastrophe insurance, as it is implemented by most employers today.
Car insurance pays when you have an accident. You don't go out looking to get in an accident, and you don't usually spend the insurance company's money trying to not have an accident as you drive around (Insurance companies may invest money doing this, like Geico did when they funded some radar guns in the past). Pretty much we dread getting in accidents, and we dread having our home get damaged, or robbed, or vandalized.
The difference with most health insurance plans is that we are almost encouraged to go to the doctor for the smallest thing. After all, it is just a $10 co-pay. Why not go spend a hundred bucks of insurance company money, it only costs me 10, and who knows, this headache might be a tumor, and besides I need some time away from the office.
I worked in corporate America for many years and this is exactly the attitude many people had, at the several places I worked.
You can see how this entitlement mentality could cost insurers lots and lots -- reflected in increased premiums for everyone.
I'm one of those people who has to be near death to actually go to a doctor. I've been blessed with excellent health, and I see a physician on the average of once or twice a year. And it comes out of my pocket, because my insurance plan has a huge deductible and no co-pay. I go, I pay. And, being self-employed, time away from work is time not making money.
So I think the very nature of most health insurance is different from most other insurance. There are two simple things which can change this. First, we need to de-couple employment and health care. Employers should not offer health care. This should be something a person makes their own decision about and buys on the open market. Second, no co-pays, no prescription drug plans, none of that. Insurance pays, after your deductible, the amount of the loss. Just like home owner's insurance. This puts a dis-incentive in place to be sick. It should be as massively inconvenient to be sick as it is to be in an accident or have your home robbed, if you want to insure against it.
What about the people who cannot afford health insurance? This is a harder question. Today, in the United States, if you show up at an ER, for the most part, you will get treated. Should the government pay for it, should they be involved? I don't think so! Let's look at it another way. If you think that it is the job of the government to provide a health benefit for everyone, then what about a basic housing benefit and a basic food benefit? Is it any different? What is means is that those of us who choose to work and pay taxes will support those people who are either unwilling or unable to work. The government, at least the federal government, has no place doing these things.
Bottom line: We live in a capitalistic society. That means that there will be winners and losers. We should create incentives for people to try and win. Offering things for free, or that other people pay for, is not an incentive. I have no incentive to conserve energy when I stay in a hotel. The price is the same whether I set the thermostat on 60 or 75. Insurance should create an incentive to NOT use it. No co-pays. You go, you pay.
Patrick
Thursday, August 27, 2009
PFTA: AN ALARM, NOT A SOUND, FOR RESIDENTIAL VULTURE INVESTORS TO HEED
So, I hear you’re scooping up all the cheap residences around the Valley and planning to toss the tenants who look like “questionable” renters, based on the condition they’re keeping the property in, right? Oops. The Protecting Tenants at Foreclosure Act of 2009 (PTFA), part of the Helping Families Save Their Homes Act of 2009 (Pub. L. 111-22, approved May 20, 2009), requires that tenants residing in foreclosed residential properties be provided notice to vacate at least 90 days in advance of the date on which you want to have the tenants vacate your new property. Except where the purchaser will occupy the property as his/her/their primary residence, the term of any bona fide lease also remains in effect for the balance of the term. Oops, some more - but read on.
With the unprecedented number of foreclosures, tenants often were caught unaware that the residential property in which they reside was being foreclosed and were given little notice of the need to vacate the property. The objective of these new protections is to ensure that tenants receive appropriate notice of foreclosure and are not abruptly displaced.
Sections 702 and 703 define the scope of PFTA's coverage over residential properties. The Section 702 requirements to provide tenants with at least 90 days' advance notice to vacate and to preserve the term of any bona fide lease apply to foreclosures on all Federally related mortgage loans or on any dwelling or residential real property. Section 703 makes conforming changes consistent with the Section 702 requirements to the Section 8 rental voucher assistance provisions of the United States Housing Act of 1937 (1937 Act). (All these provisions “sunset” on December 31, 2012, by the way.)
