AANC NEWS November, 2010 NAAPAC Supports N.C. Congressional Candidates Greenville Area Property Managers Association leaders Apartment Association Leigh Ann Raiford Odom, Business Manager for Meridian of North Carolina Park Apartments, and Amanda Lyall, Assistant Community Manager for University Manor Apartments, met with U.S. 2101 Rexford Road, Congressman Walter Jones (R-3rd District of North Carolina) Suite 330-E in Greenville on Tuesday, October 26th to outline apartment Charlotte, NC 28211 industry matters and to share NAA Political Action Committee Phone: 704.334.9511 support (see photo at right). AANC’s Ken Szymanski also Fax: 704.333.4221 participated in the meeting. www.aanconline.org Leaders from the Triangle Apartment Association and the AANC met with U.S. Congressman Brad Miller (D-13th District of North Carolina) in Raleigh on Wednesday, October 27th to outline AANC Officers multi-housing matters and to share NAA Political Action Committee support. President: Susan Passmore Vice President Tim Hose Treasurer: Kellie Falk-Tillett Secretary: Mindy McCorkle Lobbyist: (above, L to R) Josie Eatmon, Triangle AA Executive (above, L tor R) Congressman Miller, Kim Colleen Kochanek Director; Fred Dean, NRP Group & Triangle AA President; Howard (Campaign Manager, Brad Miller Congressman Brad Miller (D-13 th District); Susan Congressional Campaign), and Fred Dean Executive Director: Passmore, Blue Ridge Property Management and AANC Ken Szymanski President; Ken Szymanski, AANC Executive Director AANC Mission Statement Greenville Continues to Grow a Progressive Local Association The Apartment Association of North Led by a series of committed volunteers, the Greenville Area Property Carolina is a statewide Managers Association continues to respond to multifamily rental organization comprised housing industry needs in parts of Eastern North Carolina. The of local apartment GAPMA’s current President is Emily Carter (CAM, CAPS), the Area associations to promote Manager for American Campus Communities. Emily understands safe, affordable housing the issues involved with multi-housing management, and sees the through participation value that Association membership can make. For example, she and in the legislative the Association have made excellent strides with members, their process, and through local Police Department, and Greenville City Council in being pro- communication to active with crime deterrence. “We take responsibility for operating and education of its reasonably safe communities, and it’s important to sustain good members, public officials management practices and an open dialogue with public officials and the general public. in minimizing problems,” said Emily. GAPMA’s Emily Carter and Mandy Lyall AANC NEWS Page 2 AANC Engages With Local Elected Officials at N.C. League of Municipalities Show On October 24th and 25th, the AANC actively demonstrated the many advantages of multifamily rental housing at the annual North Carolina League of Municipalities conference, held in Winston-Salem. Hundreds of municipal officials from the League’s 542 members and towns attended. AANC’s message was one of affordable housing for many city citizens and employees, efficient city service delivery, quality fire protection and accessible design, professional management, and resident flexibility. AANC thanks the enthusiastic volunteers who energetically tended the AANC booth: Mindy McCorkle and Tammy Oglesby AANC President Susan Passmore Rhonda Roth and Chris Parr (Blue Ridge) (Blue Ridge) and Jody Longwill (Parr Investments) (Burkely Communities) Jon Lowder (Triad Apartment Mayor Jerry Walker, Association), Mary Gwyn of the Western North (Apartment Dynamics), Carolina Town of Clyde, and Ken Szymanski (AANC was the winner of the Executive Director) AANC Booth Door Prize! AANC Participates in Civil Rights Luncheon in Greensboro On October 27th, AANC President Susan Passmore, Board Member Jody Longwill, Triad Executive Director Jon Lowder, and Ken Szymanski were part of a Civil Rights Luncheon in conjunction with the 63rd Annual Meeting of the National Association of Human Rights Workers. The Keynote Speaker was Bryan Greene, U.S. Department of HUD Assistant Secretary for Fair Housing at the HUD National Office in Washington, DC. Mr. Greene specifically mentioned the AANC as an actively engaged and laudable trade association in matters of fair housing and civil rights. Mr. Greene also outlined the significance of the “Westchester case,” where federal officials tied in local government’s affirmative duty to deliver affordable housing outside of traditional low-income neighborhoods as a condition for receiving federal Community Development (neighborhood improvement) funds. Later in the four-day conference, the NAHRW held an Awards Ceremony. Those recognized included N.C. Representative Alma Adams who received the Legislative Award, legendary Ken Szymanski with his 2010 school desegregation lawyer Julius Chambers who received the Judicial Award, and AANC NAHRW Advocacy Award Executive Director Ken Szymanski, who received the Advocacy Award for his many years