Why Real Estate Lawyers Are Essential in Property Transactions
Buying or selling property is one of the biggest financial decisions most people make in their lifetime. While real estate agents play a crucial role in connecting buyers and sellers, it is the real estate lawyer who ensures that the transaction is legally sound from start to finish. From reviewing contracts to resolving disputes, these […]
Affordable Housing Coalition Says Texas Law Violates State Constitution
The Texas Workforce Housing Coalition (TWHC) is challenging the constitutionality of recently enacted House Bill 21 (HB21) in a lawsuit filed against the Bexar Appraisal District. The petition, filed on September 9, 2025, along with co-plaintiff Post WB Apartments, LLC, says the new bill will not only aggravate the affordable housing crisis in Texas, but also have a chilling effect on continued investment in Texas.
According to Gibson Dunn & Crutcher Partner Trey Cox, lead attorney in the case, “The unconstitutional implementation of HB21 is nothing less than the breakdown of the rule of law in Texas. Worse yet, the teachers, nurses, first responders, and other essential workers who currently benefit from affordable housing will be the ones hurt most as they will likely be forced to move from their homes when affordable housing units across the State begin to evaporate.”
Supporters of HB21 cast the new law as an overdue update of Chapter 394 of the Texas Local Government Code that regulates the operation of housing finance corporations (HFCs) throughout Texas. HFCs are non-profit financial instrumentalities established by individual municipalities in Texas to help meet affordable housing needs throughout the state, usually through partnerships with private industry. Typically, developers who partner with an HFC on a housing development project in Texas receive a full property tax exemption in return for renting to low- or moderate-income Texans upon the project’s completion.
The old Chapter 394 placed no restrictions on where within the state of Texas these HFCs could operate. This has led to tensions between HFCs and local appraisal districts in situations where an outside HFC approves a project within the local appraisal district’s borders, and in effect reduces that district’s property tax rolls without local involvement or consent. The new rules purport to close this “loophole” by adding geographic limitations and mandating that, for developments outside of an HFC’s municipal boundaries, the local appraisal district in which the project is located needs to agree to any property tax exemptions.
Remarkably, the new Chapter 394 necessitates that HFCs must gain the retroactive consent of appraisal districts on outside projects, even for contracts completed before HB21 was signed into law. The new rules will unilaterally terminate property tax exemptions that were legally extended by HFCs for affordable housing developments in years past that lacked local consent.
Cox highlights that “The State of Texas lured billions of dollars worth of investments from real estate developers to build affordable housing for working-class Texans with the promise of favorable tax treatment, only to now pull the rug out from under those developers.” The plaintiffs assert that these retroactive changes undermine existing contracts in violation of the Texas Constitution.
Another perspective the lawsuit seeks to address is how these reforms to the old Chapter 394 will worsen a growing housing crisis in the state. Texas is feeling the impact of rapid population growth, as major companies across the US continue to relocate to Texas. North Texas has grown by over half a million since 2020 and the severe shortage of affordable housing stock in many cities tops the nation. This increasing short supply of affordable housing puts upward market pressure on rents in the state. As existing property tax exemptions are nullified under the new law, rents on existing apartment units will need to rise further to cover increased costs associated with the underlying loss of property tax exemptions, further exacerbating the challenges of a tight housing market.
The TWHC release concludes with a warning “that if the laws of the State of Texas can be changed at any time and applied retroactively to already closed deals, destroying the contracts and the economics of those deals, it will have a catastrophic chilling effect on investment in the State,” as well as a devastating impact on affordable housing in Texas.
Eight Essential Steps to Minimize Environmental Liabilities in Industrial Property Transactions
Industrial property transfers are drawing renewed interest from both domestic and foreign investors. These assets can be attractive, but US environmental law imposes strict, often joint and several, liabilities that can create significant risk for buyers.
The current regulatory landscape, including the US Environmental Protection Agency’s (EPA) recent designation of perfluorooctanoic acid (PFOA) and perfluorooctaneusulfonic acid (PFOS) as hazardous substances under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), has heightened disclosure and liability stakes. This designation is subject to ongoing litigation, adding further uncertainty. In this environment, successful transactions depend on rigorous environmental diligence, clear allocation of responsibility among buyers, sellers, and insurers, and deal structures that anticipate regulatory change. When executed properly, these strategies enable deals to close on time, at a price that accounts for quantified environmental costs, and with clearly defined accountability for remediation.
This article outlines eight steps industrial property purchasers can take to mitigate uncertainty.
Where financial considerations permit, buyers should purchase a company’s assets, and not corporate stock. In an asset purchase, it is easier to allocate liabilities between the buyer and seller so that environmental liabilities are not unwittingly assumed.
Diligence should satisfy ASTM E1527‑21 and the All Appropriate Inquiries rule to preserve defenses and support underwriting, with particular attention to per- and polyfluoroalkyl substances (PFAS) pathways and vapor intrusion.
Negotiating win‑wins often requires understanding the costs associated with known contamination and the risks associated with data gaps.
Risk mitigation should be understood in layers, combining indemnities, escrows, and to the extent it is available, fit‑for‑purpose environmental insurance with state program tools like no‑further‑action letters.
Early, structured engagement with regulators can de‑risk timelines and improve remedy optionality.
Post‑closing value creation depends on deliberate execution of continuing obligations, access rights, and institutional control maintenance.
Evolving PFAS rules now change the liability calculus and the diligence scope, even as courts review EPA’s 2024 designations.
Deal teams should assume the unexpected and bake in mechanisms to equitably share novel regulatory shocks.
Deal Structure and the Corporate Baseline
The structure of any transaction is the first and often most effective tool for managing legacy environmental liability. Asset purchases, as opposed to stock purchases, allow buyers to select which liabilities to assume and to ring-fence legacy issues within the seller’s retained entity. Using a single-purpose subsidiary to acquire assets can preserve corporate separateness and limit recourse to the entity where risks reside. Assumption-of-liability clauses can be drafted to exclude pre-closing environmental obligations, with targeted carve-ins for specifically priced items. Indemnities, escrow arrangements, and environmental or representations-and-warranties insurance can provide additional protection. However, under CERCLA and state law, successor liability may still attach if the transaction is deemed a de facto merger, mere continuation, or fraudulent transfer. To mitigate this, parties should maintain corporate formalities, ensure adequate capitalization, and avoid hallmarks of continuity.
For real estate, structuring ownership through a property-holding company that leases to the operating company can further isolate site risk, while embedding environmental covenants and access rights. Early planning for permit transfers or reissuance, and clear allocation of compliance and corrective-action duties through environmental management agreements, are often essential. These measures reduce tail risk and provide both parties with clarity on retained and transferred liabilities.
Setting a Legal and Technical Baseline
Diligence is the next critical step in managing environmental risk. Under CERCLA, buyers can potentially limit their liability by complying with the “All Appropriate Inquiries” (AAI) rule, which is the statutory framework for landowner liability protections. EPA now recognizes ASTM E1527-21 as the operative standard for Phase I Environmental Site Assessments (ESAs), with the previous standard retired as of February 2024. AAI defenses are highly process- and timing-dependent. The 180-day shelf life for a Phase I ESA runs from the earliest completed critical task, not the report date, and the assessment expires after one year regardless of updates. If a deal timeline slips, interviews, lien searches, regulatory records, and the site visit often must be refreshed, along with the environmental professional’s certification. Failure to meet these requirements can jeopardize liability defenses.
ASTM E1527-21 also requires environmental professionals to document significant data gaps, expand historical research for both the subject and adjoining parcels, and clearly distinguish among Recognized Environmental Conditions (RECs), Historical RECs, and Controlled RECs. Buyers should require site mapping and photo documentation tied to RECs. This documentation supports price adjustments, lender reliance, and enforceable post-closing obligations.