The American Recovery and Reinvestment Act of 2009 (Pub. L. 111-5, approved February 17, 2009) (Recovery Act) contains similar protections under the heading "Community Development Fund" in Title XII of Division A, which applies to emergency assistance funding provided for the Neighborhood Stabilization Program, if you want to read more about that.
Let’s focus on the coverage of Section 702 in this post – that coverage is very broad. Section 702 applies, commencing after May 20, 2009, to "any foreclosure" on (1) a federally related mortgage loan, or (2) any dwelling or residential real property. Section 702 provides that "federally-related mortgage loan" has the same meaning as that provided in section 3 of the Real Estate Settlement Procedures Act (RESPA) (12 U.S.C. 2602).
The definition of federally-related mortgage loan is very broad in RESPA, but federally-related mortgage loans represent only part of Section 702's coverage. Section 702 further covers "any dwelling or residential property," and that extends the requirements to all residential property foreclosures, regardless of type or entity involved in the foreclosure, no matter whether the tenants receive any type of housing assistance.
The tenants to whom the notice must be provided must be bona-fide tenants, as this term is defined in Section 702(b). Section 702(b) defines “bona fide lease or tenancy,” and under this definition, bona fide tenants do not include the mortgagor or the child, spouse or parent of the mortgagor. (See 702(b)(1)) With respect to the lease, Section 702(b)(2) and (3) provide that a bona fide lease or tenancy must have been the result of an arms-length transaction, and the lease or tenancy requires the receipt of rent that is not “substantially less”(whatever that means these days) than fair market rent for the property or the unit's rent is reduced or subsidized due to a federal, state, or local subsidy. Section 702(a)(2)(B) clarifies that the protections provided by this new law are minimum protections and do not supersede any greater protections (longer advance notice or additional protections) provided by state or local law. California’s got a law on the books already, I understand.
So, here’s when the requirement of Section 702 to provide at least 90 days notice to tenants applies:
(1) The advance notice applies to tenants in any foreclosed dwelling or residential real property, regardless of the type of loan or other security interest on the property.
(2) An advance notice of 90 days is the minimum period of notification. A longer period may be provided, for example, if greater protections are provided by state or local law.
(3) Responsibility for providing the advance notice to tenants falls on the immediate successor in interest of the property, which usually is the purchaser.
(4) The notice must be given to anyone whom, as of the date of the notice of foreclosure, is a bona fide tenant, whether or not there is a lease.
In addition, Section 702 provides that a tenant under any bona fide lease entered into before the notice of foreclosure has the right to occupy the premises until the end of the remaining term of the lease. The only exception to preserving the remaining term of the lease is for a purchaser who will occupy the unit as a primary residence. Even under this exception, however, the tenant must still be provided with the 90-day advance notice to vacate.
Once again, the lease or tenancy must meet the following requirements to be "bona fide" for purposes of Section 702 applying:
(1) The tenant cannot be the mortgagor or the child, spouse, or parent of the mortgagor,
(2) The lease or tenancy must be the result of an arms-length transaction, and
(3) The rent required under the lease cannot be substantially less than “fair market rent” for the property or the rent is subsidized by a federal, state or local subsidy.
So, cagey residential investor, scoop away, but don’t salivate over the forthcoming “rent bumps” until you check your compliance obligations under these federal statutes and any that Arizona may pass that are even more stringent.
-MNW
With the unprecedented number of foreclosures, tenants often were caught unaware that the residential property in which they reside was being foreclosed and were given little notice of the need to vacate the property. The objective of these new protections is to ensure that tenants receive appropriate notice of foreclosure and are not abruptly displaced.
Sections 702 and 703 define the scope of PFTA's coverage over residential properties. The Section 702 requirements to provide tenants with at least 90 days' advance notice to vacate and to preserve the term of any bona fide lease apply to foreclosures on all Federally related mortgage loans or on any dwelling or residential real property. Section 703 makes conforming changes consistent with the Section 702 requirements to the Section 8 rental voucher assistance provisions of the United States Housing Act of 1937 (1937 Act). (All these provisions “sunset” on December 31, 2012, by the way.)
