Category: Real Estate Litigation

Langley: Important New Personal Injury Case

Langley v. MP Spring Lake, LLC, A18A0193 (May 1, 2018), just issued by the Georgia Court of Appeals, may have a big impact on many future Georgia personal injury cases. Langley involves a residential landlord-tenant relationship in which a tenant sued her landlord for injuries more than a year after the injuries occurred. Normally, in Georgia, an injured party has two years to file a personal injury lawsuit. However, in this case, the landlord moved to dismiss the case because the lease provided only one year to sue the landlord.  This is the exact language in the lease:

Limitation on Actions. To the extent allowed by law, Resident also agrees and understands that any legal action against Management or Owner must be instituted within one year of the date any claim or cause of action arises and that any action filed after one year from such date shall be time barred as a matter of law.

Focusing on the word any, the Court of Appeals ruled that any legal action included not only breach of contract claims but also personal injury claims. Thus, the lease trumped Georgia’s statute of limitations. The Court reasoned that parties should be free to enter into contracts without interference from the courts.

At Gomez & Golomb, we practice personal injury and real estate litigation. Thus, for us, Langley cuts both ways. It’s bad for our personal injury clients, but good for our real estate and corporate clients. From now on, in personal injury cases, we will be looking even more closely at applicable contracts for language that may limit injury claims. For our real estate and corporate clients, we will be advising them that Langley opens the door to include terms in their contracts that limit liability.

Georgia Tax Deed Purchasers Are Responsible for Paying Association Dues

Under Georgia law, a tax deed purchaser is obligated to pay homeowners’ association assessments that come due after the tax sale. See Croft v. Fairfield Plantation Property Owners Assn., 276 Ga. App. 311, 314 (2005). This includes the period before the purchaser can foreclose on the right of redemption. Georgia courts have held that a tax deed purchaser acquires sufficient title to trigger automatic membership in the association. The rationale is that assessments and fees paid to a homeowners’ associations benefit a tax deed purchaser.

The good news for tax deed holders is that Georgia courts allow tax deed holders to include condominium association assessments paid as part of the redemption price. Harvest Assets, LLC v. Northlake Manor Condo. Assn., 340 Ga. App. 237 (2017).

Georgia Tax Deeds: Excess Tax-Sale Funds and Super Liens

There was an important shift in Georgia tax deed law last year. The Georgia Supreme Court, in DLT List, LLC vs. M7even, 301 Ga. 131 (2017), decided that a party who redeems a tax deed is not automatically first in line to receive excess tax-sale funds following a tax sale.

The facts of DLT List are straightforward: a property was auctioned at a tax sale and sold for $110,000. The delinquent taxes were $5,000, so there were $105,000 in excess tax-sale funds. The delinquent taxpayer applied to the tax commissioner to receive the excess funds–there were no other claims to the funds. Several months later, a third-party, who held a lien against another property owned by the delinquent taxpayer, redeemed. The redeeming party applied for the excess tax-sale funds. The question became who was entitled to the excess tax-sale proceeds.

Under existing law in Georgia, a redeeming party, simply by virtue of redeeming, is entitled to first position against excess tax-sale funds. This arose out of an often-cited case, National Tax Funding vs. Harpagon, 277 Ga. 41 (2003), which involved competing lien holders in the context of a tax sale. Harpagon held that following a tax sale, a competing lien holder had two choices: (1) claim the excess tax-sale funds, or (2) redeem the property. Importantly, if a competing lien holder chose to redeem, the redemption converted the competing lien holder’s claim into a first-position lien against the property. This is known as a “super lien” and allows a redeeming party to leapfrog over higher priority creditors. A super lien has many benefits for tax sale investors.

Redeeming parties, relying on the super lien language in Harpagon, began claiming their super lien status not only gave them a first-position lien against the property, but also entitled them to the excess tax-sale funds following redemption. These claims were affirmed by the courts in cases like Wester v. United Capital Financial of Atlanta, LLC, 282 Ga. App. 392 (2006).