To qualify for the Bona Fide Prospective Purchaser defense under CERCLA, buyers must go beyond a compliant Phase I ESA. They must exercise appropriate care after closing, comply with institutional controls and land-use restrictions, cooperate with response actions, and avoid affiliations with liable parties that could defeat the defense. Counsel should translate these continuing obligations into operational playbooks, access agreements, and funding mechanisms, ensuring that defense eligibility is maintained throughout ownership, not just at closing.
PFAS, Regulatory Uncertainty, and Closure
The regulatory landscape for PFAS has shifted significantly. In July 2024, EPA designated PFOA and PFOS as hazardous substances under CERCLA. This triggers immediate reporting obligations for releases at or above one pound in a 24-hour period and allows the government to pursue cost recovery for response actions. EPA has indicated it will exercise enforcement discretion, focusing on manufacturers and industrial contributors rather than municipal utilities. However, this policy is not a liability waiver and could change.
For deal teams, these changes have immediate and practical implications. Phase I ESAs must now evaluate PFOA and PFOS as in-scope hazardous substances to comply with AAI. Many transactions will require PFAS screening as part of Phase II sampling, especially where known pathways exist, such as firefighting foam at manufacturing facilities or airports, plating and etching lines, paper and textile operations, or landfills and leachate. Counsel should anticipate both reporting and remediation obligations and ensure these are reflected in deal pricing. However, EPA appears to be continuing to reevaluate some aspects of the 2024 listing, creating uncertainty. Buyers can often address contingent risk from broader PFAS designations or stricter cleanup criteria by expanding the scope of defined terms and representations and warranties, or by including targeted reopener provisions or conditional escrows.
PFAS issues also complicate waste permitting. Guidance for destruction and disposal is evolving, analytical methods are expanding, and Clean Water Act programs are beginning to incorporate PFAS monitoring and limits. Consultants should map regulatory touchpoints across air, water, waste, and product stewardship to ensure buyers understand the full lifecycle obligations for both legacy releases and ongoing operations.
Translating Consultant Findings into Deal Language
Negotiating a win-win transaction requires converting environmental findings into agreed economics, controls, and decision rights. This process often begins with credible cost modeling. Consultants can provide order-of-magnitude estimates for investigation, interim measures, and likely remedies, accounting for the possibility of future regulatory tightening. For example, chlorinated solvent plumes that create vapor intrusion risks may require both immediate mitigation and long-term monitoring, while soils with polychlorinated biphenyls (PCB) or metals under pavement may be managed with caps and institutional controls.
Contract documents must be crafted to perform under real-world conditions. Sellers will often seek to limit indemnities to known conditions and include survival periods, caps, baskets, and exclusive remedy clauses that reflect the likelihood and scale of claims. Access and cooperation covenants should specify sampling rights, chain-of-custody, split-sample protocols, and designate the owner or operator of record for response actions to avoid CERCLA operator exposure. Where risk-based closures are anticipated, contracts should provide a clear reference to the documentation of institutional control obligations, engineering control operation and maintenance plans, and any five-year review commitments.
Price adjustment mechanisms can bridge valuation gaps when data is incomplete. Closing price reductions may be paired with contingent value rights or earn-outs tied to regulatory milestones, aligning incentives to expedite cleanup. In distressed or carve-out transactions, seller financing combined with environmental reserves can enable deals to close that might otherwise stall due to remediation cost uncertainty.
Layered Risk Transfer
No single tool eliminates environmental risk. Often, a layered approach should be used to address different exposures.
Indemnities and escrows are often foundational. Escrow releases should be tied to objective milestones, such as regulator-approved work plans, completion reports, or issuance of no-further-action determinations. Where regulatory uncertainty is high, parties can set aside conditional tranches to address future standards with sunset dates that reflect realistic agency timelines.
Environmental insurance can be a valuable supplement when structured appropriately in rare cases. At least theoretically, pollution legal liability policies can backstop unknown pre-existing conditions and third-party claims, and specifically crafted endorsements may address PFAS where underwriters are willing. Relying solely on representations and warranties insurance may be insufficient for some environmental matters, as representation and warranties insurance often excludes or severely limits pollution coverage. When buyers require budget certainty for a defined remedial program, fixed-price remediation contracts — sometimes paired with financial assurance — can be effective, though legacy insurance purporting to cap future environmental costs remains difficult to secure in practice.
State voluntary cleanup and brownfield programs can provide durable value. Counsel can guide sites through these programs to obtain covenants not to sue, no-further-remediation letters, or liability assurances. While these assurances are not binding on the federal government, they carry significant weight with lenders and future buyers and often serve as the basis for institutional controls. Where CERCLA risk is significant, prospective purchaser agreements or comfort letters with EPA or state agencies can align expectations for response actions and facilitate redevelopment.
Common Transactional Risk-Allocation Tools
Tool
What It Does
When It Works Best
Pitfalls
Indemnity with escrow
Allocates known or unknown liabilities; funds set aside for claims
Known impacts with modeled ranges; credible regulator path
Vague triggers; underfunded escrow
Pollution legal liability insurance
Backstops unknown pre‑existing and third‑party claims
Sites with residual uncertainty; lender comfort
PFAS exclusions; claims handling; retention levels
Fixed‑price remediation
Cost certainty for a defined scope
Well‑scoped remedies; mature data
Change‑order risk; scope creep; contractor credit
State brownfields program
Liability assurance; regulatory endpoint
Redevelopment with risk‑based closure
Federal reopener risk; IC/EC O&M obligations
Prospective purchaser agreement
Government alignment on response and liability
High‑profile CERCLA risk or NPL adjacency
Time to negotiate; limited scope; not a blanket shield
PFAS coverage remains evolving, and manuscript terms matter. IC/EC refers to institutional and engineering controls.
Regulator Strategy as Deal Strategy
Engagement with regulators should be considered as part of a proactive element of deal strategy, not an afterthought. Buyers and sellers can jointly approach agencies with a concise site history, a conceptual site model, and a proposed path to closure. However, such an approach rarely aligns with the transaction timeline. Where data gaps are material, pre-signing access agreements can enable targeted Phase II work, reducing the risk of post-signing surprises. For properties under administrative orders or subject to five-year reviews, counsel should analyze reopener provisions and, in consultation with regulators, assess whether selected remedies remain protective in light of new contaminants or updated guidance.
The evolving PFAS regulatory landscape makes alignment with regulators even more critical. The designation of PFOA and PFOS under CERCLA triggers release reporting and potential response obligations. Parties should agree on a coordinated reporting strategy before signing and ensure that disclosures are accurate. While EPA’s current enforcement discretion focuses on parties whose past practices were believed to have significantly affected the environment, this is not a liability waiver in perpetuity and may change. Proactive engagement can help shape reasonable, phased responses and reduce the risk of unexpected regulatory directives.
Post-Closing Implementation
Execution after closing is often underestimated, but it is critical to preserving value and managing risk. Buyers should implement environmental management systems that track institutional controls, maintain engineering controls, and conduct periodic audits. Access rights must be operationalized with clear notice procedures, safety protocols, and community messaging to avoid conflicts during site work. Vapor intrusion mitigation systems require ongoing service plans and tenant communication. Meticulous recordkeeping is essential, as it supports eligibility for liability defenses and satisfies insurer requirements.
Integration teams must also focus on permits, waste streams, and product lines. Permit transfers and modifications can be complicated by PFAS or other emerging contaminants as National Pollutant Discharge Elimination Systems and pretreatment programs become more stringent. Waste characterization protocols may need updating to reflect new analytical methods. Counsel and consultants should identify these pinch points and recommend corrective actions to avoid enforcement or citizen suits.
