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Constitutional Revision Commission’s Final Report /Proposed Constitutional Revisions: General Election Ballot

Michael J. Gelfand 6/1/2018

The Constitutional Revision Commission’s Final Report proposed to the citizens of the State eight sets of revisions to the Florida Constitution. The proposed revisions are scheduled to be on the next General Election Ballot, November 6, 2018. A proposed revision requires approval of sixty percent of the votes cast for the proposal. Fla. Const. Art. XI, §5(e)

Voters will look to lawyers for guidance as to the proposals. Please review the proposals so that you can provide that guidance, and understand how these proposals are important to all Florida citizens, not the least Florida lawyers, and in particular members of the Real Property and Probate Law Section of The Florida Bar and their clients. Changes to the Florida Constitution, Florida’s fundamental source of law after the Federal Constitution, impact our clients, and thus our practices.

After holding public hearings around the state to solicit citizen input the Commissioners filed 103 proposals for consideration. During open meetings at the State Capital, and a second series of public hearings around the State, the number of proposals was reduced, dropping many that were of concern to the Section. Proposals that did not survive the process included a revision to the homestead protection against forced sale, and to disability law thresholds. Surviving proposals were refined, somewhat.

Unlike Florida legislation which is required to embrace a single subject, the Commission’s proposals have no similar restraint. At least five proposed revisions contain varied subjects. The impact of grouping disparate subjects may create unusual dynamics as election day approaches.

Below are links to each proposed Revision as numbered and titled by the Commission. The Commission’s titles may be perceived as too narrow and incomplete; thus, I have supplied bullet summaries which are intended to be short, concise and non-partisan. The ballot will contain Commission approved summaries which are included in the Final Report.

SUMMARY OF PROPOSED CONSTITUTIONAL REVISIONS

Revision 1: Rights of Crime Victims; Judges

  • Victims’ rights include being informed as to process, a speedy trial, restitution and prompt return of property, protection which includes bail setting and location non-disclosure considerations, participation in clemency and expungement.
  • Speedy trial requirements which state can trigger, including 60 days from calendar call.
  • Limiting appeals and collateral attacks including two years for appeals, capital appeals being five years.
  • Judicial mandatory retirement age is to be extended to seventy-five years.
  • Agency statutory and rule interpretations are not provided judicial deference.

Revision 2: First Responder and Military Member Survivor Benefits; Public Colleges and Universities

  • State universities may not impose or increase fees without supermajority trustees’ vote (not including tuition).
  • Each state college shall have a board of trustees, and shall be supervised by the Department of Education.
  • Certain death benefits for survivors of first responders and military members are mandated.

Revision 3: School Board Term Limits and Duties; Public Schools

  • School board members are prohibited from seeking election after eight years of service.
  • School board oversight is limited to schools created by that board’s District.
  • The Legislature shall promote civic literacy for public school students.

Revision 4: Prohibits Offshore Oil and Gas Drilling; Prohibits Vaping in Enclosed Indoor Workplaces

  • Offshore extraction of oil and gas is prohibited in the state’s territorial seas unless the area is alienated.
  • Vaping is prohibited in most indoor work-spaces, excluding most private residences.

Revision 5: State and Local Government Structure and Operation

  • Regular legislative sessions in even numbered years are advanced to January.
  • Office of Domestic Security and Counter-Terrorism to support law enforcement agencies.
  • Department of Veterans’ Affairs to be headed by the Governor and the Cabinet.
  • County Constitutional Officers duties, selection and term cannot be changed by county charter.

Revision 6: Property Rights; Removal of Obsolete Provision; Criminal Statutes

  • Repeals legislative regulation of real property ownership by aliens ineligible for citizenship.
  • Deletes the prohibition of the application of a criminal penalty which was repealed after a crime occurred.
  • Repeals high speed ground transportation alternatives development.

Revision 7: Lobbying and Abuse of Office by Public Officers

  • Prohibits elected and many high placed appointed officials from lobbying for compensation while in office and for six years after leaving office, except as their office may require, and defining parameters.
  • Rule-making authorized to implement anti-nepotism requirement.

Revision 8: Ends Dog Racing

  • Prohibits racing of dogs in the State for wagers after December 31, 2020.
  • Licensed greyhound permitholder may cease dog wagering after 2018 without being subject to revocation of the right to conduct other pari-mutual activities.

Michael J. Gelfand

Florida Bar Board Certified Real Estate Attorney

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Lawyers

Gelfand & Arpe, P.A.