The American Recovery and Reinvestment Act of 2009 (Pub. L. 111-5, approved February 17, 2009) (Recovery Act) contains similar protections under the heading "Community Development Fund" in Title XII of Division A, which applies to emergency assistance funding provided for the Neighborhood Stabilization Program, if you want to read more about that.
Let’s focus on the coverage of Section 702 in this post – that coverage is very broad. Section 702 applies, commencing after May 20, 2009, to "any foreclosure" on (1) a federally related mortgage loan, or (2) any dwelling or residential real property. Section 702 provides that "federally-related mortgage loan" has the same meaning as that provided in section 3 of the Real Estate Settlement Procedures Act (RESPA) (12 U.S.C. 2602).
The definition of federally-related mortgage loan is very broad in RESPA, but federally-related mortgage loans represent only part of Section 702's coverage. Section 702 further covers "any dwelling or residential property," and that extends the requirements to all residential property foreclosures, regardless of type or entity involved in the foreclosure, no matter whether the tenants receive any type of housing assistance.
The tenants to whom the notice must be provided must be bona-fide tenants, as this term is defined in Section 702(b). Section 702(b) defines “bona fide lease or tenancy,” and under this definition, bona fide tenants do not include the mortgagor or the child, spouse or parent of the mortgagor. (See 702(b)(1)) With respect to the lease, Section 702(b)(2) and (3) provide that a bona fide lease or tenancy must have been the result of an arms-length transaction, and the lease or tenancy requires the receipt of rent that is not “substantially less”(whatever that means these days) than fair market rent for the property or the unit's rent is reduced or subsidized due to a federal, state, or local subsidy. Section 702(a)(2)(B) clarifies that the protections provided by this new law are minimum protections and do not supersede any greater protections (longer advance notice or additional protections) provided by state or local law. California’s got a law on the books already, I understand.
So, here’s when the requirement of Section 702 to provide at least 90 days notice to tenants applies:
(1) The advance notice applies to tenants in any foreclosed dwelling or residential real property, regardless of the type of loan or other security interest on the property.
(2) An advance notice of 90 days is the minimum period of notification. A longer period may be provided, for example, if greater protections are provided by state or local law.
(3) Responsibility for providing the advance notice to tenants falls on the immediate successor in interest of the property, which usually is the purchaser.
(4) The notice must be given to anyone whom, as of the date of the notice of foreclosure, is a bona fide tenant, whether or not there is a lease.
In addition, Section 702 provides that a tenant under any bona fide lease entered into before the notice of foreclosure has the right to occupy the premises until the end of the remaining term of the lease. The only exception to preserving the remaining term of the lease is for a purchaser who will occupy the unit as a primary residence. Even under this exception, however, the tenant must still be provided with the 90-day advance notice to vacate.
Once again, the lease or tenancy must meet the following requirements to be "bona fide" for purposes of Section 702 applying:
(1) The tenant cannot be the mortgagor or the child, spouse, or parent of the mortgagor,
(2) The lease or tenancy must be the result of an arms-length transaction, and
(3) The rent required under the lease cannot be substantially less than “fair market rent” for the property or the rent is subsidized by a federal, state or local subsidy.
So, cagey residential investor, scoop away, but don’t salivate over the forthcoming “rent bumps” until you check your compliance obligations under these federal statutes and any that Arizona may pass that are even more stringent.
-MNW
Tuesday, August 25, 2009
EQUITY TRUMPS PERFIDITY- AGENT’S SHENANIGANS DEFEAT SPECIFIC PERFORMANCE OF REALTY CONTRACT
The long history of Queiroz v. Harvey (a case tried in Maricopa County in 2005, not related to my co-blogger) mercifully came to a satisfying end a couple of months ago. The Court of Appeals had issued a disturbing opinion in May of 2008, in which it held that since the Buyer had cured a default in a real estate purchase contract before it had received Seller’s written notice of cancellation in writing, per the terms of the contract, the Seller was bound to perform. What the Supreme Court of Arizona decided, however, was that an Agent’s dishonest acts could be imputed to the principal even if it was unaware of those acts; therefore, the principal seeking specific performance of the contract could not benefit from Agent conduct that is inequitable. Thus, under the maximum of “he who seeks equity must do equity,” the Buyer could not compel performance from the Seller.