Vapor Intrusion, TSCA-PCBs, and State-Level Traps
Vapor intrusion is often a critical issue in industrial portfolios. Chlorinated solvents and petroleum hydrocarbons can create indoor air risks that require mitigation, regardless of soil or groundwater remedies. Sampling plans should account for seasonal variability and ensure that any required mitigation is integrated into operations and lease structures. For multi-tenant assets, standardized lease language and access provisions are necessary to monitor and maintain sub-slab depressurization systems.
PCBs regulated under the Toxic Substances Control Act (TSCA) can complicate due diligence and site closure. PCB bulk product and remediation waste are subject to strict cleanup and disposal requirements, and self-implementing cleanups must adhere to federal thresholds and approvals. Buyers should not assume that risk-based closures under state programs will satisfy TSCA; a TSCA-specific analysis may be essential where legacy electrical equipment, old building materials, or historical spills are present.
State regimes can shape deal contours in ways that federal law does not. For example, New Jersey’s Industrial Site Recovery Act imposes transaction-triggered remediation and certification obligations. Other programs, such as Ohio’s Voluntary Action Program or Illinois’ No Further Remediation letters, offer attractive liability assurances but include ongoing obligations that must be costed and managed. Consultants and counsel should tailor diligence and documentation to the cadence and requirements of the relevant state program, ensuring that regulator expectations — not just federal defenses — are satisfied.
Conclusion
Environmental risk in industrial property transfers must be understood and managed through layered strategies such as targeted indemnities, well-funded escrows, site-specific environmental insurance, and regulatory instruments that provide durable liability assurance. Early, purposeful engagement with regulators and disciplined post-closing execution of continuing obligations can also protect both the transaction and the future owner’s defenses.
Even with these steps, from the perspective of a property buyer, residual uncertainty is unavoidable. Agencies may change standards, remedies can underperform, and new contaminants may emerge. The most successful transactions balance the need for future investment in industrial assets with clear, funded, and enforceable cleanup responsibilities allocated between parties that protect health and the environment.
Homebuyers Privacy Protection Act Signed Into Law, Restricting Trigger Leads
On September 5, the Homebuyers Privacy Protection Act (H.R. 2808) was signed into law. The law amends the Fair Credit Reporting Act to restrict the sale of consumer information generated when borrowers apply for residential mortgage loans.
Under the new framework (previously discussed here), consumer reporting agencies may release a mortgage-related trigger lead only if the recipient makes a firm offer of credit or insurance and qualifies under narrow criteria. Eligible recipients include those with documented consumer authorization, current holders or servicers of the consumer’s mortgage, and depository institutions or credit unions with existing account relationships. The statute takes effect 180 days after enactment and also requires the Comptroller General to study the consumer impact of trigger-lead solicitations delivered by text message, with findings due to Congress within one year.
Putting It Into Practice: With enactment, the Homebuyers Privacy Protection Act moves from a legislative proposal into an operational compliance requirement. Institutions that rely on prescreening must now prepare to meet the narrowed statutory conditions. That means documenting consumer authorizations, limiting data-sharing to only eligible entities, and ensuring all offers remain firm under the Fair Credit Reporting Act. Institutions should begin revising prescreening and lead-management processes now, and continue monitoring the GAO’s mandated study of text-message solicitations for potential future changes.
Discrimination in Places of Public Accommodation an Increased Focus of the Department of Justice
On July 21, 2025, the Department of Justice (DOJ) updated its recent accomplishments, which included a section on enforcing citizens’ rights in a place of public accommodation.1The DOJ noted two such litigations under Title II. The more recent matter, United States v. Fathi Abdulrahim Harara, et al. (Jerusalem Coffee House) (N.D. CA 2025)2 was based on a pattern of discriminating against Jewish patrons based on race and religion. The other, United States v. AWH Orlando Property, LLC, d/b/a DoubleTree by Hilton Hotel Orlando at SeaWorld (M.D. FL 2025.),3 led to a consent decree challenging a discriminatory policy of the hotel against hosting guests of Arab descent.
Disputes over public accommodation discrimination are not uncommon and there have been a number of such private lawsuits in 2025 alleging Title II violations involving religions and races. Some of these public accommodation disputes have involved incidents online in violation of the Americans with Disabilities Act (ADA) compliance for websites. These concerns on public accommodation appear to be a growing item of which businesses should be aware.
Impact of Title II
In contrast to Title VII of the Civil Rights Act of 1964, as amended, which prohibits discrimination in employment based on protected classes including race, color, religion, sex, and national origin, Title II prohibits discrimination in public accommodations based on race, color, religion, or national origin. Title II may be enforced directly by individuals in federal court, or by the DOJ when a pattern of discrimination in public accommodations is alleged. Most states’ antidiscrimination statutes also contain provisions prohibiting discrimination in public accommodations. Places of public accommodation may include hotels, restaurants, movie theaters, concert halls, and sports and other entertainment arenas. An emerging area of law is whether places of public accommodation can include virtual spaces. In connection with this, both private citizens and the DOJ are bringing actions challenging entities that they feel are not providing certain groups access to places of public accommodation.
United States v. Fathi Abdulrahim Harara (Jerusalem Coffee House)
One such place of public accommodation is the Jerusalem Coffee House in Oakland, California. The Jerusalem Coffee House has been sued twice before, both by Jonathan Hirsch – captured on video being asked whether he was a Zionist while wearing a hat displaying a Star of David – and another private citizen, Michael Radice of Los Angeles, who alleged he experienced harassment and intimidation by the owners of the coffee shop for being Jewish and being a Zionist.
According to the DOJ’s June 2025 lawsuit:
Jonathan Hirsch, who was wearing a hat displaying the Star of David, was repeatedly asked by the café’s owners whether he was a Zionist and then asked to leave.
The coffee shop’s exterior wall and menu are decorated with inverted red triangles, a symbol popularized by Hamas.
The coffee shop advertised an event on combatting “normalization” in March 2025, a term used to describe the legitimization of Israel’s right to exist.
The coffee shop released a new menu on October 7, 2024, containing new drinks called the “Sweet Sinwar” and “Iced In Tea Fada.”
The Jerusalem Coffee House filed a motion to dismiss, arguing that the allegations in the complaint of two isolated incidents, even if accepted as true, do not amount to a “pattern or practice” within the meaning of Title II. The DOJ filed its opposition and later the defendants filed their reply, and now the motion is fully briefed. Although the motion to dismiss remains pending, as noted in the DOJ’s opposition, their focus is “about Defendants’ policy and practice of denying service to patrons who are identifiably Jewish.”
United States v. AWH Orlando Property, LLC d/b/a DoubleTree by Hilton Hotel Orlando at SeaWorld
The DOJ entered into a consent order in another case alleging discrimination in public accommodations in violation of Title VII concerning Middle Eastern politics on February 5, 2025. In the case against AWH Orlando Property, the DOJ had alleged that the defendant hotel adopted and implemented a policy against hosting guests of Arab descent in violation of Title II by unilaterally canceling an event that was to be hosted by a nonprofit educational and cultural organization, the Arab America Foundation. The consent order required the defendant to issue a statement to the Arab America Foundation that all guests are welcome at the hotel, establish a written antidiscrimination policy, notify employees of their obligations under the consent decree, provide Title II training, conduct outreach to Arab American groups, and regularly report to the DOJ to demonstrate compliance.
2025 Decisions Addressing Public Accommodation Claims Based on Religion
In connection with private individuals raising concerns on public accommodation in connection with religion, there have been some decisions addressed by the courts in 2025.
