Bricklemyer Smolker & Bolves, p.a.

“Property rights. Every American citizen values these rights and regards their protection as a basic premise upon which our constitutional democracy is founded.”

PRIVATE ASSESSMENT OF MULTI-FAMILY RENTAL PROJECTS

"Devil in the Details"

Developers and operators of apartment projects will often find themselves acquiring land and/or projects in a planned unit development ("PUD"). Whether the PUD is residential or commercial, multi-family housing rarely fits into either category. This often manifests itself in inequalities in the assessment mechanism. That is, most PUDs have associations of some sort which assess the property owners based upon common area improvements within the project. The multi-family developer must look carefully at how assessments are applied to it and determine whether they are equitable and thereby be recovered in the rents charged.

Too often, the multi-family project bears a disproportionate burden of the expenses in that formulas for assessments do not take the multi-family projects into account. For example, assessments may be made on a per capita basis, per dwelling unit, per lot, per front footage, or dwelling area. In each instance the assessments will come out differently. The assessment analysis must then be compared to what services the association is providing and the benefit those services may or may not have on the multi-family project. For example, there may be nature areas or recreational amenities which are not located near the multi-family project and therefore of very limited value to it. Yet, the project may be paying the same amount as other land uses within the project.

These issues should be addressed during due diligence. The documentation regarding assessments, however, may be in any number of places - restrictive covenants, bylaws, resolutions and the like. Of equal importance is the nature of the homeowner association imposing the assessments. Is it developer controlled and for how long? Is it adequately funded or are special assessments on the horizon? Can the documents be easily amended, or too easily amended? Many of these things can be negotiated and the financial impact mitigated where the investigation is thorough and a sound negotiating strategy in place.

Note: The complete article from which this ALERT is taken was written by Douglas C. Roland and is available on request.