Legal Morsels Archives - Kaye Bender Rembaum

December 5, 2022December 5, 2022

Federal Court Identifies Potential Collection Issue for Community Associations in Florida

Community association operations rely upon the timely and full payment of all assessments by all of the owners. One of the mechanisms that Florida law provides to put associations in a stronger position when an owner becomes delinquent is the “secured interest” of the association in the unpaid assessments by way of its ongoing lien against the unit or lot for the unpaid assessments. This secured interest puts the claim of the association at a higher priority than most other claims, other than a first mortgage or unpaid property taxes. However, a recent decision in the United States Bankruptcy Court for the Southern District of Florida, In re: Adam, Case No.: 22-10140-MAM, September 23, 2022, has cast a potential cloud on that secured interest.

In the In re Adam case, the Association previously obtained a judgment of foreclosure for over $76,000, which was considered as a secured interest by the Court. The Association was also claiming an additional $36,558 which came due after the judgment was entered. The owners were asking the Court to decide that the $36,000 was not secured and therefore uncollectible in the bankruptcy (or at least not fully collectible).

In deciding whether certain association claims were secured and collectible in the bankruptcy setting, the Court undertook an analysis of Florida law on the subject. The Court noted that both the Florida Condominium Act (Chapter 718 F.S.) and the Homeowner’s Association Act (Chapter 720 F.S.) currently contain express provisions that identify that the lien of the association is effective from the original recording of the declaration (with the added requirement in HOA’s that the declaration specifically expresses this lien right). However, the Court also points out that the Condominium Act was amended in 1992 to provide for this effective date. (The Homeowner’s Association Act was amended to provide for it in 2008.) Prior to these amendments, these Statutes provided for the effective date of the lien to be when it was recorded in the public records of the county. The analysis of the Court required it to consider whether the current version of the Statute applies to the situation or whether an earlier version of the Statute is the controlling authority. (This case involved a condominium so only the Condominium Act was considered in the decision.)

To make that determination, the Court applied the principles of the seminal case of Kaufman v. Shere, 347 So.2d 627 (Fla. 3d DCA 1977), which require declarations to contain the specific phrase “as amended from time to time” when identifying the Statute that governs the documents in order for the current version of the Statute to apply. This is because Statutes are not retroactive in their application unless the legislature expressly makes them so in the Statute itself. Both the U.S. and Florida Constitutions do not allow for the State to make a law that infringes upon the vested rights in an existing contract (which would be the declaration). As a result, the contract (declaration) would need to have the specific “as amended from time to time” language (often called “Kaufman” language) to automatically incorporate changes to the Statute that is not otherwise retroactive.

When the Court reviewed the governing documents, it noted that they were from 1987 and did not have the Kaufman language. As such, the Court held that the provisions of the declaration were the same as the Statute in 1987, which provided that the lien was effective only upon being recorded in the public records of the county. Since the Association did not file another lien for the amount being claimed subsequent to the foreclosure judgment, the Court concluded that this portion was not secured. In the bankruptcy setting, this meant that the Association would likely be unable to recover most, if not all of this claim from the Debtors, Mr. and Ms. Adam.

While this issue may be most relevant to associations when dealing with a case in bankruptcy, it is possible that it could also be raised in state court foreclosure cases under certain circumstances. It is also important to note that this Bankruptcy Court did not include a significant issue in the analysis regarding the Statute at issue, that being whether or not the statutory provision was “substantive” or “procedural”, as those terms apply to this situation, which could have led to a different result. (This portion of the legal analysis is quite technical and beyond the scope of this article.)

For communities whose declarations were recorded prior to the statutory changes described above, the first step in protecting the interests of the association is to review the documents to determine whether Kaufman language is already in them. If not, the board may wish to consider proposing an amendment to the owners to change the documents to include this language, if not for the entire declaration, then at least for the timing of the effectiveness of the lien of the association. Having qualified legal counsel review these issues in the documents is a strong business practice.