Specifically, Buyer’s Agent rushed to a branch of the title company that was not the branch where the escrow was to be opened without the earnest money deposit and quickly deposited $1,000 earnest money funds by money orders. Shortly thereafter, the Seller’s cancellation notice was sent to the branch where the escrow was to have been opened. Buyer argued this notice was untimely – the breach (failure to deposit earnest money along with the faxed signature page from the contract) was cured prior to the written cancellation notice (expressly required under the contract) was received – and, therefore, the Seller’s cancellation was superseded by the Buyer’s Agent’s cure.
The Court of Appeals was not persuaded by evidence that the “deposit rush” was precipitated by the Agent’s knowledge that the Seller was going to cancel the contract. Instead, it held that as a matter of law that the Buyer as principal actually must know that the Agent was acting dishonestly in its dealings with the Seller before being barred from prevailing on its specific performance claim.
One moment, please, ruled the Supreme Court. A principal seeking specific performance as its remedy may indeed be bound by its Agent’s inequitable conduct, knowledge of that conduct or its absence thereof notwithstanding. A representation by an agent incident to a contract is attributed to a disclosed principal no differently than if the principal made the representation directly “when the agent had actual or apparent authority to make the contract.” The Supreme Court indicated the Court of Appeals misunderstood the meaning of the Weiner opinion from 1963, which suggested that the principal must himself act willfully – but not in a case like this one, the high court opined:. “As between the principal who has retained an unscrupulous agent and an innocent third party who relies on the agent’s misrepresentation, it is the third party who deserves protection.” (¶ 15 of the Supreme Court opinion)
The Supreme Court seemed most impressed by its conclusion that the Agent was concealing the fact, by its hurried deposit of the earnest money from the Agent’s own funds (anonymously, recall, via money orders), that the Buyer might be unable to make payments of the deferred portion (i.e., Seller carry-back) of the purchase price – a non-disclosure “that goes to the heart of the transaction” and therefore should have been disclosed by the principal-Buyer and the Agent to the Seller. For today, truth and justice will out.
Now, more than ever, who you associate with in the real estate business matters profoundly.
-MNW
Specifically, Buyer’s Agent rushed to a branch of the title company that was not the branch where the escrow was to be opened without the earnest money deposit and quickly deposited $1,000 earnest money funds by money orders. Shortly thereafter, the Seller’s cancellation notice was sent to the branch where the escrow was to have been opened. Buyer argued this notice was untimely – the breach (failure to deposit earnest money along with the faxed signature page from the contract) was cured prior to the written cancellation notice (expressly required under the contract) was received – and, therefore, the Seller’s cancellation was superseded by the Buyer’s Agent’s cure.
The Court of Appeals was not persuaded by evidence that the “deposit rush” was precipitated by the Agent’s knowledge that the Seller was going to cancel the contract. Instead, it held that as a matter of law that the Buyer as principal actually must know that the Agent was acting dishonestly in its dealings with the Seller before being barred from prevailing on its specific performance claim.
One moment, please, ruled the Supreme Court. A principal seeking specific performance as its remedy may indeed be bound by its Agent’s inequitable conduct, knowledge of that conduct or its absence thereof notwithstanding. A representation by an agent incident to a contract is attributed to a disclosed principal no differently than if the principal made the representation directly “when the agent had actual or apparent authority to make the contract.” The Supreme Court indicated the Court of Appeals misunderstood the meaning of the Weiner opinion from 1963, which suggested that the principal must himself act willfully – but not in a case like this one, the high court opined:. “As between the principal who has retained an unscrupulous agent and an innocent third party who relies on the agent’s misrepresentation, it is the third party who deserves protection.” (¶ 15 of the Supreme Court opinion)
The Supreme Court seemed most impressed by its conclusion that the Agent was concealing the fact, by its hurried deposit of the earnest money from the Agent’s own funds (anonymously, recall, via money orders), that the Buyer might be unable to make payments of the deferred portion (i.e., Seller carry-back) of the purchase price – a non-disclosure “that goes to the heart of the transaction” and therefore should have been disclosed by the principal-Buyer and the Agent to the Seller. For today, truth and justice will out.
