Wyatt Real Estate & Construction Law

Wyatt, Tarrant & Combs, LLP

A deal is a deal…

In a decision announced last week, the Kentucky Supreme Court affirmed the validity of assignments of developer rights in subdivisions. The case, Your Community Bank, Inc. v. Woodlawn Springs Homeowners Association, Inc., concerned whether our client, Your Community Bank, could enjoy the rights of the developer under the subdivision’s declaration of covenants, conditions and restrictions. Your Community Bank stepped into the developer’s shoes when it accepted an assignment of developer’s rights from the developer’s estate and a deed to several lots in lieu of foreclosing on the subdivision. The original developer exempted itself from paying annual lot dues to the homeowners association until a home was built on a given lot. When the homeowners association asserted a lien for unpaid lot dues on vacant lots, Your Community Bank asserted that it had ALL the rights and responsibilities of the original developer, including the exemption.

The Nelson Circuit Court agreed but the Court of Appeals reversed. Your Community Bank appealed, and the Kentucky Bankers Association found the case compelling enough to file a friend of the court brief. The Kentucky Supreme Court found that the assignment of developer’s rights was valid and that Your Community Bank did not need to pay lot dues until a home was built on a given lot.

Although the case contains little sweeping language, the holding is important for banks and developers alike. If the Court of Appeals opinion had been left in place, banks and successor developers would have had no idea what development rights could or couldn’t be assigned, stalling redevelopment of unfinished projects throughout Kentucky.  With this opinion, the Kentucky Supreme Court reasserted that a deal is a deal.

Cliff Ashburner, Louisville

Indiana takes a balanced approach to Home Improvement Contract Act

On November 14, 2014, the Indiana Court of Appeals issued a well-reasoned opinion in Timothy W. Paul v. Stone Artisans, Ltd., 29A04-1406-PL-258, that reduces the potential harshness of Indiana’s Home Improvement Contract Act (“HICA”). The HICA was enacted in response to what the courts have referred to as “well-known abuses found in the home improvement industry.” It requires a home improvement contract to contain nine specific elements. The contract at issue contained all but two of these elements: the approximate starting and completion dates of the home improvements and the printed name of the consumer below their signature. Under a strict reading of the HICA, these omissions are considered “deceptive acts” making the contract voidable and opening the contractor to damages.

In this case, even though the homeowner received the benefit of the home improvements and did not complain of the workmanship, he nevertheless attempted to void the contract based upon the omissions and violation of the HICA. The Court reasoned that “the public policy underlying HICA is to protect consumers when making home improvement contracts . . . and not enforcing the contract would do little to further the policy” behind the HICA. The Court held that trial courts must apply a “balancing approach and examine certain factors to determine if the contract violates public policy,” including (1) the subject matter of the contract, (2) the strength of the public policy, (3) the likelihood that the action requested will further that policy, (4) the seriousness of the forfeiture to be suffered by the party seeking enforcement of the bargain, and (5) the parties’ relative bargaining power and freedom to contract. The Court agreed with the trial court that despite “any deficiencies in the contract, [the homeowner] received the benefit of [contractor’s] services and was fully aware of all the terms of” the relationship with the contractor; therefore, upholding the validity of the contract did not violate the public policy behind the HICA.

The full text of the opinion can be found here.

Jason Lopp, New Albany

Mississippi – Construction Lien Rights Expanded

LienFor many years, Mississippi was part of a small minority of states that did not allow construction liens on property unless the lienor had a direct contract with the property owner or the owner’s agent. The Mississippi legislature recently abolished the old one–tiered construction lien approach and adopted provisions which allow second-tier subcontractors and suppliers, as well as prime contractors, to file construction liens on non-residential private projects. The new lien structure will undoubtedly have an impact on all parties involved in a project, from contractors to owners to project lenders.

While the number of parties that can file a lien has grown substantially, including now subcontractors and suppliers, as well as architects, engineers and land surveyors, there are strict limitations on when and how liens are filed.

  1. To have lien rights, both the first-tier and second-tier lienor must be properly licensed in Mississippi.
  2. Liens must be filed in the chancery clerk’s office where the property is located within 90 days following the lienor’s last work/services performed or materials furnished.
  3. Filed liens must substantially comply with Mississippi statutory format.
  4. Second-tier lienors must provide “pre-notice” within thirty days after the first delivery of labor, services or material.
  5. Lienors must mail a copy of a filed lien to the owner and contractor, if applicable, or their registered agents, within two business days after the lien is filed.
  6. Lienors must be in “substantial compliance” with their contract, subcontract or purchase order.