For the matter Lopez v. YWCA of Ne. N.Y. (N.D. NY 2025), the plaintiff alleged that the subcontractors the YWCA hired to move her to 121 Park Place destroyed “several valuable religious items that Plaintiff keeps at her door and keeping with her faith, an African-based belief system known as Santeria.” The plaintiff alleged that individuals on behalf of the defendant “minimized these violations” because they did not recognize the plaintiff’s religion as “on par with other major religions, such as Christianity, Islam, Buddhism, etc.” The court held that “[e]ven construed liberally, Plaintiff’s conclusory allegation that Siciliano and Rayne did not recognize Plaintiff’s religion as ‘on par with other major religions’ does not allow a plausible inference of discriminatory intent based on religion.”
With the matter Benshoof v. City of Shoreline (W.D. WA 2025), it was alleged, among other things, that a grocery store’s requirement to wear a mask violated his religious beliefs. The plaintiff identified himself as a “reverend of the Church of the Golden Rule” and alleged that his “firmly held spiritual beliefs proscribe him being coerced to wear a face covering as a condition of entrance to public accommodations including, but not limited to, Central Markets.” The court found that these allegations “do not permit the court to infer that the [masking policy] place[s] a substantial burden on the exercise of his religion.” The court, in dismissing the complaint, noted that the plaintiff “does not identify how or why the tenets of his religion proscribe masks and he fails to describe how [Defendant] T&C’s mask policy placed a substantial burden on the exercise of that religion.”
Growing Concern on Public Accommodation Claims in Cyberspace
While there have been many lawsuits filed asserting that websites are places of public accommodation under the ADA, there are other actions being asserted that address the issue of religion and access to online communities.
In Hasson v. Luminosity Gaming, LLC,4 the plaintiff in his December 2024 lawsuit, later amended on May 15, 2025, claims that an online gaming community is a place of public accommodation, and that banning the plaintiff from participating in the community’s tournaments because of his support for Israel, identification as a citizen of Israel, and self-identification as a Zionist amounts to discrimination based on race, religion, and national origin in violation of Title II and New York civil rights laws. The plaintiff in Hasson claims that other members of the community who espouse anti-Semitic views and commentary have not been banned from the community. Per the August 29, 2025, status report to the court, a proposed second amended complaint is forthcoming, and the parties are anticipating substantive motions. The Hasson suit has raised questions about whether political and religious views are influencing competitive eligibility criteria for professional gaming and, if so, whether this constitutes a violation of Title II and corresponding New York civil rights laws.
A question similar to whether an online gaming community is a place of public accommodation pursuant to Title II was raised in 2022 in Elansari v. Meta, Inc. (3rd Cir. 2024). In that case, the plaintiff alleged that Meta, d/b/a Facebook, discriminated against him in violation of Title II and Pennsylvania state law because he is Muslim when it blocked certain content concerning what he referred to as the Palestine/Israel conflict but was not “blocking and silencing pro-Israel and pro-Jewish organizations advocating violence against Arabs and Muslims.” The defendant filed a motion to dismiss, arguing that the plaintiff failed to state a claim under Title II because it is not a place of public accommodation. The U.S. District Court for the Eastern District of Pennsylvania agreed, granting the defendant’s motion to dismiss. In so ruling, the Elansari court held that (1) Facebook is not a public accommodation under Title II because it is not a physical facility and (2) the plaintiff did not allege that he was denied access to services on Facebook, but merely alleged that some Palestine/Muslim news pages were removed while Israel/Jewish news pages were not. Elansari v. Meta, Inc. (E.D. PA 2022). Later on, the Third Circuit affirmed the dismissal, and found the plaintiff lacked standing.
Implications for Business Owners in 2025
Business owners should be aware of these new efforts by the DOJ, as well as by private citizens, and be ready to defend against such allegations by ensuring that all patrons – to its physical locations and online communities – are provided with equal opportunity to use and enjoy its services under Title II. To aide in this effort, business owners should consult with counsel about (1) revising policies and procedures to ensure that all patrons receive the same service regardless of religion and national origin and (2) training their employees on these policies.
Business owners also should be cognizant that places serving the public are not the appropriate location for activities that could be perceived as creating a hostile environment for patrons based on religion and that potential new government activism on addressing antisemitism and religious discrimination may become more frequent in 2025 and 2026. ___________________________________________________________________________________________
1 https://www.justice.gov/crt/recent-accomplishments-housing-and-civil-enforcement-section#public
2 25-cv-04849 (N.D. CA)
3 25-cv-67 (M.D. FL)
4 24-cv-09693 (S.D. NY)
How to Amend HOA Bylaws and Covenants in North Carolina
Homeowners’ Associations (HOAs) play a critical role in managing residential communities across North Carolina.
Their governing documents, specifically the Declaration of Covenants, Conditions, and Restrictions (commonly called CC&Rs, covenants, or the declaration), and Bylaws, establish the legal and operational framework for how a community is governed. As communities evolve, the need to amend these documents may arise to address outdated provisions, clarify ambiguities, or adapt to new laws and homeowner preferences. The amendment process must be handled with care and in full compliance with North Carolina law.
Legal Framework: 47F and 47C
In North Carolina, the legal authority for HOA governance is primarily derived from Chapter 47F of the North Carolina General Statutes, known as the North Carolina Planned Community Act (the “PCA”), which governs all single-family home subdivisions and planned unit developments created on or after January 1, 1999. Condominiums are governed by Chapter 47C of the North Carolina General Statutes, known as the North Carolina Condominium Act (the “Condo Act”), which applies to all condominium communities created on or after October 1, 1986. These statutes provide default procedural rules, including requirements for notice, voting thresholds, and the recording of amendments.
For planned communities formed before January 1, 1999, the amendment process for the bylaws and declaration is governed primarily by the language in the governing documents themselves, and by the North Carolina Nonprofit Corporation Act (“Chapter 55A”) for amendments to Bylaws. For condominiums formed before October 1, 1986, the amendment process for the Bylaws and declaration is governed by Chapter 47A of the North Carolina General Statutes and the language in the governing documents themselves (and Chapter 55A for amendments to Bylaws).
Step 1: Review Governing Documents
The first step in the amendment process is to thoroughly review the HOA’s declaration and bylaws. These documents typically contain their own provisions describing how amendments may be proposed and approved, including who is authorized to initiate an amendment – often the board of directors or a group of homeowners through a petition – and the percentage of votes required for adoption. Under the PCA, unless the declaration provides a higher threshold, an amendment to a planned community’s declaration requires the approval of the owners of lots to which at least 67% of the total votes in the association are allocated. The same threshold applies to condominium declarations under the Condo Act, provided that amendments that create or increase declarant rights, increase the number of units, change the boundaries of units, change the allocated interest of a unit, or change the uses to which a unit is restricted require unanimous consent of all the unit owners.
The Condo Act also provides a method for amending the declaration without 67%-member approval in certain circumstances. The executive board may propose amendments to the declaration without a vote of all unit owners to correct errors, comply with legal or lending requirements, or accommodate persons with disabilities, so long as such amendments are not explicitly prohibited by the declaration or the Condo Act. These amendments are considered ratified unless a majority of unit owners reject them at a meeting held within 10 to 60 days after notice.
Amendments to bylaws are generally subject to less stringent requirements than declarations. Under the Planned Community Act and Condo Act, the association’s executive board is authorized to adopt bylaws. However, amendments to the bylaws require a membership vote, as governed by Chapter 55A, which requires that amendments to bylaws be approved by the members by two-thirds of the votes cast or a majority of votes entitled to be cast, whichever is less. The association’s governing documents may require a greater vote, but cannot require a lesser vote.