Fast forward to 2017.  In DLT List, LLC vs. M7even, the Georgia Supreme Court revisited the issue of excess tax-sale funds and found that super liens attach only to real estate, not to personal property. Therefore, because excess tax-sale funds are personal property, super liens don’t attach to excess tax-sale funds. Thus, redeeming parties aren’t entitled to any preference with regard to excess tax-sale funds. By so deciding, the Supreme Court distinguished Harpagon and overruled cases like Wester.

While this ruling isn’t likely to slow down the tax deed business in Georgia, as a real estate investor, it’s something to be aware of.

Bankruptcy: repeat filings

A question we get frequently, especially after a debtor files a second or third bankruptcy as a delay strategy, is just how many times can a debtor get away with filing for bankruptcy? We refer to these folks, not so affectionately, as “serial filers.” While not perfect, there are some restrictions for debtors filing multiple bankruptcies:

180 days: A debtor can’t file a second bankruptcy case for 180 days if the debtor’s case was dismissed (i.e., the bankruptcy wasn’t completed) for the following reasons: (1) by the court for willful failure of the debtor to abide by orders of the court, or to appear before the court in proper prosecution of the case; or (2) the debtor requested and obtained the voluntary dismissal of the case following the filing of a request for relief from the automatic stay.

Two bankruptcies in one year: When a debtor files a second bankruptcy within one year of the dismissal of the first case, the automatic stay expires 30 days after filing (11 U.S.C. § 362(c)(3)). There’s one exception, which is if the debtor can prove to the court that the second case was filed in good faith (meaning the debtor didn’t file repeatedly to delay collection by a creditor), the court has discretion to extend the automatic stay.

Three bankruptcies in one year: When a debtor files a third bankruptcy within one year of the dismissal of the first case, the automatic stay doesn’t take effect at all upon the third filing (11 U.S.C. § 362(c)(4)).

After successful completion of a bankruptcy (i.e., a discharge): For a Chapter 7 bankruptcy, a debtor is not eligible for a discharge if the debtor received a discharge in another Chapter 7 filed within the prior eight years, or in a Chapter 13 case filed in the prior six years (unless the prior Chapter 13 payment plan either paid 100% of the unsecured claims or paid 70% of the unsecured claims). For a Chapter 13 bankruptcy, a debtor is not eligible for a discharge if the debtor received a discharge in another Chapter 13 case filed in the prior two years, or in a Chapter 7 case filed in the prior four years.

Miscellaneous note: The one-year period for either termination or non-application of the stay begins to run from the date of dismissal of the first case. In a joint case, if only one of the debtors had a prior case dismissed in the year before filing, the automatic stay is affected only as to the debtor with the prior case. Section 362(c) (3) and (4) apply to the acts of a specific debtor rather than joint debtors in the aggregate.

Please call us if you need clarification or have any questions.

Interesting Homeowners’ Association Dispute

For Georgia real estate litigation nerds, a recent case issued by the Georgia Court of Appeals provides interesting reading. The case, Great Water Lanier, LLC v. Summer Crest at Four Seasons on Lanier Homeowners Association, Inc., A17A1810 (January 2, 2018), involves a convoluted dispute between an investor and a homeowners’ association (HOA). At issue were whether a property was subject to an HOA. The owner of the property asked a court in Hall County to find that the parcel was not subject to the HOA, while the HOA requested the opposite and asked that the property owner pay HOA dues.

The Court of Appeals recited well-settled Georgia law that a person that purchases property is bound by terms in the deed that conveys the property (whether the buyer likes it or not).

The warranty deed in question referred to the HOA, but did so in an arguably ambiguous way. In addition, there were documents signed by the parties that showed the property was not intended to be a part of the HOA. After applying the rules of contract construction to the warranty deed, the Court of Appeals determined the language was not ambiguous, and therefore the language referencing the HOA in the warranty deed controlled over any other documents.

The takeaway is to carefully examine the warranty deed and all other documents when purchasing property.