of fair housing work. AANC NEWS Page 3 AANC PAC Board of Trustees Off to an Excellent Start AANC The AANC Political Action Committee supported the following candidates for the North Carolina General Assembly prior to the November 2nd election: PAC The Voice of Multifamily CANDIDATE Rep. Van Braxton Rep. Jim Crawford COUNTY(IES) REPRESENTED Greene, Lenoir, Wayne Granville Rep. Pryor Gibson Anson and Union CHAIRPERSON OF THE AANC PAC BOARD OF TRUSTEES: Rep. Julia Howard Davie, Iredell Meg Pisczek Rep. Carolyn Justice New Hanover, Pender Rep. Ric Killian Mecklenburg TRUSTEES Rep. Danny McComas New Hanover Apartment Association of Western NC: Sandra Austin Carlton Rep. Bill Owens Camden, Currituck, Pasquotank, Tyrrell Cumberland County Apartment Association: Jonathan Elliott Rep. Thom Tillis Mecklenburg Greater Charlotte Apt. Assoc: Skip Huddleston, Jay Tillman Sen. Dan Clodfelter Mecklenburg Greenville Area Property Managers Association: Amanda Lyall Sen. Phil Berger Guilford, Rockingham Triad Apartment Association: Chris Dunbar, Frank Forde Sen. Margaret Dixon Cumberland, Bladen Triangle Apartment Association: Cliff Webster, Will Brownlee Sen. Fletcher Hartsell Cabarrus, Iredell Wilmington Apartment Association: Jennifer Byrd Sen. Neal Hunt Wake Photo Highlights from October’s AANC Board Meeting in Troy, NC Photos by Mary Gwyn AANC to Participate in Reception for 2011 General Assembly Members Mark your calendars for this event on January 26th, 2011 from 6:30 until 8:30 PM at the NC Natural Science Museum in Raleigh. AANC will have 10 tickets for the event which coincides with the kick-off of the General Assembly’s “Long Session.” With a dramatically different elected-official landscape for 2011, the apartment industry will have a number of challenges and opportunities to make a difference for multifamily rental housing in the year ahead. AANC NEWS Page 4 A Landmark Precedent: Reviewing the Effects of Woodridge Homes v. Gregory By Will Brownlee, BROWNLEE LAW FIRM, PLLC The appellate courts of North Carolina (the N.C. Court offensive acts or sounds that would disturb the rights of of Appeals and the N.C. Supreme Court) are the courts other person; to not destroy or deface the apartment or of highest authority in our State. Their opinions serve common areas; and to remove abandoned or inoperable as powerful precedents that bind and guide the future vehicles within forty-eight hours’ notice. decisions of lower courts, including the small claims courts and district courts, which generally hear eviction lawsuits The lease also contained provisions regarding the and their appeals, respectively. Of the opinions issued by landlord’s right to terminate the lease or non-renew it at the the appellate courts, some decisions are “unpublished”, end of the term. Because the community was a subsidized which is to say the Court chose not to publish them formally community, the lease required that the landlord have and thus did not intend for the decision to be a binding “good cause” – i.e., specific examples of prior violations of precedent for future cases. Others are officially “published” the lease and related conduct issues – to non-renew the and are thus a precedent for future courts. lease at the end of the term. Finally, the lease contained a specific provision that stated that “the failure or omission of Published cases dealing with residential landlord-tenant landlord to terminate this lease for any cause given above law are rather rare. The rarity is largely due to the fact shall not destroy the right of the landlord to do so later for that appellate cases in the landlord-tenant world are similar or other causes.” already uncommon, as most cases settle long before then. However, every once in a while, a landlord will choose to Between January 2008 and December 2008, Ms. Gregory fight a case to the appellate level – and when they do, it is received five separate notices that she had committed wise for landlords everywhere to pay particular attention violations of the rules and regulations provided in the lease, to such cases, as they may result in important precedents including issues such as trash, an abandoned vehicle, a that will change the way parts of the rental industry does confrontation with another resident, and her refusal to business. allow maintenance staff into her apartment to perform a required inspection. On December 26, 2008, the landlord Woodridge Homes v. Gregory, 697 S.E.2d 370 (decided July sent Ms. Gregory a notice of its intention to non-renew the 20, 2010), is such a case, and it is a good idea for us all lease effective January 31, 2009; as evidence of its good to read it, understand it, and remember it. For a copy of cause in doing so, the landlord cited the “repeated minor the case, go to: http://www.aoc.state.nc.us/www/public/ violations of the lease” and “one or more major violations of coa/opinions/coa2010.htm. the lease,” and in doing so, the property manager provided specific examples relating back to the five notices Ms. THE FACTS AND BACKGROUND OF GREGORY Gregory received earlier in the year. Ms. Gregory was a tenant