Step 2: Drafting the Amendment
After confirming the applicable process and voting requirements, the next step is to carefully draft the proposed amendment. Legal counsel should be consulted to ensure that the amendment language is clear, enforceable, and does not conflict with any existing provisions or applicable law. A well-drafted amendment should avoid ambiguity, align with North Carolina statutes, and be internally consistent with the rest of the association’s documents. Poorly drafted language can lead to confusion, disputes, or litigation, and may ultimately be found unenforceable by a court. Even if statutory requirements are met, homeowners may still challenge an amendment by arguing that it fails to meet the “reasonableness” and “original intent” tests established by North Carolina courts.
Step 3: Notice and Voting
Before a vote can be held, members must be provided with adequate notice. Under both the PCA and the Condo Act, at least 10 days’ notice (and no more than 60 days) must be given for any meeting of the association membership. The notice must clearly explain the proposed amendment and provide clear instructions for how members may vote. The notice should also explain the rationale behind the proposed change. Voting procedures may vary and can include in-person meetings, mail-in ballots, or electronic voting, provided these methods are permitted under the association’s governing documents or adopted rules.
Step 4: Approval and Recording
Once the amendment has been approved by the required percentage of votes, the final step is to properly document and, if necessary, record the amendment. Amendments to the declaration must be recorded with the Register of Deeds in the county where the community is located, in accordance with the PCA and Condo Act. Without proper recording, even a validly approved amendment may not be legally enforceable.
Amendments to the bylaws, on the other hand, generally do not require recording in the Register of Deeds. However, they should be dated, clearly written, and retained in the association’s official records for transparency and future reference.
Conclusion
Amending HOA bylaws and covenants in North Carolina requires careful adherence to both the association’s governing documents and applicable state law. By understanding and following the procedures set forth under North Carolina law and seeking legal guidance when needed, associations can implement changes that are legally sound and reflective of the community’s evolving needs. When properly executed, amendments strengthen governance, improve clarity, and help preserve the integrity and functionality of the homeowners’ association for years to come.
Recent SJC Decision on Residential Security Deposits: What Massachusetts Landlords Need to Know
Massachusetts, one of the most tenant-friendly states in the country, prohibits landlords from deducting from a tenant’s security deposit for repairs related to “reasonable wear and tear” under G.L. c. 186, § 15B(4). However, the statute does not define “reasonable wear and tear” and despite its inclusion in the law since 1970, the Supreme Judicial Court (SJC) had never interpreted it until its August 1, 2025 decision in Peebles v. JRK Property Holdings, Inc., SJC-13702, which significantly reshaped how landlords may approach the use of residential security deposits for property repairs.
Massachusetts landlords commonly deduct the costs of repainting, carpet cleaning, and other refurbishments from newly departed tenants’ security deposits. In Peebles, the SJC determined that “reasonable wear and tear” requires a fact-specific inquiry including review of:
The nature and cause of the condition to be repaired;
The condition of the property upon commencement of the lease term;
The use for which the property was leased;
The extent of property deterioration to be expected from the reasonable use for such purpose; and
Duration of the occupancy [i]
Noting that a tenant’s reasonable use of a property may result in the necessity of repainting, carpet cleaning or other repairs or refurbishments upon expiration of the lease, the court held that deducting costs of such repairs and refurbishments from a security deposit may violate the statute.[ii] However, the SJC declined to set a bright-line rule that without further inquiry security deposit deductions for repairs or refurbishments do not necessarily constitute a violation of G. L. c. 186, § 15B(4).[iii]
However, Peebles delivered a clear warning to landlords regarding lease clauses that require a tenant to professionally clean the premises upon yield-up. On this issue, the SJC held that such requirements conflict with G. L. c. 186, § 15B(4) and are per se unenforceable.[iv]
The impact of Peebles imbues an already ambiguous area of Massachusetts landlord-tenant law with partial answers. Going forward, it is likely that courts engaging in fact specific inquiries regarding what constitutes “reasonable wear and tear” will err on the side of tenants. Note that a judicial determination that a specific deduction violates the statute may result in a tenant’s recovery of up to three times the amount wrongfully withheld under G. L. c. 186, § 15B(7).[v]
Landlords can protect themselves and avoid penalties by: (i) obtaining condition statements at lease commencement; (ii) providing itemized statements to tenants within thirty days of the expiration of the lease detailing the purpose and costs of landlord repairs; (iii) evidencing the necessity of such repairs; and (iv) adhering to other statutory requirements, such as holding the security deposit in a Massachusetts bank, ensuring it is placed in an interest-bearing account, and limiting the deposit to no more than one month’s rent.
Due to the statutory penalties for non-compliance, landlords should consult with experienced counsel as to application of the statute to their circumstances.
[i] Peebles v. JRK Prop. Holdings, Inc., SJC-13702, slip op. at 13.
[ii] Id. at 16.
[iii] Id.
[iv] Id. at 18-20.
[v] Id. at 6.
Colorado American Dream Act: Condominium Construction Defect Procedures
Colorado’s housing shortage—particularly in the for-sale condominium market—has been driven in part by the high cost and unpredictability of construction defect litigation. In 2025, the General Assembly enacted House Bill 25-1272, the Colorado American Dream Act, to address these barriers and encourage new condominium development. The Act creates a voluntary Multifamily Construction Incentive Program (MCIP) that offers developers a clearer, more predictable framework for addressing construction defect claims in exchange for meeting defined quality, inspection, and warranty standards.
The MCIP is effective on January 1, 2026. On and after January 1, 2026, developers of attached condominium developments consisting of 2 or more units can voluntarily opt in to this program by:
Recording an Opt-In Notice. Recording a notice of election into the MCIP in the real property records before offering units for sale;
Provide 1/2/6 Limited Warranty. Providing a written limited warranty to unit owners at closing, which covers workmanship and materials for 1 year, electrical, plumbing, and mechanical systems for 2 years, and structural components for 6 years; and
Hire an Independent Inspector During Construction. Hiring an independent third-party inspector—licensed or certified and unaffiliated with the developer—to inspect project components and confirm compliance during construction.
Key Benefits of Opting InDevelopers who opt into MCIP gain several procedural safeguards and substantive protections, making defect litigation more structured and predictable:
Statute of Repose Reduction. The statute of repose, i.e., the period of time during which a claim may be brought, is reduced from 10 to 6 years.
Mandatory Warranty First, Litigation Later. Unit owners and the association must pursue all warranty-based remedies before filing a defect claim.
Clear Limits on Claim Types. Narrows the scope of claims to actual property damage or loss of use, bodily injury or death, failure of a component to perform its intended function, and safety risks to occupants.
Certificate of Review Rule (for Architects & Engineers). Claims against design professionals require a certificate of review (signed expert opinion) to be filed with the initial complaint—not after—ensuring early and stricter scrutiny of claims.
Structured Claim Response Process. Developers must respond to claims within defined timelines—either by offering a settlement (money or repairs) or providing a formal explanation with applicable standards, which creates transparency and promotes early resolution.
Attorney Fee Shifting. If a settlement offer is unreasonably rejected, the court may award attorneys’ fees to the developer. Conversely, if the builder fails to make a reasonable offer, the unit owner of the association may recover fees.
Affirmative Defenses Expressly Available. Developers may assert defenses and avoid or limit liability for defects not caused by them, such as extreme weather or natural catastrophes, acts of war, terrorism, or vandalism, a unit owner or association’s neglect, misuse, or failure to mitigate damage, and circumstances where repairs previously made under the program successfully addressed the defect.
Insurance Protection. Developers are protected from the risk of insurers denying or canceling liability coverage merely because they made a repair or settlement offer, so long as it’s within the claims process.
Other ChangesWhether a developer elects to opt into MCIP or not, the Act includes the following new benefits.
