A challenge occasionally faced by residential landlords is what to do if a tenant dies during the term of the lease and no one “steps in” to handle the tenant’s estate.  Landlords of low-income subsidized housing may be especially likely to encounter this scenario.  Many low-income tenants have not made a Will that would appoint an Executor and otherwise don’t have sufficient assets to entice a relative to take the necessary steps to “open an estate” and qualify to handle the deceased tenant’s affairs.

If rent is no longer being paid for the deceased tenant, some landlords may think that it is appropriate to dispose of the tenant’s personal belongings as they see fit and retake possession of the premises.  However, landlords in North Carolina should be aware that there is a proper way of handling the situation.

What to do if the property is left unoccupied

An initial question is whether anyone continues to occupy the leased premises.  If the premises are not occupied by a person, then the landlord may – if no estate has been opened, and the paid rental period has expired for at least 10 days – file an affidavit with the court that provides information about the tenant’s death and the items remaining in the premises. The landlord must send a copy of the affidavit to any contact person who the tenant listed (or, if none, must post notices about the affidavit).  After the affidavit is filed, the landlord can remove and store the tenant’s property and retake possession of the premises.  After 90 days, if no one has duly qualified to collect the tenant’s belongings, the landlord can then either give the items to a non-profit organization or sell the items.  Proceeds from selling the items can be applied to unpaid rents or other costs; however, a sale requires posting of certain notices.   The landlord must provide an accounting to the court with regard to any donation or sale of the items.

What to do if the property remains occupied

If any person occupies the premises after the tenant’s death (for example, a friend or relative is living in the property), a different issue is presented.  If the person was a co-tenant with the deceased tenant, the co-tenant can likely continue with the lease – and deal with the issue of what to do with the deceased tenant’s things.  However, assuming that the occupant has no right to continue renting the premises and needs to be removed, the proper procedure can be tricky.  Arguably, the person is a trespasser and could be locked out, with no recourse against the landlord.  But a more prudent path would be to file an eviction lawsuit to regain possession of the premises.  In light of the fact that North Carolina’s eviction procedures require a landlord-tenant relationship between the plaintiff and defendant to initiate “summary ejectment” proceedings, this raises a question about who to name as the defendant in the suit.  The occupant (who is not actually a tenant)?  The original tenant (who is dead)?  One solution is for the landlord to have a “public administrator” appointed as the representative of the tenant’s Estate and then sue the public administrator.  Ultimately, significant costs and headaches can be encountered, if this situation arises.  An experienced landlord-tenant attorney can help.

About the Author

Elliot Fus

Elliot has practiced law for over 20 years and is a member of the Federal, North Carolina and Forsyth County bar associations. He is an experienced litigator with major case experience in state and federal courts and in private arbitrations. Elliot has a broad range of experience with landlord-tenant law in contexts ranging from shopping centers to affordable housing complexes.

Land use regulation affects everyone in one manner or another.  Our homes, schools, businesses, roads and parks are all subject to local government regulation as to their location, construction and how they may be used.  In North Carolina, all city and county zoning and planning regulations derive their power from state law.  That is, if a city or county cannot find authority within state statutes to take a particular action, it may not do so unless and until the legislature grants such authority.

NC Zoning Regulations

The state of North Carolina grants zoning authority primarily under two sections of the General Statutes: Article 19 of Chapter 160A for cities; and Article 18 of Chapter 153A for counties.  These provisions were compiled into these chapters in 1973, and in the decades since then provisions have been added, amended and repealed to become what nearly everyone agrees is a very disorganized and often confusing compilation of regulations.  Local governments had difficulty determining how to validly adopt and administer ordinances based upon this hodgepodge of laws.  Developers were often similarly bewildered.

As early as 2015, efforts began to “reorganize, consolidate, clarify and modernize” statutes related to local land use planning and zoning regulations.  On July 11, 2019 Governor Cooper signed into law Session Law 2019-111, creating a new chapter of the General Statutes, Chapter 160D, containing 14 Articles and additional statutes clarifying and conforming statutes contained in other chapters of the General Statutes.  The former Chapters regulating local land use planning are repealed as of the effective date of the new law, January 1, 2021.