Now, more than ever, who you associate with in the real estate business matters profoundly.
-MNW
Friday, August 21, 2009
BANKRUPTCY BAFFLER: REJECTION OF REAL PROPERTY CONTRACTS DE-SIMPLIFIED
One of the quandaries of Chapter 11 bankruptcy law is understanding what is an “executory contract” and what is not; the distinction is critical for appreciating what obligations can be scraped off, like mud from your shoes, if you decide to take this route as a tactical way to save your business or your assets (if you’re out of business). The bankruptcy code is not helpful in defining an executory contract, although everyone has an intuition what it is. The intuition usually is that an executory contract is one that isn’t “completed on both sides.” An executed contract, by contrast, is one that is finished; no performance by anybody remains, in other words.
Seems elementary enough; if someone has additional obligations left, then the contract is executory, right? Under the bankruptcy rules, a debtor who is a party to an executory contract may either reject the contract, affirm it (continuing performance following affirmation) or affirm and assign the contract to a third party (passing on the obligations to the assignee). Where real property-driven agreements are concerned, the waters of clarity are murky. This is because at times, bankruptcy courts, particularly appellate ones, will interpret certain types of contracts as conveying “real property rights” or “interests,” at which point there is doubt whether the election of a bankruptcy debtor persists. There is some irony here; for years in the commercial leasing context, American appellate courts have been eschewing the application of “property rights” concepts in favor of treating leases as contracts, without property heritage obeisance. For example, commercial leases in Arizona incorporate an implied covenant of good faith and fair dealing; this is unusual, because in a strict property rights milieu, good faith isn’t relevant. Think of fiefdoms and lords and vassals. Good faith in medieval times? What?
About 18 months ago, the 9th Circuit Bankruptcy Appellate Panel (“BAP”) weighed in on this issue. The Debtors, named Hayes, wanted to reject restrictive covenants relating to lakeside residential subdivision lots that lowered their property value (because they had a deterrent effect on the sale of the property), or merely were a source of aggravation. The bankruptcy court ruled that residential restrictive covenants do not make an executory contract that could be rejected under Bankruptcy Code §365(a). Hayes appealed; and three judges on the BAP considered the issue. The panel referred to a 1998 opinion from the 9th Circuit Court of Appeals (In re Robert L. Helms Construction) in finding that a contract is executory if the obligations of each party are “so unperformed” at the date of the bankruptcy filing that either party’s failure to complete performance constitutes a material breach of the agreement at issue. In the 1998 Helms opinion, the 9th Circuit held that an option contract is not executory because the optionee’s only true obligation, payment for the option right, is discharged at the time the option arrangement is made. In other words, one party was essentially “done” performing when that bankruptcy was filed; and at least some further performance by each party is required to find an executory contract.
So, the BAP in Hayes’ instance found that while the debtors had an ongoing obligation to comply with the CC&Rs, the Association had few if any continuing obligations. (The only one cited by the judges was the Association’s right – not obligation, in the perspective of the BAP panel – to expel any offending landowner in the subdivision.) The BAP panel pointed out that this didn’t rise to the level of “mutual obligations” at the time the bankruptcy petition was filed or afterwards. The bankruptcy court’s decision was therefore affirmed.