March 11, 2022March 11, 2022

Rental Restrictions in Homeowners’ Associations

Robert L. Kaye, Esq., BCS | Legal Morsels

A large percentage of Florida residential property owners are subject to restrictive covenants on their property, be it by a declaration of condominium or declaration of covenants. In addition to these restrictions, Florida Statutes contain additional restrictions that apply to these properties, some of which involve use restrictions. For condominiums, the provisions of the statutes are of a heightened significance because but for the statutes, condominium ownership of property does not exist. However, for homeowners’ associations, restrictive covenants have been in use for centuries, well in advance of the existence of such statutes. As a result, certain statutory provisions may not apply to every homeowners’ association in Florida.

There is a restriction within both the U.S. and Florida Constitutions that limit the ability of the state to enact a law that will impair an existing contract or vested contractual right. Use restrictions contained in declarations of covenants have been identified by Florida courts as existing contracts between the property owner and the entity that operates the community under the governing documents (the association). There is also case law in Florida that addresses whether a change in the statute applies to the community based upon if a particular phrase is included in the governing documents (commonly referred to as Kaufman language).

If the governing documents include Kaufman language, any changes made by the legislature in a given year will automatically be incorporated into the governing documents and apply to that community. Conversely, if there is no Kaufman language, only what is referred to as “procedural” changes made by the legislature will apply to that community. An example of a procedural change would be a change in a notice requirement for elections. Statutory changes that are “substantive” would not apply in that instance to that community. An example of a substantive change would be requiring the association to take on all exterior maintenance of the residential dwellings (presuming the documents do not already provide for that obligation). Without the Kaufman language in the governing documents, this latter statutory change would not apply to that community, as such change would likely be considered unconstitutional.

During the legislative session in 2021, Section 720.306 of the Florida Statutes was amended to add subsection (h), which provides, in pertinent part, that any amendment to a governing document after July 1, 2021 that prohibits or regulates rental agreements applies only to a parcel owner who acquires title to the parcel after the effective date of the amendment or to a parcel owner who consents to the amendment (with specific exceptions relative to short term rentals and limiting rentals to up to 3 times a year). However, under the analysis discussed above, rental restrictions and the ability to amend governing documents are generally considered substantive vested rights. As such, this new statute appears to impair the existing contractual rights of many property owners in homeowner association communities.

The first step in considering whether this new rental restriction change applies to a particular homeowner association community is to check the governing documents for Kaufman language (this also assumes that the documents were not initially created on or after July 1, 2021). Typically, Kaufman language is not included in original documents by developers of communities, but many associations have added it by amendment after the developer was no longer involved. If the Kaufman language is in the documents, the new statutory rental restriction provisions apply. If, however, there is no Kaufman language, the new rental restriction statute would not be applicable to the community. In this instance, the membership could still amend the governing documents to prohibit or regulate rentals within the community, which should be enforceable against all current owners, regardless of whether or not they voted in favor of the amendment.

The issue of whether or not this new statutory change regarding rental restrictions violates the Federal and State Constitutions has not been tested in the Florida or Federal courts as of this writing. Before considering amending the governing document in a homeowner association community to create rental restrictions, it is recommended to consult with the association attorney as to the limitations that may apply.

June 17, 2021June 17, 2021

New Requirements For Collection of Delinquent Assessments

Robert L. Kaye, Esq., BCS | Legal Morsels

The Florida Legislature has revised the procedures for collecting delinquent assessments, which add additional steps and delays for the owner to pay before legal action can commence and/or attorney’s fees can be recovered. Senate Bill 56 has revised Sections 718.116 and 718.121 for condominiums; 719.108 for cooperatives; and, Section 720.3085 for homeowners’ associations. With these changes, the collection procedures for all of these types of communities will be substantially the same. The new laws are effective July 1, 2021.

Initially, the new provisions have revised the time for the notices sent by the association attorney for condominiums and cooperatives to 45 days for both the pre-lien first letter and the post-lien notice of intent to foreclose. (Homeowners’ associations were already at 45 days.)