who resided in an apartment After sending the non-renewal notice on December 26, community originally subsidized by the Farmer’s Home 2008, the landlord took Ms. Gregory’s portion of all future Administration, later renamed the Rural Housing Services. subsidy payments (including the next payment received for As was the case for all the rental units in the same January 2009) and placed the funds in a separate, non- community, Ms. Gregory’s rent was subsidized through interest bearing account labeled as an “escrow account.” payments from the Department of Agriculture. Woodbridge Homes did not receive a separate subsidy check for Ms. When Ms. Gregory failed to vacate her apartment by Gregory’s unit; rather, it received a single rent subsidy January 31, 2009, the landlord filed a summary ejectment check covering all of the units in the Woodbridge Homes lawsuit in small claims court. The landlord won the small community. claims case, but the tenant appealed the case to district court. At district court, Ms. Gregory was represented The lease contained language common to many apartment by attorneys from Legal Aid, who moved to dismiss the lease contracts, including agreements for Ms. Gregory to eviction case under two theories: (1) that by accepting keep her apartment clean and free of rubbish; to conduct rental subsidies after each of the five violation notices, herself and her occupants in a civil manner and not to allow landlord had waived its right to claim any of those violation AANC NEWS Page 5 notices as “good cause” to non-renew the tenancy; and (2) that the landlord still maintained the right to non-renew that by accepting rental subsidies from the Department of the lease even if the landlord had waived the right to evict Agriculture after sending the non-renewal notice, landlord immediately for any one of the prior warnings. had accepted rent and thus waived the non-renewal as well as its right to evict. The District Court judge agreed, Perhaps the most encouraging aspect to the Court’s granted the motion, and the eviction case was dismissed. opinion is its implicit endorsement of non-waiver provisions, From there, the landlord appealed the decision to the N.C. where lease language can trump the common law waiver Court of Appeals. rule. This arguably sets the stage for more aggressive non-waiver provisions, where the parties could agree to Thankfully, the N.C. Court of Appeals disagreed and accept rent and still maintain all rights to declare a breach reversed the District Court’s decision. However, the and evict – such as the ones found in many standardized decision is more complex than merely winning or losing. leases, including the AANC Lease and NAA Lease. However, Each side – both the pro-landlord side and the pro-tenant the question of whether such strong anti-waiver provisions side – won important battles in the decision, and each are unquestionably enforceable in a residential lease may battle has significant implications for landlords throughout ultimately be another case for a future court to decide. North Carolina, particularly subsidized housing providers. The decision has pros and cons for landlords in North PART 2 OF THE N.C. COURT OF APPEALS DECISION: Carolina, as we will discuss, below. THE BAD NEWS – SUBSIDY PAYMENTS CAN BE CONSIDERED “RENT”…BUT THERE IS A SILVER LINING PART 1 OF THE N.C. COURT OF APPEALS DECISION: THE GOOD NEWS – THE LEASE’S “NON-WAIVER” CLAUSE In several other states, courts have ruled that rental subsidy payments are not to be considered rent for the purposes The concept of waiver has a long history in North Carolina. of waiving the right to evict. It was generally assumed the The precedent case of Winder v. Martin, 183 N.C. 410, 111 same rule would apply in North Carolina. Unfortunately, the S.E. 708 (1922), states that a landlord who has knowledge Gregory court found otherwise – or as the Court stated: of a breach of a lease for which there is a right to re-enter “We conclude that rent assistance payments . . . do, in fact, and re-take possession of the premises, waives the breach constitute rent for the purposes of the common law waiver and the right to evict by later accepting a rental payment. rule.” Though the Court declined to rule whether Section In the Gregory case, Legal Aid argued for the expansion 8 payments specifically constituted rent for purposes of of the Winder v. Martin rule (let’s call it the “common law the common law waiver rule (“We express no opinion as waiver rule”), where acceptance of rent would waive each to whether rent assistance payments made in connection and every warning of a breach and remove them as a with the Section 8 program constitute rent for purposes “good cause” basis to non-renew the lease. Essentially, of the common law waiver rule”), the Court’s logic and the prior violations of the lease would be somehow erased analysis as to how subsidy payments constitute rent sets from existence through the acceptance of subsequent rent the stage for a future case to decide that issue as well. payments and subsidies, and those violations could never Thus, it may be