Hmm. So much for the reach of contract law into the realm of real property rights. The BAP panel neglected to comment upon the multiparty dimension of CC&Rs; these actually are “group contracts” among all landowners who are subject to the restrictive covenants – apart from the Association as a party. In other words, each owner has an ongoing obligation to every other landowner in the subdivision not to violate the restrictions on use and other CC&Rs requirements, like maintenance of and insuring their lots, or payment of common area assessments. (That’s why most CC&Rs state that enforcement may be had by the owners’ association or any individual owner or owners.) I suspect that this is a convention of common law in every state in the U.S., although such a convention may have been changed by statute in some jurisdictions. Those obligations to behave in a neighborly way continue in effect every day of a subdivision’s existence. Well, never mind the neighbors. But, be careful if you think that a “property right”-oriented agreement like an option to purchase/lease or a right of first refusal is dischargeable in your bankruptcy, at least in the 9th Circuit states.
-MNW
Seems elementary enough; if someone has additional obligations left, then the contract is executory, right? Under the bankruptcy rules, a debtor who is a party to an executory contract may either reject the contract, affirm it (continuing performance following affirmation) or affirm and assign the contract to a third party (passing on the obligations to the assignee). Where real property-driven agreements are concerned, the waters of clarity are murky. This is because at times, bankruptcy courts, particularly appellate ones, will interpret certain types of contracts as conveying “real property rights” or “interests,” at which point there is doubt whether the election of a bankruptcy debtor persists. There is some irony here; for years in the commercial leasing context, American appellate courts have been eschewing the application of “property rights” concepts in favor of treating leases as contracts, without property heritage obeisance. For example, commercial leases in Arizona incorporate an implied covenant of good faith and fair dealing; this is unusual, because in a strict property rights milieu, good faith isn’t relevant. Think of fiefdoms and lords and vassals. Good faith in medieval times? What?
About 18 months ago, the 9th Circuit Bankruptcy Appellate Panel (“BAP”) weighed in on this issue. The Debtors, named Hayes, wanted to reject restrictive covenants relating to lakeside residential subdivision lots that lowered their property value (because they had a deterrent effect on the sale of the property), or merely were a source of aggravation. The bankruptcy court ruled that residential restrictive covenants do not make an executory contract that could be rejected under Bankruptcy Code §365(a). Hayes appealed; and three judges on the BAP considered the issue. The panel referred to a 1998 opinion from the 9th Circuit Court of Appeals (In re Robert L. Helms Construction) in finding that a contract is executory if the obligations of each party are “so unperformed” at the date of the bankruptcy filing that either party’s failure to complete performance constitutes a material breach of the agreement at issue. In the 1998 Helms opinion, the 9th Circuit held that an option contract is not executory because the optionee’s only true obligation, payment for the option right, is discharged at the time the option arrangement is made. In other words, one party was essentially “done” performing when that bankruptcy was filed; and at least some further performance by each party is required to find an executory contract.
So, the BAP in Hayes’ instance found that while the debtors had an ongoing obligation to comply with the CC&Rs, the Association had few if any continuing obligations. (The only one cited by the judges was the Association’s right – not obligation, in the perspective of the BAP panel – to expel any offending landowner in the subdivision.) The BAP panel pointed out that this didn’t rise to the level of “mutual obligations” at the time the bankruptcy petition was filed or afterwards. The bankruptcy court’s decision was therefore affirmed.
Hmm. So much for the reach of contract law into the realm of real property rights. The BAP panel neglected to comment upon the multiparty dimension of CC&Rs; these actually are “group contracts” among all landowners who are subject to the restrictive covenants – apart from the Association as a party. In other words, each owner has an ongoing obligation to every other landowner in the subdivision not to violate the restrictions on use and other CC&Rs requirements, like maintenance of and insuring their lots, or payment of common area assessments. (That’s why most CC&Rs state that enforcement may be had by the owners’ association or any individual owner or owners.) I suspect that this is a convention of common law in every state in the U.S., although such a convention may have been changed by statute in some jurisdictions. Those obligations to behave in a neighborly way continue in effect every day of a subdivision’s existence. Well, never mind the neighbors. But, be careful if you think that a “property right”-oriented agreement like an option to purchase/lease or a right of first refusal is dischargeable in your bankruptcy, at least in the 9th Circuit states.