The most important and significant addition to this statutory change is the addition of a new notice requirement by associations before they may refer a matter to the association attorney for collection and recover the attorney’s fees involved. This written notice is required to be mailed by first class mail to the address of the owner on file with the association. If the address on file is not the unit or parcel address, a copy must be sent there as well. The association is also required to keep in its records a sworn affidavit attesting to the mailing. The new statute contains a form for that notice which is required to be substantially followed.

As the respective statutory provisions now indicate, associations must incur a minimum of 120 days of collection efforts before a foreclosure action can begin, with a total of three (3) separate required statutory notices. This includes the: (i) initial 30 day notice of the intent to refer the matter to the association attorney (for which no attorney’s fees can be charged to the owner); (ii) 45 days for the pre-lien notice period; and, (iii) 45 days for the pre-foreclosure lien period. As such, in order to best protect the interests of the association, it is recommended that the first 30-day notice be sent at the earliest possible date in the association collection process. This will typically be when the governing documents indicate the assessment to be “late”. Careful review of the governing documents by legal counsel should be undertaken to determine whether there is a specific “grace period” indicated in the documents before the assessment is considered late. Once that determination is made, the board should adopt a formal collection policy that incorporates these new statutory requirements, which will also need to be mailed to all owners. A new provision has also been added that begins with “If an association sends out an invoice for assessments. . .” to unit or parcel owners, such notice is to be sent by first class mail or electronic transmission (email) to the respective addresses for the owners that are in the association official records.

Moreover, if the association wishes to change the method of delivery of an invoice, the new Statute creates specific steps that must be followed precisely in order for the change to be effective. Specifically, a written notice must be delivered to the owner not less than 30 days before the change of delivery method will be implemented. The notice must be sent by first class mail to the address on file with the association. If the address on file is not the unit or parcel address, a copy must be sent there as well. In addition to the notice requirement, the owner must “affirmatively acknowledge” his or her understanding of the new delivery method. The written acknowledgment can be sent electronically or by mail, and must be maintained in the Official Records (although it is not available for inspection by other owners). However, without this acknowledgment, the association may not change the method of delivery. The Statute does not presently include a time frame for the owner to provide that acknowledgment or offer any remedy to the association if none is forthcoming. This can be particularly daunting or problematic when the association changes management companies, when the new company’s procedures differ from the prior company.

Before the association attorney can commence any collection work for an association, it will be necessary for the association to provide all of the backup documentation of the compliance with each of these new statutory requirements, as well as the information previously required (such as a current account ledger). If any of the documentation is missing with the initial turnover information, there will be delays in the collection process, which can be detrimental to the association operation. It is therefore imperative that these new procedures are fully integrated into the association operation without delay.

We recommend that you contact your Association counsel with any questions on the new procedural requirements to ensure compliance.

February 20, 2021February 20, 2021

Legal Morsel | Court Concludes That Mistakes on a Claim of Lien Does Not Invalidate the Claim

LEGAL MORSELS | BY ROBERT KAYE, ESQ., B.C.S.

The Florida Fourth District Court of Appeal recently provided a ruling regarding the ability of a homeowner’s association to successfully complete a foreclosure for unpaid assessments when there was an error in the amount indicated as being owed on the claim of lien. In the case of Pash v. Mahogany Way Homeowners Association, Inc., Case No. 4D19-3367, January 27, 2021, the Appellate Court was faced with the challenge of a lower court ruling in favor of the homeowner’s association in which the homeowner, Mr. Pash, had claimed that the amount indicated on the claim of lien was overstated from what was owed. The record also reflected that the homeowner’s association admitted that it made a mistake in its calculation of the assessments on the lien but corrected the amount when it filed the foreclosure case. It was not disputed that some assessments were delinquent when the foreclosure case began.

In a split decision, a majority of the Court focused on the requirements of Section 720.3085(1)(a) of Florida Statutes, as well as the provisions of the Declaration of Covenants for the Community. The Statute provides the following:

To be valid, a claim of lien must state the description of the parcel, the name of the record owner, the name and address of the association, the assessment amount due, and the due date. The claim of lien secures all unpaid assessments that are due and that may accrue subsequent to the recording of the claim of lien and before entry of a certificate of title, as well as interest, late charges, and reasonable costs and attorney fees incurred by the association incident to the collection process. The person making payment is entitled to a satisfaction of the lien upon payment in full.