The timing of actions for payment and rights to ‘bond off” claims have also been impacted by the new legislation. Check back with The Dirt for more information as the new Mississippi lien regime is put into practice.

- Julie Sneed Herlihy, Jackson, MS

TIMING IS EVERYTHING: What a remote contractor (subcontractor) should know about notice and timing requirements under Tennessee’s Mechanics’ and Materialmen’s Liens Statute

clockThe notice and timing requirements contained in Tennessee’s Mechanics’ and Materialmen’s Liens statute Tenn. Code Ann. § 66-11-101 et seq. can prove fatal to the lien rights of an unwary lien claimant, especially a remote contractor, laborer or supplier. Tennessee’s lien statute imposes different requirements for a party that is not in direct contractual privity with an owner to obtain a lien. In particular, the lien statute requires that a remote contractor provide two types of notices in a particular time frame in order to obtain a mechanics’ lien: (1) Notice of Nonpayment; and (2) Notice of Lien.

Tenn. Code Ann. § 66-11-145 requires that a remote contractor provide a Notice of Nonpayment to the owner and prime contractor as a condition precedent to obtaining a lien. A Notice of Nonpayment stating that the subject account is unpaid must be delivered to the owner and prime contractor within 90 days of the last day of each month within which the remote contractor performed the work, not the date the bill goes out. The Notice of Nonpayment must be specific, too. The Notice should include: (1) name of Continue reading

The Zoning Campaign: Part 2

(Editor’s Note:  This is part 2 of a 2 part entry on zoning issues written from a Tennessee perspective. Wyatt has lawyers with zoning expertise in Indiana, Kentucky, Tennessee and Mississippi.)

“All politics is local”: Get to Know the Decision Makers

Familiarize yourself with the form and structure of the municipal government where you are seeking rezoning. Learn who the key decision makers are and make an effort to meet them if possible. If there is a local economic development official or board, get them behind your project as early as possible. Research the members of the planning commission and the board of zoning appeals. These people control your destiny. Reach out to the individual planning commissioners and elected officials to set up meetings with them individually before the official city meetings take place. Tell them about your plans to obtain a rezoning of the subject property and ask them for their thoughts. Follow up with hand-written individual thank-you notes after the meeting, addressing their specific comments. Do not underestimate the power of a one-on-one, face-to-face meeting. If you have a commercial project in mind, provide the city officials with a copy of your site plan and any supporting materials at the meetings.

Know thy Neighbors

Understand how a rezoning would affect those who live and work nearby the subject property. You will likely be required to notify all individuals owning property in the surrounding area of your rezoning plans, so take the time to talk to these individuals if they show up at the planning commission or other city meetings. Consider holding neighborhood meetings to Continue reading

The Zoning Campaign

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(Editor’s Note: This is part one of a two part look at zoning from Wyatt’s Nashville office. Though written from a Tennessee perspective, many of the tips are applicable across Wyatt’s offices in Indiana, Kentucky, Tennessee and Mississippi.)

When attempting to rezone property, it is important to become acquainted with your surroundings. An effort to rezone a piece of property is, in many ways, like a political campaign, requiring equal amounts of field work, research, public relations and addressing constituent concerns. What follows are five important tips for getting property rezoned for commercial development.

Get to Know the Geography

Before doing anything else, get to know the land. If the subject property is located within a city or county in which you are unfamiliar, drive there and spend some time exploring. If you know someone who lives in the area of the subject property, ask them to show you around the area in an effort to understand how the particular parcel fits in with the surrounding community. For example, if you are attempting to rezone a vacant lot from residential to commercial, and the subject lot is surrounded by other residential zones, understand how a potential commercial rezoning might impact the area and if the location makes sense for the goals you are trying to accomplish with your project. Understanding the “lay of the land” is critical.

Brush up on the History

Has the subject property been rezoned in the past? Has someone applied for a rezoning of the subject property in the past? Did the rezoning attempt pass or was it denied? If it was denied, what were the reasons for the denial? Contacting local zoning officials and requesting minutes, notes, tapes, records, etc. from prior attempted rezonings for the subject property will prove invaluable. If someone else has already encountered the challenges related to rezoning for the particular property, learn from those challenges before you launch you campaign.

- Mary Lauren Teague, Nashville


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