-MNW
Monday, August 17, 2009
MORE MECHANICS’ LIEN MACHINATIONS
On January 26, 2009, this Blog informed you about the Galeb-Miller v. Markham Contracting case on appeal that would be argued the following week, and invited your continued attention to those proceedings. The opinion in the case (1 CA-CV 07-0872) was published as a Memorandum Decision (e.g., one not to be used as precedent in future Arizona litigation) on May 19, 2009. So, was this blogista inattentive? Not really; the loser – big loser, actually, filed a motion for reconsideration in June, and the briefing on that motion was concluded just a few weeks ago. The Galeb case involves the imposition of damages in the form of a penalty upon a party (here, the contractor, supposedly) for the filing in the public records of a groundless lien under A.R.S. Section 33-420, the false lien statute. The big loser here was the owner; the Court of Appeals is being asked to reconsider its decision to deny Galeb-Miller any manner of damages whatever arising under the statute.
The factual background is that Markham Contracting’s attorney filed a lawsuit to foreclose on a lien, and concurrently recorded a notice of lis pendens confirming the existence of a suit and the entitlement of the contractor to a claim sounding in ownership against the real property. Problem was, Galeb earlier had procured and recorded surety lien-discharge bonds to “insure over” the claim of mechanic’s lien before the lis pendens recorded. (By operation of law, the recording of such bonds discharged Markham’s liens.) Now, the surety was one Contractors Bonding and Insurance Co. (“CBIC”); the attorney for Markham had obtained from a title company a “litigation guarantee” report, which identified an interest in the property owned by CBIC. The title company did not apparently disclose the capacity in which CBIC had an encumbrance against title, and the attorney did not inquire – at least, not until it was served with the bonds, into the nature of CBIC’s interest in the property. But the counsel knew that the title company had identified CBIC as a party in interest, who had to be named in the suit (and was not, for reasons unknown here).
The parties tried to settle, but got stuck in a few places, so Galeb sued and asserted it was entitled to damages for the violation of the statute on several groundlessness grounds, being:
a. Markham’s principals knew that the lis pendens was groundless themselves;
b. Markham’s attorney’s knowledge must be imputed to Markham if the officers knew the lis pendens was being recorded, and IF the attorney knew or had reason to know that the lis pendens was groundless;
c. Markham’s counsel was an agent for Markham, and therefore the knowledge of the attorney should be imputed to the principals under common law agency doctrine; and
d. Markham’s lien filings asserted termination fees and interest, categories of expense that are not recoverable under the mechanics’ lien statutory scheme (aka “non-lienable damages”).
Our court of appeals ruled that:
(i) Markham neither knew or had reason to know the discharge bonds had been filed, and did not read the “litigation guarantees,” so Markham likely did not know that the lis pendens filings were groundless; and
(ii) It was improper for the trial court to impute the attorney’s knowledge about the CBIC bonds, which was incomplete at best, to Markham; and
(iii) Because Markham had a good faith belief that it could rightfully impose a lien and therefore refused to relinquish it after demand from the owner, the contractor cannot be acting in bad faith, because the lien statutes are obscure.
Galeb got nothing in damages in the appeal; and the Court of Appeals opinion ends by remanding the matter to Superior Court for fact findings on whether the liens contained a material misstatement or false claim, and whether a letter sent to Markham’s counsel imputed to Markham (or afforded to Markham actual) knowledge that the liens were at least partially invalid due to the termination fees and interest that is statutorily unrecoverable. Galeb filed for reconsideration, likely because it went from having several hundred thousand dollars in a settlement posture to having squatola, other than a big bill from its counsel. So, we await the outcome of the motion to reconsider, and the treatment of the likely Notice of Appeal to the Supreme Court of Arizona to be filed by Galeb to follow.