While the case was reversed for other reasons, the majority of the Court stated that “Nothing in section 720.3085(1)(a) suggests that the claim [of lien] must be free of error for it to serve as an otherwise valid claim of lien.” The Court also concluded that the statute, as written, does not provide that an error in the amount stated in the claim of lien invalidates an otherwise valid claim by an association. Rather, the Court indicated that the association is merely asserting “a claim” in the lien and the association remains obligated to prove its claim in order to prevail in its case and homeowners have the ability to contest the claim made.

The Florida Condominium Act contains substantially the same provision as set forth above in Section 718,116(5)(b) F.S. Consequently, it is anticipated that a lower court would likely apply the conclusions of this case to a condominium association foreclosure case.

It remains to be seen whether this holding is going to be viewed as an anomaly or will be followed by the remaining District Courts in Florida. Notwithstanding this easing of the perception of association requirements on this point, it remains the recommendation that all collection efforts by associations be fully documented to a “zero” balance on the specific homeowner account to minimize any possible adverse conclusion in an assessment foreclosure case. Legal counsel familiar with community association law should be involved to assist in the formal collection efforts against any homeowner.

September 2, 2020September 3, 2020

LEGAL MORSEL: NEW FLORIDA LEGISLATION ON EMOTIONAL SUPPORT ANIMALS

LEGAL MORSELS | BY ROBERT KAYE, ESQ., B.C.S.

In the 2020 Legislative session, the Florida Legislature adopted Senate Bill 1084, which was signed into law by the Governor, and became effective on July 1, 2020. This new law addresses emotional support animals on a state level. It provides clarification regarding qualifications for this special status under Florida’s Fair Housing Act, as well as identifies penalties for wrongfully and/or fraudulently attempting to qualify for the exempt status and have the animal. However, while significant and helpful, it is also important to bear in mind that there are Federal laws on this topic that apply as well and care is needed to avoid potential conflicts.

The new Section 760.27 of Florida Statutes, within the Florida Fair Housing Act, initially adds a definition for an “emotional support animal”. Specifically, an emotional support animal is one that “does not require training to do work, perform tasks, provide assistance, or provide therapeutic emotional support by virtue of its presence which alleviates one or more identified symptoms or effects of a person’s disability.” When considering an application for an emotional support animal, the Statute indicates that the person requesting the emotional support animal cannot be required by the housing provider (which includes associations) to pay extra compensation to the provider in order for the requesting individual to have the animal.

The new Statute does allow the housing provider/association the right to deny the reasonable accommodation request under certain circumstances. One instance is if such animal poses a direct threat to the safety or health of others or poses a direct threat of physical damage to the property of others, which cannot be reduced or eliminated by another reasonable accommodation. This could be significant in the event there is an existing resident who may have a documented medical condition that would be negatively impacted by the presence of the animal (such as an allergy condition).

If the disability is not readily apparent, a housing provider/association may request reliable information that reasonably supports that the person requesting the animal has a disability and lists the types of supporting documents that would qualify as acceptable. These include: a determination of disability from any federal, state or local government agency; receipt of disability benefits or services from any federal, state or local government agency; proof of eligibility for housing assistance or a housing voucher received because of a disability; information from a health care provider, with the requirement that if such provider is not physically located in Florida, the provider must have provided in-person care or services to the applicant on at least one occasion (this “in-person” care requirement for an out-of-state provider is a significant change in the new Statute); and, information from any other source that the housing provider/association reasonably determines to be reliable in accordance with federal law. Also authorized in the new statute is for the housing provider/association to request reliable information that may include identifying the particular assistance or therapeutic emotional support provided by the specific animal; and, other information that the housing provider reasonably determines to be reliable under federal law.

If the person requesting the animal is asking for more than one emotional support animal, the housing provider/association may request information regarding the specific need for each animal. Proof of compliance with state and local requirements for licensing and vaccinating each emotional support animal may also be required.