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New Decision: Injunctions and Prevailing Party Fees and Costs (Coconut Key HOA v. Gonzalez)

Michael J. Gelfand 5/11/2018

Yesterday morning the Fourth District Court of Appeal clarified two important concepts for practitioners: who is a “prevailing party,” particularly in a multi-count complaint context; and, when injunctive relief is appropriate, even though money may compensate for past damages?

THE ISSUES

Coconut Key HOA, Inc. v. Gonzalez, Case Nos. 4D17-739 & 17-1749 (Fla. 4th DCA May 9th, 2018), involved an appeal and a cross-appeal. Gonzalez, a homeowner, sued asserting that the homeowners’ association failed to “properly manage the surface water management system” as required by the “governing documents” and including what the appellate court stated were assertions regarding the HOA Act. Count one sought a money judgment for damages allegedly resulting from the flooding of her property. Count two sought injunctive relief relating to the homeowners’ association’s alleged management failures, including failing to address alterations.

Three distinct trial court decisions provided the foundations for the issues on appeal.

  • After a three-day trial the jury found that the association failed to maintain the surface water management system; however, the Association’s breach did not cause Gonzalez’s damages and no damages were rewarded on count one.
  • Following the jury’s determination that the Association “violated clear legal rights in its governing documents,” the trial court granted Gonzalez’s motion for entry of the mandatory injunction sought in count two.

INJUNCTIVE RELIEF

Reciting the standard of appellate review as being discretionary, the appellate court cited three elements forming the statutory basis for legal and equitable relief in §720.305(1):

  • A clear legal right which has been violated;
  • Irreparable harm must be threatened; and,
  • Lack of an adequate remedy at law.

As to the first element, the jury found a violation of the governing documents. Addressing the second element, evidence existed that flooding could only be resolved if the Association acted. For the third element, past and future damages were differentiated. While compensatory damages were potentially available, they would only address past damage and only an injunction would prevent future harm. Nevertheless, the potential of damages for future diminished property value did not negate the lack of an inadequate remedy at law.

ATTORNEYS’ FEES

Rejecting the “no money judgment, no fees” approach to prevailing party attorneys’ fees, the appellate court focused upon the “prevailing party” language in §720.305(1).

Generally, the standard of review of an entitlement to attorney’s fees is an abuse of discretion; however, where the denial of entitlement was based not on a factual determination, but on the trial court’s interpretation of a legal issue, specifically a “prevailing party” designation, a de novo standard of review applies. The trial court is subject to reversal if the decision is not supported by “logic and justification for the result and founded on substantial, competent evidence.” As a corollary, the court recounted that when a “prevailing party” fee statute applies, reasonable attorneys’ fees must be awarded to the party that “won on the significant issues.” The trial court’s focusing on damages, or the lack thereof, was in error.

In a learning moment on the way to the holding, the appellate court reminded counsel that when a court must interpret the meaning of a legal term that is not otherwise defined by contract or statute, the court will often follow the definition contained in Black’s Law Dictionary. Corresponding to this point, Black’s is quoted as defining “prevailing party” as “[a] party in whose favor a judgment is rendered, regardless of the amount of damages awarded.Black’s Law Dictionary 1154 (8th ed., 2004) (emphasis in quotation added from original).

Applying Black's “prevailing party” definition, the appellate court held that:

  • “Normally, the ‘touchstone of the prevailing party inquiry must be the material alteration of the legal relationship of the parties.’” which usually occurs when there is an enforceable judgment. Practicality trumps principle because “a moral victory or a satisfaction would not suffice.”
  • When considering the amount of fees, Proportionality, or the relationship of the client’s recovery to the amount of fees to be awarded is not a proper factor. The court noted that private claims such as this are distinguishable from public litigation where a prevailing party may not recover damages, such as civil rights cases pursuant to 42 U.S.C. §1988. Thus, a prevailing party determination was not based on “the magnitude of relief,” but instead on whether “some relief on the merits” was obtained, harkening to the concept of whether a party succeeds “on any significant issue in the litigation.”

COSTS

Regarding court costs, the trial court has no discretion but to award costs to the “prevailing party.” More on what should have been a straightforward matter is below.

CONCLUSION

Concluding, the trial court’s decision granting the injunction was affirmed and the decision denying attorneys’ fees and costs was reversed and remanded for an award not only for the injunction claim but also for the damages claim.