The Court of Appeals had a little footnote of interest in its decision, numbered 18; it says that given that the recording of the bonds “killed” the mechanics’ liens in the total amount of those bonds, Markham only can be liable for the balance (the amount of the liens not discharged by the recorded bonds) under ARS 33-420. That’s interesting since the lis pendens was recorded after the bonds were; that lis pendens remained of record, which might arguably have chilled prospective purchasers’ inquiries about the property. Maybe someone will reconsider the wisdom of that footnote or at least explain what the Court was thinking along those lines. Also, it would be nice to hear from a court why Markham isn’t required to review the exceptions noted on the litigation guaranty report from the title company, once it has notice that there’s an evident conflicting claim of an encumbrance against the property. Eventually.
--MNW
The factual background is that Markham Contracting’s attorney filed a lawsuit to foreclose on a lien, and concurrently recorded a notice of lis pendens confirming the existence of a suit and the entitlement of the contractor to a claim sounding in ownership against the real property. Problem was, Galeb earlier had procured and recorded surety lien-discharge bonds to “insure over” the claim of mechanic’s lien before the lis pendens recorded. (By operation of law, the recording of such bonds discharged Markham’s liens.) Now, the surety was one Contractors Bonding and Insurance Co. (“CBIC”); the attorney for Markham had obtained from a title company a “litigation guarantee” report, which identified an interest in the property owned by CBIC. The title company did not apparently disclose the capacity in which CBIC had an encumbrance against title, and the attorney did not inquire – at least, not until it was served with the bonds, into the nature of CBIC’s interest in the property. But the counsel knew that the title company had identified CBIC as a party in interest, who had to be named in the suit (and was not, for reasons unknown here).
The parties tried to settle, but got stuck in a few places, so Galeb sued and asserted it was entitled to damages for the violation of the statute on several groundlessness grounds, being:
a. Markham’s principals knew that the lis pendens was groundless themselves;
b. Markham’s attorney’s knowledge must be imputed to Markham if the officers knew the lis pendens was being recorded, and IF the attorney knew or had reason to know that the lis pendens was groundless;
c. Markham’s counsel was an agent for Markham, and therefore the knowledge of the attorney should be imputed to the principals under common law agency doctrine; and
d. Markham’s lien filings asserted termination fees and interest, categories of expense that are not recoverable under the mechanics’ lien statutory scheme (aka “non-lienable damages”).
Our court of appeals ruled that:
(i) Markham neither knew or had reason to know the discharge bonds had been filed, and did not read the “litigation guarantees,” so Markham likely did not know that the lis pendens filings were groundless; and
(ii) It was improper for the trial court to impute the attorney’s knowledge about the CBIC bonds, which was incomplete at best, to Markham; and
(iii) Because Markham had a good faith belief that it could rightfully impose a lien and therefore refused to relinquish it after demand from the owner, the contractor cannot be acting in bad faith, because the lien statutes are obscure.
Galeb got nothing in damages in the appeal; and the Court of Appeals opinion ends by remanding the matter to Superior Court for fact findings on whether the liens contained a material misstatement or false claim, and whether a letter sent to Markham’s counsel imputed to Markham (or afforded to Markham actual) knowledge that the liens were at least partially invalid due to the termination fees and interest that is statutorily unrecoverable. Galeb filed for reconsideration, likely because it went from having several hundred thousand dollars in a settlement posture to having squatola, other than a big bill from its counsel. So, we await the outcome of the motion to reconsider, and the treatment of the likely Notice of Appeal to the Supreme Court of Arizona to be filed by Galeb to follow.
The Court of Appeals had a little footnote of interest in its decision, numbered 18; it says that given that the recording of the bonds “killed” the mechanics’ liens in the total amount of those bonds, Markham only can be liable for the balance (the amount of the liens not discharged by the recorded bonds) under ARS 33-420. That’s interesting since the lis pendens was recorded after the bonds were; that lis pendens remained of record, which might arguably have chilled prospective purchasers’ inquiries about the property. Maybe someone will reconsider the wisdom of that footnote or at least explain what the Court was thinking along those lines. Also, it would be nice to hear from a court why Markham isn’t required to review the exceptions noted on the litigation guaranty report from the title company, once it has notice that there’s an evident conflicting claim of an encumbrance against the property. Eventually.
--MNW
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