A housing provider/association may not request information that discloses the diagnosis or severity of a person’s disability or any medical records relating to that disability. The housing provider/association may develop and make available the application form the housing provider/association prefers be used in making the application, but may not require the use of a specific form or notarized statement or deny a request solely because the requesting party did not use the housing provider/association’s method.

The statute expressly indicates that emotional support animal registration of any kind is not, by itself, sufficient information to reliably establish that a person has a disability or disability-related need. If the animal causes any damage to the premises or another person, the owner of the animal is liable for such damages.

A significant and notable portion of this Bill is the addition of Section 817.265 F.S., within the Criminal Code of Florida. This new provision identifies as a misdemeanor of the second degree for falsifying information or written documentation or knowingly providing fraudulent information or written documentation for an emotional support animal application. The wrongful conduct also includes otherwise knowingly and willfully misrepresenting through a verbal or written notice, as having a disability or disability-related need for an emotional support animal or being otherwise qualified to use an emotional support animal. This could result in imprisonment for a period not to exceed sixty (60) days and/or a fine of up to $500.00. If an individual is convicted for this conduct, the person must also perform 30 hours of community service for an organization that serves persons with disabilities or for another entity or organization that the court may decide upon. These sanctions could apply not only to the individual requesting the reasonable accommodation, but also to the “medical provider” who provides fraudulent information to support the request.

While is it significant that there are criminal sanctions included in this new statute, it is also necessary to recognize the limits that are included in it as well. The words “knowingly” and “willfully” create a substantial burden on the State in prosecuting an alleged incident since it will be required to prove beyond a reasonable doubt the knowledge and intent of the party being charged, which can be extremely difficult to do. Whether a local Assistant State Attorney is willing to pursue such a charge is generally an open question at this time.

Although it is helpful to have these guidelines in the State statutes, it is also important to keep in mind that there are Federal Fair Housing Laws that include this particular issue and whenever there is any conflict between the Federal and State requirements, the Federal law will apply. Since these types of issues can create costly potential exposure to associations, it remains a necessity that board members consult with competent association attorneys versed on this topic whenever confronted with a request for a reasonable accommodation of this type.

Attorney Robert Kaye, Author of the 'Legal Morsels' column, Next Appears on Radio Show 'Ask the Experts' Thursday, September 3rd

July 17, 2020July 20, 2020

Appellate Court Decision Results In The Need For Added Vigilance By Condominiums Undertaking Construction Projects

Legal Morsels | by Robert Kaye, Esq., B.C.S.

It is not unusual for the board of directors of a condominium association to take on construction projects within the condominium. Many such projects involve updating and redecorating the common elements. Quite often, projects can include necessary repairs or maintenance-related components along with material alterations or substantial additions to the common elements. For such material alterations to the common elements, Section 718.113 of Florida Statutes has long contained a limitation on the ability to make these types of changes as either being in accordance with the requirements of the declaration of condominium or, if the declaration has no provision, then by a vote of not less than 75% of the eligible voting interests. In a recent decision of the Florida Third District Court of Appeal, in Evelyn A. Bailey and Robert Farnik v. Shelborne Ocean Beach Hotel Condominium Association, Inc., Case Nos. 3D17–559 & 3D17-0767, July 15, 2020, the Court reviewed the actions taken by the Board of Directors of Shelborne Ocean Beach Hotel Condominium Association, Inc. (the “Association”) in extensive construction projects costing in excess of $30 million. In reporting its decision, the Court has either inadvertently or intentionally created an issue of which condominium boards now need to be very familiar so as not to be negatively impacted after significant expenditures have been made on construction projects.

In Shelborne, the Association had undertaken two rounds of construction projects, starting initially in 2010 and a second phase that began in 2013. During the project, significant construction defect issues were discovered which not only added to the project, but also caused the condominium to be completely closed from July 2013 through September 2014. The initial project and special assessments were approved by only the Board. Subsequently, in 2014 and 2016, after the project was completed, over 75% of the unit owners voted to approve the material alteration part of the project. Among the issues the Court addressed in Shelborne, was the timing of the approval by the unit owners to the material alterations.