MORE THOUGHTS FOR THE PRACTITIONER

While the decision provides helpful explanations, there are some areas that may leave you with contradictory impressions and concerns.

  • Interestingly, the court cited initially to the Condominium Act’s authorization of a private cause of action for injunctive relief in §718.303(1) without stating the reason for the quotation. It may be that the Condominium Act specifically provides for injunctive relief for a breach where the HOA Act only generally refers to “actions at law or inequity, or both” may be brought for “redress.” §720.305(1). There does not appear to be a reason for distinguishing causes of action between the two Acts, perhaps a matter for future legislative action, but nevertheless, the different wording between the two Acts does not appear to justify a different approach.
  • Concerning the award of costs, note the seemingly inconsistent treatment. Though citing to §57.041, the court did not actually quote that statute when holding that costs are awarded to the “prevailing party.” The statute actually provides for a cost award to the “the party recovering judgment….” §57.041(1) Fla. Stat. (2017). The distinction was most recently the subject of Section commentary concerning Olson v. Pickett Downs, Unit IV HOA, Inc., Case No. 5d 15-4043 (Fla. 5th DCA, December 2, 2016). Interestingly, the HOA Act has a prevailing party cost provision which the court could have utilized to the same end.

Michael J. Gelfand

Past Chair

Real Property, Probate and Trust Law Section

of The Florida Bar

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______________________________________

Note: This article is not legal advice. Statements and comments made are not those of The Florida Bar or the RPPTL Section

© 2018 Michael J. Gelfand

Michael J. Gelfand

Florida Bar Board Certified Real Estate Attorney

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys

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New Decision: Assessments, Alterations, Injunctions and Mootness (Smulders v. Thirty-Three Sixty Cd’m Ass’n)

Michael J. Gelfand 4/27/2018

A condominium association’s completion of an alteration project does not moot a challenge to the special assessment funding the project as determined the day before yesterday by Florida’s Fourth District Court of Appeal in Smulders v. Thirty-Three Sixty Cd’m Ass’n, Inc., Case No. 4D17-1138 (Fla. 4th DCA, April 25, 2018).

The Condominium Association approved a $350,000.00 special assessment to maintain and renovate lobbies. Two unit owners sought injunctive and declaratory relief claiming that the Association violated the Declaration of Condominium. After the Association commenced the project the owners sought a temporary injunction which was denied. The owners in “a prudent act,” paid the assessment. By the time each of the parties’ summary judgment motions were heard, the project was completed and the owners of all the Condominium’s units having paid their share of the special assessment.

At the hearing on the parties’ summary judgment, the court questioned whether there was anything to enjoin noting that “it’s over.” The trial court granted the Association’s Motion for Summary Judgment.

Reversing, the appellate court stated that the mootness finding “is contrary to the system of self-government created by the Condominium Act. Section 718.303(1).

Nothing is more central to condominium governance than the manner in which a board raises money from unit owners and then spends it. Given the glacial pace of litigation, a board would almost always be able to pass a special assessment, collect it, and spend it on a project before a challenge to the assessment came to trial. If the spending of an assessment always rendered moot a challenge to its legality, then the self-governance contemplated by the Condominium Act would be severely undermined; a board would have little check on its handling of money.

The owners’ claim for reimbursement of the assessment remained if a violation of the Declaration is proven, presumably as part of the declaratory judgment count. Further, if the owners prevail, the owners are entitled to the pro rata amount of assessments funding the litigation and their attorneys’ fees pursuant to §718.303(1) Fla. Stat. (2017).

The decision provides a practical reinforcement that there does not necessarily have to be a race to court before work is completed, at least as to monetary remedies. Presumably, the concept that completed work does not moot a challenge to the authority to undertake work would equally apply to a challenge by an association against an owner’s alteration. Interestingly, the appellate court outlined monetary remedies being available pointedly not disagreeing with the trial court’s determination that an injunction to reinstate the lobby before the work was inappropriate. When a case is moot, the opinion provides guidance on the method of disposition which should be a dismissal, not final judgment.