Higher Approval Requirement Before Initiating a Claim. An association must now obtain 65% owner approval (up from a simple majority) to initiate a construction defect claim.
Settlement Used to Repair Defects. Any settlement or judgment proceeds must be used first to repair defects before other uses.
Duty to Mitigate. A claimant must take reasonable steps to mitigate damage before filing a claim. If they don’t, any damages attributable to that failure may be barred.
Buyer Beware: Analyzing New Jersey Court’s Ruling on Prior Knowledge Exclusions
Businesses decide to switch liability insurers or obtain higher policy limits for various reasons. In doing so, policyholders should exercise caution to avoid future claim denials (or even policy recission) based on so-called “prior knowledge” issues. Prior knowledge comes into play when the policyholder knew about facts, incidents, or circumstances that occurred before the policy incepted, which can lead to problems if the insurer asserts that the policyholder had “prior knowledge” of an incident before seeking new coverage, limits, or policies.
A recent case from the federal district court in New Jersey emphasizes the importance in carefully assessing and, if needed, disclosing claims or potential claims when applying for a claims-made liability policy to minimize the risk of a “prior knowledge” claim denial or policy rescission.
The Warranty Statement, Prior Knowledge Exclusion, and Claim Denial
Ascot Specialty Ins. Co. v. Mason, Griffin & Pierson, P.C., et al. (D.N.J. Aug. 18, 2025), involved a probate lawsuit alleging that a wife misappropriated real estate and other assets with the assistance of her lawyer. The next year, that lawyer’s firm placed a new professional liability policy with Ascot after signing an application and warranty statement with the following notice:
NOTICE: It is agreed by all concerned that if any of the proposed Insured Persons is responsible for or has knowledge of any Wrongful Act, fact, circumstance, or situation which s(he) has reason to suppose might result in a future Claim, whether or not described above, any Claim subsequently emanating therefrom shall be excluded from coverage under the proposed insurance. . ..
The firm declared in the warranty statement that it had no claims or lawsuits against it.
The issued policy provided coverage for wrongful acts that occurred during the policy period but also included a prior knowledge exclusion, extending coverage to wrongful acts that occurred prior to the inception of the policy period only if:
no Insured has any basis (1) to believe that any Insured breached a professional duty; or (2) to foresee that any such Wrongful Act or Related Circumstances might reasonably be expected to be the basis of a Claim against any Insured . . ..
During the policy period, the same claimant from the probate lawsuit filed a new action, bringing a malpractice action directly against the law firm. In that complaint, the claimant alleged that the firm committed legal malpractice by knowingly, intentionally, or negligently assisting the wife in tortious misappropriation of assets in connection with preparation of the estate plan. The firm notified Ascot of the claim, but Ascot denied coverage due under the prior knowledge exclusion.
The New Jersey Court Upholds the Insurer’s Prior Knowledge Disclaimer
After denying the claim, Ascot initiated a coverage suit in federal court in New Jersey seeking a declaration that it had no obligation to defend or indemnify the firm based on the prior knowledge exclusion and the firm’s alleged breach of the warranty statement in the application.
Ascot and the law firm disputed whether at the time the probate lawsuit was filed, the firm should have reasonably foreseen that a malpractice claim would be filed against the firm or should have reasonably foreseen that an insured breached its professional duty, which were the two triggers at issue in the prior knowledge exclusion.
Ascot argued that any reasonable attorney would have foreseen that the conduct alleged in the probate lawsuit would result in a claim against the law firm. In opposing Ascot’s motion for judgment on the pleadings, the firm countered that any question of what an attorney would have expected in light of the earlier probate lawsuit should be presented to the jury. The firm countered by emphasizing that the probate lawsuit did not include any direct legal malpractice claims and the probate complaint was amended to remove the claims against the firm’s attorney so that a reasonable attorney would not expect a malpractice claim would arise.
The court explained that the purpose of prior knowledge exclusions is to protect insurers against a professional who, recognizing a past error or omission, “rushes to purchase a claims-made policy before the error is discovered and a claim asserted against him.”
The court went on to discuss that courts typically used a mixed “subjective-objective” test to interpret prior knowledge exclusions. This test involves considering first if the insured had knowledge of the relevant suit; and then considering whether the suit might reasonably be expected to result in a claim. The parties asked the court to apply a subjective-objective test, consistent with New Jersey law, but the court declined.
The reason was that the policy language in the prior knowledge exclusion omitted the subjective portion of the hybrid test and provided only an objective test—whether a reasonable professional in the insured’s position might expect a claim or suit to result. Applying the policy’s objective-only prior knowledge test, the court concluded that, based on the allegations in the probate action, a reasonable attorney would believe that an insured breached a professional duty or foresee that a wrongful act might be reasonably expected to be the basis of a claim against an insured.
Specifically, the court noted that the probate lawsuit sought to disqualify the law firm’s attorney for conflicts of interest and his knowing and intentional facilitation of tortious asset transfers. The probate lawsuit also expressly referenced the firm’s alleged fiduciary violations, invoking the model rules of professional conduct based on the firm’s provision of legal services to both the claimant and his wife for many years.
Given those alleged conflicts, knowing and intentional conduct, and fiduciary violations, the court found that the probate lawsuit demonstrated that a reasonable attorney would either believe that the insured breached a professional duty or foresee that the insured’s actions might reasonably be expected to be the basis of a future claim. The court acknowledged that a formal malpractice claim was not required to trigger the prior knowledge exclusion. But because the policy’s prior knowledge exclusion only required that a reasonable person believe that a malpractice claim may arise or that an insured breached a professional duty, the court concluded that the insurer had met its burden to trigger the exclusion as a matter of law. Thus, the law firm did not have coverage for the malpractice lawsuit.
The court’s decision emphasizes the importance in understanding what constitutes “prior knowledge” when applying for a new insurance policy, as even objective knowledge can constitute “prior knowledge” in some instances.
Governing Law Matters, but Policy Language May Override Default Rules
Insurance claims are determined by state law. And because all 50 states have developed their own unique body of insurance law, the outcome of coverage disputes frequently turns on what law governs.
As discussed in Ascot, for example, the test for evaluating “prior knowledge” varies materially between states but generally follows one of three standards:
A purely subjective test, which looks only at what the insured actually knew.
An objective test, which does not reference the specific state of mind of the insured in question but only considers what a reasonably objective insured should have known.
A hybrid subjective-objective test, which is based on what the insured actually knew (subjective) and what a reasonably objective insured would have expected (objective).
However, all of that can be put to the side if the actual policy language provides a different standard. In Ascot, the parties all agreed that New Jersey’s hybrid objective-subjective test should control, but the court dispensed with that standard where the policy required only objective knowledge.
As a result, policyholders navigating prior knowledge issues should consider both state law and how it may be impacted by the specifics of the policy.
Beware of Coverage and Rescission Risks with Broad Warranty Statements
Warranty statements pose another issue altogether irrespective of any exclusionary language. Warranty statements are often required in applications for new policies, increased limits, or similar requests to improve coverage.
Warranty statements vary materially between insurers, lines of coverage, and products but generally pose recurring traps for the unwary, especially if policyholders sign broad warranties without performing appropriate due diligence or negotiating clearer and narrower language. Key questions include:
Is the warranty limited to a particular insurer, policy, or purpose?
What kind of representation is being made, whose knowledge is relevant, and what if any guardrails are in place to dictate what does or does not need to be done to obtain that knowledge?
What kind of knowledge is relevant—knowledge of facts, claims, circumstances, wrongful acts, or something else?
What can the insurer do if there’s a misrepresentation or omission?