In 2018, Section 718.113(2)(a) of Florida Statutes was amended to provide the following:

Except as otherwise provided in this section, there shall be no material alteration or substantial additions to the common elements or to real property which is association property, except in a manner provided in the declaration as originally recorded or as amended under the procedures provided therein. If the declaration as originally recorded or as amended under the procedures provided therein does not specify the procedure for approval of material alterations or substantial additions, 75 percent of the total voting interests of the association must approve the alterations or additions before the material alterations or substantial additions are commenced. This paragraph is intended to clarify existing law and applies to associations existing on July 1, 2018. (emphasis added as the new language from 2018)

While the opinion in Shelborne does not specifically indicate whether the Declaration of Condominium contained a voting requirement for material alterations, the percentage of owners is the same as what the Statute indicates. (We can only presume that the Declaration was silent and, if not, the issue may not have been raised by either party for the Court to consider.) The Court determined that some of the items of construction did not have sufficient evidence in the trial record to determine whether the items were necessary maintenance and, therefore, concluded that a unit owner vote was necessary for those items. The Court further found that since the unit owner approval did not occur before the material alterations or substantial additions were commenced, the Association was in violation of the Statute. In that the construction was already completed and the owners have clearly approved it, this decision does not provide clear guidance as to what should then occur based upon this violation.

Normally, a statutory change in 2018 would not affect or be applicable to actions taken in 2014 and 2016. However, by including the last sentence of the change to the Statute, it is considered to have been the intent of the Legislature that the Statute have retroactive application, meaning it applies to situations that pre-date the statutory change.

While the plain reading of the Statute leads to the conclusion that the requirement for the approval of the owners to take place prior to the material alteration being commenced applies to those situations in which the declaration is silent on the issue, the Shelborne decision has clouded that issue by failing to mention that distinction. Many declarations of condominium contain provisions that allow the board to make the determination to proceed with a material alteration or contains a triggering event, such as a minimum percent of the annual budget to be spent before the unit owner vote applies or a lower voting requirement of the unit owners then provided in the Statute. As a result of this decision, it is likely that courts or administrative agencies will consider the requirement to obtain owner approval before the material alteration is commenced to apply to all material alterations requiring owner vote.

The key takeaway for board members of condominium associations in Florida is to have the declaration of condominium reviewed by its association counsel to make certain that the declaration clearly provides for the manner in which material alterations to the common elements are to be handled. It is likely that the vast majority do not currently specify the timing of the owner approval or contain an allowance for it to occur after the project has commenced. Amendments to the declaration should be considered to provide clarity in the process for addressing material alterations or substantial additions to the common elements, including express authorization for the unit owner approval to occur subsequent to the commencement of the project. Without such clarity in the declaration, the association can find itself facing the possibility of having to undue significant changes already made and paid for, and for the associated expenses.

September 30, 2019

WHEN IS A MASTER ASSOCIATION SUBJECT TO CHAPTER 718 OF FLORIDA STATUTES?

Many communities throughout Florida were and continue to be developed with multiple layers of community associations. Often, such communities face legal questions that require a determination as to what statutory provisions should apply to their operation. Although it has seemed a fairly straight-forward proposition for over thirty (30) years, the issue of whether or not a recreation or master association is subject to the requirements of Chapter 718 of Florida Statutes (the “Condominium Act”) has recently become not as “black and white” as many would prefer.

In 1988, the 5th District Court of Appeal decided what had been considered the defining case on the topic, Downey v. Jungle Den Villas Recreation Association, Inc., 525 So. 2d 438 (Fla. 5^th DCA 1988). The Jungle Den decision applied a “two-pronged test” when considering the qualifications of the recreation or master association. The first test, called “constituency”, considers whether the facilities are used exclusively by condominium unit owners. The second test, called “functionality”, reviews the activities performed by the association being considered and whether it involves condominium property. In 1991, in light of the Jungle Den decision, Section 718.103(2) F.S. was amended to include a definition of an “association” to be “any entity which operates or maintains other real property in which unit owner have use rights, where membership in the entity is composed exclusively of unit owners or their elected or appointed representatives and is a required condition of unit ownership.” The Statutory change took a portion of the Jungle Den decision and codified it. In other words, under the 1991 change to the Statute, if the members of a mandatory membership recreation or master association are exclusively condominium unit owners, the recreation or master association is subject to the Condominium Act. As a result, for many years, the constituency test was applied more weightily than the functionality test and often would be the only criteria considered to conclude that the association was subject to the Condominium Act.