A New Chapter

As described in the North Carolina School of Government’s Legislative Reporting Service, here are some highlights of Chapter 160D:

• Includes a new Definitions section, defining terms such as bona fide farm purposes, conditional zoning, etc.
• Clarifies the law regarding vested rights.
• Contains provisions governing the subject matter and procedure for adopting moratoria on development.
• Amends Conflicts of Interest laws as they apply to local elected and appointed officials.
• Amends the law regarding the exercise by cities of extraterritorial jurisdiction (ETJ) over zoning.
• Brings together provisions for the establishment and procedures for Planning Boards, Boards of Adjustment, Historic Preservation Boards and Appearance Commissions.
• Requires all members of appointed boards to take an oath of office.
• Establishes sunset provisions for substantial commencement of work following development approval.
• Provides for appeals of administrative decisions and includes timelines and procedures for such appeals.
• Includes Requirements and Procedures for Quasi-Judicial hearings for some land use decisions, such as appeals of administrative decisions, special use permits and variances.
• Restates requirements for Comprehensive Plans as a condition for enforcement and application of zoning ordinances. Allows for the adoption and use of narrower comprehensive plans to cover smaller geographic areas within a jurisdiction or to deal with subjects such as transportation and greenspace preservation.
• The procedures for adopting, amending or repealing Development Regulations are clarified, particularly with regard to notice requirements.
• Classifications of Zoning Districts are limited to the following: 1) conventional districts; 2) conditional districts; 3) farm-based districts; 4) overlay districts; and 5) special districts allowed by Charters.
• Allows administrative staff changes for minor modifications in conditional districts and for special use permits.
• Consolidates and clarifies Subdivision Regulation Ordinances.
• Chapter 160D also provides for regulation of particular kinds of land uses (e.g., adult businesses, agricultural uses, etc.), manufactured and modular homes, historic districts, environmental regulation, wireless telecommunication facilities, community appearance commissions, development agreements, solar collectors, and more.
• Articles under Chapter 160D also address Building Code Enforcement, Minimum Housing Codes, Open Space Acquisition and Community Development.

Compliance with the provisions of Chapter 160D will require nearly all counties and municipalities to adopt and/or amend their land development regulations as of the effective date of this legislation, January 1, 2021. Land developers may see changes prior to this date.  It is recommended that developers consult with county and municipal staff to stay current on local regulation changes.  Blanco Tackabery has attorneys who are skilled in this area to assist you.

About the Author

Bowen C. Houff

Bo has been practicing law for over 30 years. His practice is concentrated primarily in the areas of municipal law, zoning and business litigation. He regularly represents Municipal councils Boards and committees as well as developers seeking rezoning of land, special and conditional use permits and favorable interpretations of zoning ordinances.

If you have some experience with contracts, you’ve likely heard the phrase “liquidated damages.” While this term might sound mysterious to many people, the concept is relatively easy to understand. Liquidated damages are basically an agreed-upon amount of money that a party to a contract will be required to pay in the event that the party breaches the contract.

Use of a liquidated damages provision can be effective at avoiding costly disputes over how much financial harm was caused by a breach of contract. However, these provisions are not always enforceable and should be crafted with care.

What’s the Problem?

The crux of a liquidated damages provision is that it is to be used in a situation where you can’t easily determine what “actual damages” would be caused by the breach. So, to avoid the difficult exercise of proving actual financial harm, the parties will stipulate to an amount that they think is reasonable.

For example, let’s say that a shopping center rents a space to a tenant to operate a business. The lease requires the tenant to be open for business every day. The parties understand that, if one tenant in the shopping center “goes dark” and is not operating, the shopping center as a whole will be less vibrant, have less customer traffic, and be less profitable. The parties also understand, however, that – if one business in the center violates the agreement by not continuously operating – it will be very difficult to establish exactly how much money was lost by the shopping center. Therefore, the parties agree to an amount of liquidated damages that will be imposed in the event that a tenant stops operating, so that the center is not required to provide evidence of its actual financial damages (which may be impossible to calculate).

The trick with liquidated damages provisions is that their enforceability is often subject to debate. If the liquidated damages are not reasonable, then a court may deem them to be an unenforceable “penalty.” As stated by North Carolina courts: “A stipulated sum is for liquidated damages only (1) where the damages which the parties might reasonably anticipate are difficult to ascertain because of their indefiniteness or uncertainty and (2) where the amount stipulated is either a reasonable estimate of the damages which would probably be caused by a breach or is reasonably proportionate to the damages which have actually been caused by the breach.”