Concerning assessment payments, the appellate court provides support to two significant strategy issues. First, noting that payment of assessments while in the dispute is normally “prudent” to avoid an assessment lien foreclosure action. Second, that there is no Condominium Act provision allowing for the deposit of disputed funds in the court registry, unlike the provision for deposit of rents in the Landlord Tenant Act §83.60(2) Fla. Stat. (2017). (In this regard, the same lack of authority appears to apply to the Homeowners’ Association Act)

It is interesting to note that this opinion was issued almost ten years after an opinion by the same author in D & T Properties v. Marina Grande Association, 985 So.2d 43 Fla. 4th DCA (2008) in which Judge Gross’ opinion held in part that “… like electricity, internet access is becoming a necessity of modern life.” Id. at 50, rejecting a buyer’s challenge to a developer’s addition of internet service as part of a “multimedia” package was a material alteration or modification of an offering allowing a buyer to cancel a contract.

Michael J. Gelfand

Past Chair

Real Property, Probate and Trust Law Section of The Florida Bar

Click www.RPPTL.com for Breaking News

About Florida’s Largest Substantive Law Section!

Note: This article is not legal advice. Statements and comments made are not those of The Florida Bar or the RPPTL Section

© 2018 Michael J. Gelfand

Michael J. Gelfand

Florida Bar Board Certified Real Estate Attorney

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys


New Decision: Appeals/Voluntary Arbitration (Bloom v. Iron Horse POA)

Michael J. Gelfand 4/12/2018

Yesterday, the Fourth District Court of Appeal strictly construed the basis for appealing an award in voluntary arbitration in a short decision. Bloom v. Ironhorse Property Owners Association, Inc., Case No.: 4D17-1985 (Fla. 4 DCA, April 11, 2018). A community association was involved; however, that may be only by happenstance.

Specifically, concerning voluntary binding arbitration, §44.104 Fla. Stat. (2016), narrowly limits the basis for a trial court to reject an award. If the issue on appeal does not fit into one of the delineated items, then, as the court quoted from the statute: No further review shall be permitted unless a constitutional issue is raised.

Please note that the cited statute and the holding do not apply to mandatory pre-suit arbitration conducted by the Division of Condominiums. The decision does not elaborate on the underlying dispute, but by the terminology utilized, it is apparent that the parties voluntarily choose the arbitration route.

Michael J. Gelfand

Past Chair

Real Property, Probate and Trust Law Section of The Florida Bar

Click www.RPPTL.com for Breaking News

About Florida’s Largest Substantive Law Section!

Note: This article is not legal advice. Statements and comments made are not those of The Florida Bar or the RPPTL Section

© 2018 Michael J. Gelfand

Michael J. Gelfand

Florida Bar Board Certified Real Estate Attorney

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys


New Decision: Interest/Assessments (First Equitable Realty v. Grandview Palace Cd’m.)

Michael J. Gelfand 4/12/2018

In the first of two interesting appellate opinions yesterday, it was held that a trial court has no discretion regarding the ministerial award of interest awarded to a condominium association seeking to collect delinquent assessments. First Equitable Realty III Ltd. v. Grandview Palace Cd’m. Ass’n., Inc., Case No.: 3D17-669 (Fla 3rd DCA, April 11, 2018).

As a result of the Association’s lawsuit against a developer, the Association recovered a judgment for unpaid assessments. The declaration of condominium provided that interest accrues at the maximum rate permitted by law. The trial court reduced the interest claim to approximately $14,000.00, about one-third of the Association’s calculation. The Court determining that “the Association was responsible for protected litigation” and the Association “failed to mitigate its damages.”

Reversing, the appellate court relied on §718.116(3) Fla. Stat. (2017), which provides a default assessment interest rate of 18% per year if the declaration of condominium fails to provide a different rate. The court held that the statute is “clear and ambiguous.” Thus, the court would not reinterpret the statute. Therefore, the trial court had no discretion to vary from the Declaration’s rate of interest.

The opinion is unclear as to the underlying facts the trial court relied upon when reducing interest. Apparently, the trial court was less than impressed with the proceedings. Whether that impression was justified or not is unknown.

This decision likely is of assistance to condominium associations where a trial court may not understand the dynamics with the need to litigate when delinquent assessments are not paid. It is also likely that the holding will apply to homeowners’ associations because the Homeowners’ Association Act provisions in §720.3085 Fla. Stat. (2017) are substantially similar to the Condominium Act provisions cited above. As a practical matter counsel likely will need to exercise some awareness of courtroom dynamics and the potential need to educate a trial before a trial court may seek to “take it out on you” by silently punishing through a reduction in attorney’s fees.”

Michael J. Gelfand

Past Chair

Real Property, Probate and Trust Law Section of The Florida Bar

Click www.RPPTL.com for Breaking News

About Florida’s Largest Substantive Law Section!