However, in 2018, the 3rd District Court of Appeal was called upon to review a commercial complex made up of a master association and four (4) condominium associations in deciding a case involving this same issue in Dimitri v. Commercial Center of Miami Master Association, Inc., 253 So. 3d 715 (Fla. 3d DCA 2018). The association in Dimitri was formed in 1982 and operates the master association for a group of condominium buildings, each with its own sub-association. The master association is responsible to maintain or provide for the maintenance of all common property in the complex which is not owned and controlled by any of the sub-associations. The master association did not have any responsibility on any of the condominiums. The primary issue decided in Dimitri was whether the change in the Statute in 1991 applied to the association in the case. The Court also considered the two-prong test relative to the operation of the association, and whether it was subject to the Condominium Act.

Since the governing documents for the association in the Dimitri case were recorded in 1982, the Court concluded first that they pre-dated the Statutory definition and the facts would have to be reviewed further to determine whether the newer version of the Statute applied. The decision indicated that the declaration of covenants involved did not contain the specific “magic” phrase required to result in subsequent substantive changes in the Statute being automatically applied to the association at issue, that phrase being that the community is subject to particular laws “as they may be amended from time to time.” Since the documents here did not include this language, the Court determined that the change to the Statute in 1991 did not apply to the 1982 documents and, therefore, was inapplicable to that community. Additionally, as a general rule, statutes are not retroactive in nature. In order for a Statute to be retroactive in its application, the Statute must expressly so state. The Court in Dimitri concluded that Section 718.103(2) F.S. had no such express intent and, as a result, was not retroactive in its application. Only the prior definition in the Statute when the association was formed in 1982 would be applied to this complex, which did not result in the complex being subject to the Condominium Act.

In considering the two-prong test from Jungle Den, while the constituency of the Association was exclusively condominium unit owners, the Court further concluded that the association there did not administer and manage “condominium property” as it was defined in the Statute in place in 1982. As a result, it did not satisfy the second level of the test (functionality) and, consequently, was not subject to the Condominium Act.

For any condominium community in Florida that was developed with a master and/or recreation association, a thorough analysis should be undertaken by experienced community association counsel to make certain that the master and/or recreation association is following the correct law that applies to it. Likewise, the same analysis should be undertaken for any master and/or recreation association to ensure that it is operating in accordance with the appropriate Statute and to avoid potential claims of improper governance.

September 17, 2019October 31, 2019

LEGAL MORSEL: WHEN IS A MASTER ASSOCIATION SUBJECT TO CHAPTER 718 OF FLORIDA STATUTES?

July 23, 2019October 31, 2019

LEGAL MORSEL: FIRST DISTRICT COURT OF APPEAL CLARIFIES UNIT OWNER OBLIGATIONS ON PAST DUE ASSESSMENTS AND IDENTIFIES CONFLICT WITH THIRD DISTRICT CASE

In 2013, the world of Florida condominiums was thrown by what many considered to be the controversial decision of Aventura Management, LLC v. Spiaggia Ocean Condominium Association, Inc., which, in effect, limited the obligation of an owner for unpaid assessments of prior owners. (See prior Legal Morsel articles discussing the Spiaggia cases here; and, for the follow-up case, here).