Notably, in the context of the shopping center lease described above, a North Carolina appeals court recently upheld a liquidated damages provision that required the tenant to pay double rent for each day that its business was not operating. The tenant did not show that the amount was unreasonable, according to the court. But what if the provision called for triple rent? Quadruple rent? Perhaps the outcome would have been different.

Use These Provisions Carefully

Liquidated damages provisions appear in a variety of contexts, addressing issues that range from delays on construction projects to buyers backing out of real estate deals. These provisions can be very useful. But before inserting a liquidated damages provision in a contract, significant thought should be given to whether the provision is necessary and reasonable. If a party could easily determine its actual financial losses in the event of a breach, liquidated damages are probably inappropriate. Furthermore, the amount of liquidated damages should be carefully developed on a case-by-case basis. Otherwise, a seemingly favorable liquidated damages provision may wind up being the subject of litigation – and ultimately may not be enforceable.

About the Author

Elliot Fus

Elliot has practiced law for over 20 years and is a member of the Federal, North Carolina and Forsyth County bar associations. He is an experienced litigator with major case experience in state and federal courts and in private arbitrations. Elliot also has a broad range of experience with landlord-tenant law and has assisted many of North Carolina’s premier shopping centers.

Owning a business is exciting at times, frustrating at others, but always demanding.  There are so many decisions to make on a daily basis, and often, as a business owner, you not only have to make the decisions, but must also roll up your sleeves to make those decisions bear fruit.  One decision you should make early as a business owner is determining who will be your trusted advisors to guide you through the legal and accounting issues your business will encounter.  Selecting a professional to assist you with legal and accounting decisions is vital to launching and maintaining a viable enterprise, because decisions made early in the formation of a business can have far reaching consequences down the road.

In my practice, I often see clients who chose to handle matters without engaging attorneys and accountants early in the process, and later failed to recognize issues as they arose during the day-to-day operations of the business. Those decisions can cost business owners far more money down the road than hiring the appropriate professionals in the beginning, and can have a significant effect on the ultimate success or failure of the business.  I have found those mistakes fall into seven basic categories. This is Pitfall number 7 of 7 common pitfalls I see businesses owners make.

Pitfall # 7 – Failure to Address Customer Relations

Written Contracts with Customers/Vendors — I cannot stress enough that the days of a handshake deal are gone. Businesses must have written purchase orders, invoices, contracts, leases and estimates to conduct business in today’s world.   Moreover, having it in writing avoids the stress, confusion and misunderstandings between the business and the customer when it comes time to deliver the goods or services and get paid. Business owners should have a business attorney draft sound business forms for use by the company. The cost of doing so is just a fraction of what it costs to defend a lawsuit produced by shoddy forms downloaded from a free internet site.

Customer Service/Satisfaction — At the same time, “the customer is always right” has not gone out of style. There are so many options for customers in today’s marketplace. A savvy business owner will make sure the company’s employees are well groomed, pleasant, enjoying their job, able to address a customer’s issue, and make the buying experience a positive one the customer will repeat.

Monitor Internet/Social Media — From a reputational risk standpoint, the pervasive use of the internet and social media has created new challenges for business owners. Sites that offer customers the opportunity to evaluate a company’s performance or products should be monitored so any derogatory or unflattering information can be noted, addressed, and responded to, if appropriate. Word of mouth now has the potential to reach hundreds, if not thousands of potential customers.

Privacy Policy — Having a privacy policy is not just good business, it is legally required for any company that collects information about its customers. The law requires disclosures to customers about how the business uses the information it collects from them and whether it shares that information with affiliates or third parties. Customers have a legal right to know how a company uses its information, and the company is required to publically disclose its privacy policy.

Protect Customer Data — Cyber security should be a consideration for any company in today’s business environment. All businesses are at risk of being hacked and having customer, employee, and other sensitive data compromised. Businesses should consult with an information technology specialist that can recommend safeguards to put into place to provide maximum protection of customer data. In addition, businesses may want to consult with their insurance provider to see if their general liability policies cover cyber-attacks, and if not purchase separate cyber insurance to protect against the damage that can be done by a hacker.

About the Author

Ashley Rusher

Ashley focuses her practice on Outside General Counsel Services and Business Bankruptcy and Creditor’s Rights Practice Areas. She is an effective, results-driven advocate for her clients.  Her background of 30 years in business bankruptcies, distressed debt workouts, problem loan recovery, and real estate title and commercial litigation provides her with a solid foundation of general business, accounting and legal skills.