______________________________________

Note: This article is not legal advice. Statements and comments made are not those of The Florida Bar or the RPPTL Section

© 2017 Michael J. Gelfand

Michael J. Gelfand

Florida Bar Board Certified Real Estate Attorney

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys

New Decision: Ad Valorem Tax Class Action (Central Carillon Beach Cd’m v. Garcia)

Michael J. Gelfand 3/23/2018

This Wednesday the Third District Court of Appeal, addressing Rule 1.221 community association class action standing, significantly limited the authority of a community association to serve as owners’ class representative, in an apparent departure from the Florida Supreme Court’s precedent.

In Central Carillon Beach Cd’m Ass’n, Inc. v. Garcia, Case Nos. 3D17-1198 & 3D17-1197 (Fla. 3rd DCA, March 21, 2018), two condominium associations, Central Carillon Beach, administering 140 units, and 2201 Collins Avenue, administering 180 units, each filed for their respective unit owners a single joint ad valorem tax petition challenge to Miami-Dade County’s Value Adjustment Board (VAB). As the appellate opinion recognized, the statute governing the VAB petition process expressly provides criteria for a condominium association to file a joint petition, §194.011(3)(e) Fla. Sta. (2016). The associations prevailed before the VAB, obtaining approximately 20% and approximately 40% reductions, respectively. Note that association standing before the VAB was not at issue in the decision.

The Property Appraiser appealed the VAB reductions in circuit court, filing numerous lawsuits, one for each condominium unit, each lawsuit naming as defendants the individual owners of the subject condominium unit. The trial court denied the Associations’ Motion to Dismiss and Motion for Certification which sought to allow the Associations to serve as owners’ class representative. The Associations appealed.

The appellate court’s analysis focused initially on the definition of “taxpayer.” Unlike the above referenced statute applying to non-litigation VAB proceedings, the “taxpayer” party in litigation is “the person or other legal entity in whose name property is assessed….” §192.001(13) Fla. Stat. (2016).

Shifting to the Condominium Act’s grant of authority, the court commented that there was only one reference to an association’s class representative standing to defend an action. An association “may defend actions in eminent domain or bring inverse condemnation actions” §718.111(3) Fla. Stat. (2016).

Contrasting the two statutes, the court leaned to the more “precise” provision for tax appeals which requires a taxpayer to be named as a party, away from what implicitly were more general application provisions in the Condominium Act providing for defensive class action standing in reference to only eminent domain and inverse condemnation actions.

Moving to the community association class action rule, Florida Rule of Civil Procedure Rule 1.221, the court dismissed the Rule’s independent efficacy as the Rule “essentially repeats” the Condominium Act’s provisions. “Again, the oblique examples and categories within Rule 1.221 must yield to the precise legislative directive in §194.181(2).” Thus, the court held that because “the associations simply do not pay the taxes in question” each individual unit taxpayer shall be the defendant in the litigation contesting that unit’s tax. The court did recognize that a class representative would bring judicial efficiencies, but that did not trump the statutory and rule provisions.

The court’s approach is surprising considering the history and policy of Rule 1.221. The Florida Supreme Court created the rule because that Court held that the Florida Legislature did not have authority to create procedures for class action standing. See Avila South Condominium Ass'n, Inc. v. Kappa Corp., 347 So. 2d 599 (Fla. 1977). Thus, the Third District appears to be breaking with Supreme Court’s Avila South precedent. Further, not addressing the purpose of a class representative, is not a class representative just place holder in name alone? Unit owners are identifiable and are bound by any judgment in which a class representative was a defendant.

Additionally, relegating Rule 1.221 to a seemingly subordinate status to statute, the court’s partial quote, listing some, but not all claims listed as allowing class action representation, seemingly overlooks the crux of the Rule. The Rule’s text is expansive, not limited, authorizing association class action representation “…concerning matters of common interest to the members, including, but limited to:….” (emphasis added). The Rule was deliberately drafted in a broad fashion, the delineation of six categories of claims not meant to be exclusive, but to be merely examples.

The court did distinguish the taxation litigation standing issue on appeal from other situations where an association is a defendant class representative. Perhaps seeking to narrow the decision’s application, for example, the court noted that contractor lien foreclosure actions do not have the same statutory party requirements as tax litigation.

Many thanks to Mr. Christy for immediately providing a copy of the decision.

Best for the weekend.