The main issue in Spiaggia addressed the limit of how far back into prior owners’ unpaid assessments a current owner will be held accountable. Section 718.116 of Florida Statutes provides that an owner is jointly and severally liable for sums due from the prior owner. Spiaggia limited that to one prior owner and for only sums unpaid during that ownership. Florida practitioners in this area of the law, including Kaye Bender Rembaum, overwhelmingly agree that the Spiaggia decision was not correct. The Florida Legislature also apparently thought so and amended Section 718.116 F. S. the following year in an effort to correct the misconception. On July 16, 2019, the Florida First District Court of Appeal issued its decision in Coastal Creek Condominium Association, Inc., v. Fla. Trust Services LLC, Case No. 1D18-1457, which expressly conflicts with the conclusions of Spiaggia as to what is owed by a current owner.

Coastal Creek Condominium Association, Inc. filed a foreclosure action to collect on unpaid maintenance assessments. The Appellate Court discusses the history of the ownership of the unit and indicates that Fla Trust Services, the defendant/current unit owner in this foreclosure, had taken title to the unit on July 26, 2016, from Homes HQ, which had purchased the property at a mortgage foreclosure sale, with title conveyed to it on June 13, 2016. The original owners in all of this, who were foreclosed upon by the lender in 2016, were Tracy Langley and Todd Levraea (called “Original Owners” by the Court). The foreclosure by Coastal Creek sought sums due from August 15, 2015, which pre-dated Homes HQ ownership and the mortgage foreclosure, when the unit was owned by the Original Owners. The lower court decided that Fla Trust owed assessments only from Home HQ’s ownership and not from the time of the Original Owners, relying upon the holding of Spiaggia. The Appellate Court disagreed with that conclusion, deciding that sums claimed by the Association from the Original Owner were owed by Fla Trust as well.

In reaching its decision, the Appellate Court reviewed the relevant portion of Section 718.116 F.S., and concluded that Spiaggia had not fully grasped the intent of the Statute, which was that a current owner is jointly and severally liable for all unpaid assessments from all prior owners, not just from the time the unit was owned by the immediately prior owner, as the Spiaggia court concluded. Home HQ was jointly and severally liable for all of the sums due from the owner prior to it, the Original Owners. As such, Fla Trust was likewise liable for these sums. As a result, the Court concluded that Fla Trust is required to pay for the assessments that were not paid by Home HQ and the Original Owners. (Fla Trust still has the ability to bring legal claims against Home HQ and/or the Original Owners for their portion of the unpaid assessments.)

As a result of this conflict between District Courts of Appeal, the First District Court has certified the conflict to the Florida Supreme Court to consider whether to resolve it. We will be monitoring the progress of that certification and report any news as it develops. However, until such time as the conflict is resolved, the effect of this conflicting decision in the First District Court of Appeal from the prior decision in the Third District depends upon where the property is located that is the subject of a condominium foreclosure. For property within the jurisdiction of the 3^rd DCA (Miami-Dade and Monroe Counties), the Spiaggia decision remains the law that should be followed, and for properties located within the 1^st DCA (the most northern and northwestern part of Florida, including Tallahassee and surrounding areas), the Coastal Creek decision is to be followed. For all other jurisdictions in Florida, lower level judges will choose between the two in reaching their decisions. This can result in inconsistent rulings on the same issue, even in the same courthouse, until the Supreme Court resolves the conflict.

Additionally, and equally important here, from the way this Appellate Court phrased its opinion, it may have clarified that the 2015 holding of the Fourth District Court of Appeal in Pudlit 2 Joint Venture, LLP v. Westwood Gardens Homeowners Association, Inc., only applies to homeowners associations and not to condominiums. (See Legal Morsel on the Pudlit decision published by Kaye Bender Rembaum, P.L. here.) The Pudlit decision limited the obligation of certain third party purchasers at a lender foreclosure sale in a homeowner association based upon provisions contained in the documents of that community rather than what is set forth in the Statute. Since Pudlit was published, there have been inconsistent rulings in the lower courts regarding whether or not that same limitation applies to condominiums. In Coast Creek, the Appellate Court expressly includes sums which came due prior to the lender foreclosure. Since the unit was purchased by a third party at the lender foreclosure sale, the Court holding here did not provide the third party an exemption from the obligation to pay for sums due prior to foreclosure, as many have argued in recent years. This may prove to be very helpful to condominium associations in Florida in the future.

July 23, 2019