The warranty statement in Ascot is illustrative of where things can go wrong. That warranty asked the law firm to agree to forego coverage if “any of the proposed Insured Persons” had knowledge of “any Wrongful Act, fact, circumstance, or situation” which “might result in a future Claim.” In theory, this demanded inquiring with every person in the firm to ask about any single fact that may result in a future dispute. While a smaller law firm may be able to reasonably undertake that kind of inquiry, how is an in-house lawyer, risk manager, or C-suite executive supposed to gather knowledge of hundreds or thousands of employees at a larger scale? Closely scrutinizing and improving or clarifying similarly broad statements can help ensure policyholders and underwriters are aligned in what representations are being made to avoid surprises down the road. What may seem like an innocuous underwriting requirement in a relatively hassle-free policy placement can take on outsized importance when a future claim arises and the insurer (or its outside coverage counsel) revisits prior warranties and knowledge with the benefit of hindsight.
Conclusion
Evaluating and addressing these prior knowledge issues when securing new policies or limits can help avoid surprise denials or policy rescission months or years later when a claim arises. Engaging with coverage counsel at each stage of the process can navigate common pitfalls to maximize recovery and preserve coverage.
Single Asset Real Estate Cases
Often times some of the most ethically charged and legally nuanced bankruptcy cases involve a single piece of real estate. These so-called ‘single asset real estate (SARE)’ cases are deceptively complex and the legal and ethical issues they raise can trip up even experienced professionals.
What Is a SARE Case?
A SARE case usually involves a debtor whose primary asset is a piece of real estate, often held in a limited liability company (LLC), that generates nearly all their income. The twist? No substantial business is being conducted outside of operating that real estate.
Under the Bankruptcy Code, SARE is defined in 11 U.S.C. §101(51B), and its classification has significant implications. If a property qualifies as a SARE, the debtor faces stricter rules to reorganize under Chapter 11. This means quicker deadlines, increased scrutiny, and fewer chances to make mistakes.
As Mark Silverman of Troutman Pepper Locke puts it, “SARE debtors are under a microscope. Courts want to know: Is there really a reorganization plan or just a stall tactic?”
To better understand this, consider how courts assess whether a property fits the SARE definition. Factors include how income is derived (passively or actively), whether any business is being conducted beyond managing the property, and whether the property consists of one or multiple parcels.
Why Do These Cases Matter?
Consider this typical scenario: A borrower is days away from foreclosure. At the last moment, they file for bankruptcy. This invokes the automatic stay under Section 362 of the Bankruptcy Code, which halts creditor actions. The clock stops, and the debtor gets breathing room.
From the debtor’s perspective, it’s a second chance. From the lender’s perspective, it’s a stall tactic. And from the judge’s bench, it’s a question of motive. Timing and intention matter enormously.
David Levy of Keen-Summit Capital Partners describes it well: “Sometimes it’s about genuine attempts to reorganize. Sometimes it’s a means to buy time. The court has to figure out which.”
Adding to the challenge, SARE debtors have just 90 days to file a plan of reorganization or start making interest payments to secured creditors. This tight timeline forces courts to assess the legitimacy of the debtor’s plan very quickly.
Ethical Considerations in SARE Cases
Attorneys involved in SARE cases must walk a tightrope, balancing zealous advocacy with ethical obligations. Several ABA Model Rules of Professional Conduct come into play including:
Rule 1.7: Conflict of Interest – Current Clients
Rule 3.1: Meritorious Claims and Contentions
Rule 4.3: Dealing with Unrepresented Persons
These rules guide how lawyers assess the merit of filings, navigate loyalty to clients, and communicate with non-clients.
As Samantha Ruben of Dentons notes, “These cases force lawyers to think about who their client really is, whether the filing has merit, and how they deal with stakeholders especially when they’re not represented.”
In practice, a lawyer might face a situation where a bankruptcy filing is technically legal but ethically gray, such as where a debtor lacks a viable reorganization plan. Rule 3.1 cautions against pursuing cases without a proper legal basis, while Rule 1.7 addresses conflicts where the lawyer’s duty to one client may be compromised by duties to others.
SARE Case Studies
Orchard Hills Baptist Church
In the Matter of Orchard Hills Baptist Church, the church filed for bankruptcy on the day a foreclosure sale was set to occur. While the court found several red flags, including that it was essentially a two-party dispute, it didn’t dismiss the case. Instead, it lifted the automatic stay because the church owed more than the value of the property.
What tipped the scales? According to the court, this was the church’s first bankruptcy filing, and there was no evidence of misconduct. Matt Christensen of Johnson May points out that bad faith isn’t always present, even when the timing looks suspicious.
Fairfield TIC, LLC
In contrast, Fairfield TIC got no such pass. In In re Fairfield Tic, LLC the debtor owned a 66% share in a mall, filed days before foreclosure, and had no control over mall operations. Worse, they didn’t join the other owners in the filing. The court saw it as both objectively futile and subjectively in bad faith. The takeaway? You can’t file for bankruptcy if you have no viable plan or power to effectuate it. And without the support of other stakeholders, especially in joint ventures, the filing may backfire.
Intervention Energy Holdings
In In re Intervention Energy Holdings, LLC a creditor used a clever maneuver: acquiring a single voting share in an LLC and amending the agreement to require unanimous consent for a bankruptcy filing. When the debtor filed anyway, the creditor moved to dismiss.
The court wasn’t impressed. It ruled that such tactics violated public policy. Ethical concerns under the ABA Model Rules of Professional Conduct Rule 1.7 (conflict of interest) were front and center: when creditors act like owners, who’s really in control?
This case underscores the danger of manipulating governance to suppress a debtor’s bankruptcy rights. Attorneys involved in drafting such provisions must consider whether they’re not just clever but ethical and enforceable.
Lessons for Practitioners
SARE cases are fertile ground for strategic filings and ethical landmines. Whether you’re advising a distressed property owner or representing a secured lender, clarity of purpose and ethical compliance are paramount.
Ask yourself: Is there a legitimate business purpose to the filing? Is the debtor acting in good faith? Have you clearly documented your rationale? These questions should guide every move.
As Ruben reminds us, “Bankruptcy isn’t just a tool; it’s a process governed by rules. If we bend them too far, we risk breaking trust with the Court and our bankruptcy bar colleagues.”
To learn more about this topic, view Single Asset Real Estate Cases. The quoted remarks referenced in this article were made either during this webinar or shortly thereafter during post-webinar interviews with the panelists. Readers may also be interested to read other articles about single asset real estate.
This article was originally published here.
©2025. DailyDACTM, LLC. This article is subject to the disclaimers found here.
Who Owns Improvements on Someone Else’s Land? Why It Matters for Major Projects
Billions of dollars are invested each year into assets constructed on land owned by someone else—whether for renewable energy projects, major infrastructure projects, logistic and transport projects (such as airports and ports) or residential and commercial developments on Australian government-owned land. These projects often involve complex leasing or licensing arrangements. But a critical question is often overlooked: who owns the improvements once they are built?
The answer has serious implications for financing, security, tax and exit transaction planning.
The General Rule: Fixtures Belong to the Landowner
At common law, under the “doctrine of fixtures”, any structure or item that is affixed to land becomes a part of the land—and is therefore the property of the landowner. This includes buildings, infrastructure installations and other things that may be fixed to land with an intention that it remain in place for an extended period (or indefinitely).
The High Court in TEC Desert Pty Ltd v Commissioner of State Revenue [2010] HCA 49 confirmed the relevant principles. Putting it most simply:
If you build it on someone else’s land, they own it.
The courts assess whether an improvement is a fixture by looking at:
The degree of annexation: How securely is the item attached to the land?
The purpose of annexation: Was the item intended to remain in place for the long term?
Most buildings and major installations will satisfy these two criteria easily and can be readily identified as fixtures. In contrast, some items of heavy machinery are designed for relatively easy removal and may be installed on a temporary basis. Such machinery may not be a “fixture”.