Michael J. Gelfand

Past Chair

Real Property, Probate and Trust Law Section of The Florida Bar

Click www.RPPTL.com for Breaking News

About Florida’s Largest Substantive Law Section!

Note: This article is not legal advice. Statements and comments made are not those of The Florida Bar or the RPPTL Section. Decisions may not be final.

© 2018 Michael J. Gelfand

Michael J. Gelfand

Florida Bar Board Certified Real Estate Attorney

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys

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News: Miami-Dade County amends County Code: Requires sellers to disclose whether the property is within special taxing districts

Admin 3/21/2018

MIAMI - DADE AMENDS COUNTY CODE

Recently, the Board of County Commissioners approved ordinance 18-12 amending section 18-20.2of the Miami | Dade County Code. The new ruling calls for the seller to disclose whether the property is within one of Miami | Dade County’s 1,070 Special Taxing Districts. The seller must include speci?c language on the instrument conveying property (the deed) and have the purchaser sign it.

EXAMPLE - I HEREBY CERTIFY THAT I UNDERSTAND THAT THE PROPERTY WHICH IS THE SUBJECT OF THIS TRANSACTION IS LOCATED WITHIN _____ SPECIAL TAXING DISTRICT CREATED BY MIAMI- DADE COUNTY (OR PROPOSED TO THE BOARD OF COUNTY COMMISSIONERS) FOR THE PURPOSE OF PROVIDING LOCAL IMPROVEMENTS AND SERVICES IN THE NATURE OF _____. _______________________ Signature of Purchaser

The enforcement of this new ruling is set to begin May 17, 2018. However, there has been no clear outline as to what the penalty will be for non-compliance. Included in the new changes, the buyer will now be required to sign the deed acknowledging the disclosure. It is also unclear as to whether any liability would fall upon the title agent executing the closing should the seller not disclose the required information prior to the sale.

Currently, the new ordinance is centralized to the South Florida area, but could expand into Broward County.
 

New Decision: Condominium Arbitration (Browning v. Palisades Owners’ Ass’n)

Michael J. Gelfand 3/16/2018

Yesterday, the death knell may have been delivered to the mandatory non-binding pre-suit arbitration requirement for a condominium unit owner claims against that owner’s condominium association. The exclusion from mandatory arbitration of a “dispute” including an alleged “breach of fiduciary duty” was addressed in Palisades Owners’ Association, Inc. v. Browning, Case No. 1D17-2129 (Fla. 1st DCA, March 15, 2018),

Reinforcing that bad facts make bad law, as recited in the opinion two Association directors who are unit owners installed a permanent boat lift at the end of the condominium’s boat dock for those two owners’ “exclusive use” without obtaining approval of the unit owners. After unit owner Browning complained, the Association’s Board of Directors, including one of the two directors that installed the lift, voted to amend the “by-laws” to allow “temporary personal boat docks.” The opinion recites that a common element alteration requires super-majority unit owner approval.

Without demanding or undertaking mandatory pre-suit non-binding arbitration pursuant to §718.1255 Fla. Stat., Browning filed a complaint in circuit court. The opinion without indicating all the claims, stated that the complaint “included claims of breach of fiduciary duty by the Association….” The Association’s Motion to Dismiss predicated on the statutory arbitration requirement was denied by the trial court.

The Appellate Court in briefest part, perhaps setting the foundation for a re-hearing, recited that the statutory definition of a “dispute” which triggers mandatory arbitration, excludes “breaches of fiduciary duty”, citing to §718.1255(1) Fla. Stat. (2016). The Court rationalized that:

Browning’s complaint alleges a breach of fiduciary duty by the Association through the action of two of its board members, conflicts of interest, and violations of the Association’s by-laws. As our review is limited to the four corners of the complaint, all well-pleaded allegations must be accepted as true. Gomez v. Fradin, 41 So. 3d 1068, 1070 (Fla. 4th DCA 2010).

Thus, utilizing a binocular view of the recitation of a few seemingly “magical words” from the statute, the trial court’s denial of the Motion to Dismiss for failing to seek mandatory pre-suit non-binding arbitration was affirmed.

It is respectfully submitted that a unit owner’s mere incantation of the four words “breach of fiduciary duty” in a complaint against the owner’s condominium association fails to take into account the statute’s plain language and intent, and further is based upon misperceptions of underlying legal theories.

