Holding of Florida Supreme Court In Cohn v. The Grand Condominium Association, Inc. Reiterates Existing Law

On March 31, 2011, the Florida Supreme Court published its decision in Cohn v. The Grand Condominium Association, Inc., SC 10-430, which confirms the principle that certain statutes adopted by the State Legislature may not be applicable to existing condominiums. Contrary to some analytical comments, the holding does not create new or change existing laws

In Cohn, a mixed use condominium was created in 1986, the governing documents of which provided for a specific allocation of voting power which favored the commercial and retail unit owners. In 1995, the Florida Legislature adopted Section 718.404, F.S., regulating mixed use condominiums, providing that a mixed use condominium with 50% or greater of the ownership being residential unit owners, the residential unit owners must be entitled to vote for a majority of seats on the board. In 2007, the Legislature amended the Statute to make it retroactive.

Ms. Cohn, a residential unit owner at the Grand, requested the Grand to change its voting system to meet the new requirements of the Statute. In response, the Grand filed a declaratory judgment action in the Circuit Court, claiming the retroactive portion of the Statute was unconstitutional as an impairment of an existing contract. Both the trial court and 3rd District Court of Appeals agreed with Grand that this particular statute was an unconstitutional impairment of an existing contract right. In the Cohn decision, the Supreme Court also agreed, upholding the decision of the Third DCA, and reiterated the long-standing principle of the requirement of the existence of certain language in the declaration of condominium regarding the submission to the Condominium Act for subsequent statutory amendments to apply to that condominium.

The decision of the Supreme Court in Cohn addresses the complex issue of which of the provisions of Statute adopted after the initial declaration is recorded in the Public Records to apply to condominiums. This issue was clarified by the decision of the Third DCA in the seminal case of Kaufman v. Shere in 1977, in which the court there identified the requirement of a declaration to make its submission of the condominium to the Condominium Act “as it may be amended from time to time” in order for subsequent substantive amendments to Chapter 718 F.S. adopted after the initial recording of the declaration in the Public Records to be applicable. Without what has come to be known as “Kaufman language”, since 1977 it has been the law in Florida that the statute in effect at the time of the recording of the declaration would be the operative statutory provisions for the condominium, at least as to substantive statutory issues. Procedural statutory issues, such as the election procedures adopted by the Legislature in 1992, would apply regardless of whether or not Kaufman language was contained in the Declaration.

In Cohn, the Supreme Court identified that Kaufman language was not contained in the declaration of the Grand. As a result, the Court stated that a statutory change that substantively affected the vested voting rights of the owners of this particular condominium would not apply.

It is important to recognize that the Cohn decision has not identified a significant change in the law in Florida, rather it brings to light a concept that does not often arise. In order to evaluate whether a particular statutory provision could be challenged on this basis, the first determination that must be made is whether or not the statutory provision involves a matter that is “substantive” or “procedural” in its application. This issue is significantly more complex than it appears to be on the surface (and for the scope of this article), as these terms are not necessarily applied in the legal setting as they are in their ordinary use. What is clear from this decision is that in a multi-use condominium, the retroactive affect of Section 718.404 F.S. only applies if Kaufman language is in place.

Since 1977, it has been recommended for any community that is amending its governing documents to consider including the Kaufman language in the proposals presented to the Membership if such language is not contained in the declaration initially. In light of the holding of the Cohn decision, this recommendation remains in place.