Key Exception: Tenant’s Fixtures
A limited exception exists for “tenant’s fixtures.” This is relevant where a lease includes a clause permitting the tenant to remove certain improvements during the lease term (or shortly after lease expiration).
However:
Until the tenant removes a relevant fixture, it legally belongs to the landowner.
The removal right allows the tenant to convert the fixture back into personal property (i.e. a chattel)—but only if the rights to remove are exercised in time.
Practical risk: If the tenant fails to remove the fixture before the deadline, ownership remains with the landlord.
Contractual Agreements: Why They Do Not Always Work
In the context of a particular project, the parties may on occasion agree that someone other than the landowner (such as a tenant, developer or capital participant) “owns” certain improvements. While this agreement may be binding and effective as between those parties, it usually does not bind:
Tax authorities;
Secured lenders; or
Other third parties.
The courts have made it clear that parties cannot “contract out” of reality. In Smeaton Grange Holdings [2017] NSWCA 184 and Hollis v Vabu [2001] HCA 44, the courts rejected attempts to re-characterise legal rights through contractual language or purported disclaimers.
Tax Implications
The tax consequences of developing improvements on someone else’s land will typically follow the legal position (i.e. the improvements are fixtures and property of the landowner, subject to any tenant’s right of removal). This may be different to the commercial or contractually agreed position as to who “owns” the improvements. This can be relevant for a range of taxes, including income tax (CGT), goods and services tax (GST) and duty. Of course, specific tax rules may be relevant and such issues need to be considered on a case-by-case basis.
Statutory Exceptions
Some legislation does override the common law position. For example, section 64 of the Water Industry Competition Act 2006 (NSW) creates a statutory property right for water pipeline owners in New South Wales. Even when a pipeline is buried under land, the pipeline remains the property of the licensee and can be sold, mortgaged or otherwise dealt with.
Similar statutory exceptions may apply in other regulated sectors (e.g. telecommunications, utilities).
Further, Victoria’s property laws provide that a tenant may own certain fixtures which have been installed at the tenant’s expense. Refer to section 154A, Property Law Act 1958 (VIC). However, that section may not apply if the lease otherwise provides (or the landlord and tenant otherwise agree).
Again, such issues need to be considered on a case-by-case basis.
Are Improvements Made By a Tenant Non-monetary Consideration for the Grant of a Lease?
If a tenant agrees to undertake certain improvements to land as a condition for the grant of a lease, the provision of those improvements may be treated as nonmonetary consideration for the grant of the lease. Depending on the state or territory in which the land is located, this may trigger a transfer duty liability.
In New South Wales, Revenue NSW has issued a Commissioner’s Practice Note, CPN 027, which discusses these issues in detail. It provides worked examples involving a range of common commercial scenarios. As with the other issues discussed above, this is an issue that needs to be considered on a case-by-case basis.
Why It Matters – Key Risks
Financing Risk: If the improvement belongs to the landowner, the tenant may have no asset to offer as security.
Tax Exposure: For landholder duty and transfer duty purposes, improvements generally increase the dutiable value of land—even if another party paid for them.
Exit Planning: A tenant who has funded improvements may lose valuable assets when a lease ends if any rights of removal are not exercised.
What Should You Do?
For developers and tenants:
Understand that improvements usually belong to the landowner.
Negotiate removal rights early and clearly.
Plan for the timing of removal at lease expiry.
Check whether legislation provides a carve-out for your industry (or for tenant’s fixtures in the relevant state or territory more broadly).
For financiers:
Do not assume a borrower owns certain improvements merely because a commercial document says they do.
Review security arrangements carefully.
Consider alternative forms of collateral.
For landowners:
Consider whether the tenant should be obligated to remove certain fixtures or affixed chattels when a lease term ends.
For all parties:
Understand the tax implications of the proposed arrangements, including both federal taxes (such as income tax, CGT and GST) and state taxes (such as landholder duty and transfer duty).
Contributing author: Toby Hunt
Preserving Your Family’s Cottage Legacy
For many families, a cottage is more than just real estate; it’s a place of tradition, togetherness, and lasting memories. As time passes, cottage owners may want to consider the long-term future of their retreat. Thoughtful planning now can help ensure the property remains a source of joy for future generations while preserving the values and connections it represents.
Why Cottage Planning Matters
A cottage is often among a family’s most emotionally significant assets, and sometimes one of the most valuable. Deciding how it will be passed down can be challenging, requiring thoughtful consideration of family dynamics, tax implications, and how to manage shared use and responsibilities. Several legal strategies are available to help owners plan for the next chapter of their cottage’s story.
Common Strategies for Cottage Succession Planning
1. Qualified Personal Residence Trust (QPRT):
This is an effective tool when estate taxes are the primary concern. A QPRT holds title to real property for a specified period, during which the grantor retains the exclusive right to use the property. Upon the term’s expiration, the property passes to the designated beneficiaries. This benefits the donor by reducing the gift tax value to the property’s fair market value minus the value of the retained interest. However, a QPRT does not address shared ownership and use after the trust terminates. Additionally, the trust termination may uncap property taxes.
2. Joint Ownership Agreements:
Michigan law exempts certain transfers of jointly held property from uncapping. Adding a spouse, child, grandchild, parent, or sibling to the cottage title should not result in uncapping and may be part of a broader plan to transfer ownership to a younger generation. Yet, this arrangement comes with risks, including concerns regarding control of the property, increased liability exposure, and unintended gifting and tax consequences. A joint ownership agreement is essential to outline how decisions are made, costs are shared, and usage is managed.
3. Ownership by Trust or LLC:
Transferring cottage ownership into a trust or limited liability company (LLC) can provide greater structure and protection. Trust Agreements and LLC Operating Agreements can include rules regarding property use, expense payment, dispute resolution, and transfers after an owner dies.
This approach avoids the pitfalls of “tenants-in-common” ownership, which becomes increasingly problematic as more descendants acquire fractional interests in the cottage. Trusts and LLCs also provide flexibility as family members’ involvement changes over time.
An LLC provides some liability protection for the cottage owner and allows the owner to manage the property while gradually transferring control. A drawback of the LLC structure is that property taxes will be uncapped after more than 50 percent of the beneficial interests of the LLC have changed owners (and again each time more than 50 percent of the beneficial interests of the LLC are transferred thereafter). As a result, families who have owned a cottage for decades sometimes find that property tax uncapping considerations alone drive the decision between a trust and LLC structure, as a property tax uncapping can make continued ownership cost-prohibitive.
Factors in choosing a trust vs. an LLC include:
Reducing estate and gift taxes for multiple generations
Preserving control vs. granting future flexibility
Gifting of cottage interests
Facilitating the use of the cottage by others, whether informally or by renters
Providing liability and creditor protection
Managing decision-making and expenses
Property tax considerations
4. Gifting LLC Interests Using Annual Exclusions:
Owners can reduce their taxable estate by making “annual exclusion” gifts of membership interests in an LLC that holds a cottage. In 2025, individuals may give up to $19,000 annually (or $38,000 for a married couple) in assets to as many people as they wish without federal gift tax consequences.
Under current tax law, valuation discounts may apply to minority interests in an LLC, allowing a donor to give membership interests worth more than the stated gift tax value. Future legislation may change or eliminate the availability of these valuation discounts, so the donor should be aware of the law in effect before gifting interests.
Cottage Planning Achieves Family Goals
Without a succession plan, unresolved issues such as taxes, ownership disputes, and unclear expectations can erode the joy and meaning that family cottages bring. There is no “one-size-fits-all” approach. Family goals and personal relationships will influence the ultimate decisions.