prudent for landlords who accept subsidies be considered again. of any kind to consider them as rent moving forward and to adjust their policies accordingly. The Court disagreed, noting the differences between the common law waiver rule and the landlord’s lease in the As such, this decision has broad implications for all Gregory case. The Court stated that the landlord had not landlords in North Carolina who own or manage subsidized waived its right to non-renew the lease until (1) it became communities – whether they participate in Section 8, entitled to evict the tenant or non-renew the lease and (2) public housing, or some sort of subsidized public-private it then afterwards accepted a rental payment. Also, even if partnership or development grant program. The bottom line the landlord was entitled to evict, the “non-waiver” provision is that landlords who accept a subsidy payment arguably of the lease trumped the common law waiver rule, since the waive all breaches of lease that the landlord knew about lease clearly stated that “the failure or omission of landlord prior to cashing the check. This could be a particularly to terminate this lease for any cause given above shall not painful principle for subsidized landlords, since the rental destroy the right of the landlord to do so later for similar or assistance payments are usually in the form of one single other causes.” Based on this language, the Court believed check for the entire community, not unit by unit. In the AANC NEWS Page 6 Gregory case, Legal Aid essentially stood for the position THE BOTTOM LINE that a landlord would need to reject the entire single check in order to preserve its right to evict a single tenant. Had The one constant to the law is, ironically, change. Though Legal Aid’s argument been upheld, it would have rendered many of us often look to the legislature or executive evictions of subsidized tenants all but impossible – or at branch for such change to occur, it can also happen via the very least, financially impractical. the courts as well. Keeping up with important decisions such as Woodridge Homes v. Gregory is but one example. Fortunately, the Court disagreed with this interpretation Admittedly, this article is very heavy with the legal analysis based on the good faith action of the landlord to place and principles, but the landlord and manager who takes the evicted tenant’s portion of the subsidy payment into the time to learn them, to master them, and to adopt new an escrow account pending the outcome of the eviction policies based on them, will find themselves ahead of lawsuit. The Court found that there did not exist a particular their peers and better prepared for the eviction cases yet way to return the monies to the issuing government to come. authority, and as such, the landlord did the best thing it could by placing the funds in an escrow account. Given About the Author this set of facts, the Court could not find that the landlord AANC Board member William K. Brownlee is the waived its rights by cashing the single subsidy check. owner of Brownlee Law Firm, PLLC, a six-attor- ney law firm with offices in Raleigh and Char- This, in essence, is the silver lining – as the Court created a lotte, N.C. He graduated from The Citadel with legal roadmap for North Carolina subsidized landlords who honors in 1993 and from North Carolina Cen- need to evict a tenant. It works simply like this: the moment tral School of Law in 1999. Mr. Brownlee and you send a notice to a tenant of an eviction-worthy breach his firm have broad experience in the area of landlord-tenant or non-renewal, you must find a way to either (1) return the law, representing clients throughout the state in various mat- evicted tenant’s portion of the subsidy to the governmental ters ranging from lease interpretation and guidance to appear- authority issuing it or (2) if that is not possible (it probably ances in thousands of summary ejectment cases per year. Mr. will not be), then open an escrow account with your bank Brownlee has authored the most recent editions of both the with instructions that the portion of the subsidy monies AANC Lease Agreement and the AANC Legal Handbook. are not to be disbursed to you until: (i) the tenant has vacated the unit; or (ii) the eviction lawsuit is completely finished (including all appeals); or (iii) you have lost the eviction (if you lose, you are still owed the money since the tenant was likely in possession the entire time – and waiver is a moot point). Arguably, there is no need to open up a separate escrow account per eviction; instead, you could open up a third bank account (in addition to your operating and trust accounts) and simply call it “Eviction Escrow Account” or a similar name, and then deposit in the Escrow Account all future payments of the tenant’s portion of the subsidy checks received after you notify the tenant of a breach. By using this method, it may be possible – per the Gregory case – to keep the subsidy funds and still evict the tenant without creating a waiver defense issue.
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