Starting with the statutory duty to arbitrate, the opinion paraphrased the arbitration statute, apparently overlooking the express predicate for an exclusion from the definition of “dispute,” three significant words. Compare the Court’s recitation of the exclusion to the actual statutory text. The Court’s paraphrase is as follows:

However, the Legislature specifically excluded from the statutory definition of “dispute” several categories of more complex disagreements between unit owners and condominium associations including title claims, interpretation or enforcement of a warranty, fee assessments, evictions, breaches of fiduciary duty, and claims for damages for failure to maintain common areas. § 718.1255(1), Fla. Stat. (2016).

(Emphasis added by Court). Next, compare the above to the actual text of the exclusion:

“Dispute” does not include any disagreement that primarily involves: title to any unit or common element; the interpretation or enforcement of any warranty; the levy of a fee or assessment, or the collection of an assessment levied against a party; the eviction or other removal of a tenant from a unit; alleged breaches of fiduciary duty by one or more directors; or claims for damages to a unit based upon the alleged failure of the association to maintain the common elements or condominium property.

(emphasis added). While the opinion properly states that a statute must be given its plain and obvious meaning when clear and unambiguous, in this circumstance the paraphrasing deleted critical language. The deleted words appear intended to prevent removing from a trial court what otherwise would be a “dispute” subject to mandatory pre-suit non-binding arbitration.

The opinion’s lack of specific identification of the claims and of any discussion of their interrelationship, critical in light of the “primarily involves” statutory text, led this writer to the rare delving into the record for information outside of the opinion. For example, the opinion does not state whether the plaintiff unit owner sought damages or equitable injunctive relief. A review of the Bay County Clerk's docket reveals a Complaint that has but one count entitled “Count I – Injunctive Relief//Specific Performance as to Defendant Palisades Condominium Association [sic.].” The prayer for relief demands:

… any and all immediate and permanent injunctive relief/specific performance to do the allegation in this complaint [sic], plus damages recoverable under law, plus interest and costs and attorneys’ fees together with any all other relief deemed just and appropriate.

Beyond the title of the sole count in the Complaint misnaming the defendant Association and being identified as “Count I” when there is no second count, the single count contains contradictory allegations if the claim is primarily to seek damages for breach of fiduciary duty:

  • “this is an action in equity to compel specific performance of a restrictive covenant and to further enjoin… and damages….” (Complaint Paragraph 28).
  • “Plaintiff has no adequate remedy at law for breach of the Declaration….” (Complaint Paragraph 32).
  • “Plaintiff has suffered and is suffering irreparable injury.” (Complaint Paragraph 36).

As such, pleading claims in equity for injunctive relief would appear to bar a simultaneous claim in the same count for an action at law for damages! It must be stressed that this is not the situation where the Complaint pleads relief in different counts where alternatively may be alleged, more of which is below.

In addition, the opinion appears to take for granted that as a matter of law there are “claims of breach of fiduciary duty against a condominium association….” The Condominium Act clearly states in plain language:

The officers and directors of the association have a fiduciary relationship to the owners.

§718.111(1)(a) Fla. Stat. (2017) and (2016) (emphasis agdded).

Notably, the opinion does not site to the statute quoted above or the decision in Collado v. Baroukh __So.3d __, Case no. 4D16-2075, Fla. 4th DCA August 30, 2017 (Mandate Issued), which conclusively held:

Count one improperly alleged the association breached a fiduciary duty to its unit owners even though as a corporate entity, it does not have a duty to its unit owners. See § 718.111(1), Fla. Stat. (2016) (only officers and directors of a corporate entity have a fiduciary duty, not the corporate entity).

(emphasis added.) Thus, alleging a breach of fiduciary duty by the association does not create a cause of action.

If there was to be a claim for breach of fiduciary duty, then the Complaint would have to comply with the pleading requirements of Perlow v. Goldberg, 700 So. 2d 148 (Fla. 3rd DCA, 1997). While not excusing the conduct as alleged, in order to properly plead a count for breach of fiduciary duty, the Complaint would have to name as defendants the directors whom allegedly breached their duty which the Complaint does not.

Portions of the opinion indicate that there may be some misunderstandings that lead to the result, in addition to the paraphrasing of the arbitration statute. The opinion refers to the “by-laws” regarding amendments concerning common element use rights; however, the Complaint while mentioning the “By-laws” apparently once in the allegations (Complaint Paragraph 8), other references are to the Declaration of Condominium or to Rules. The By-laws at least in the form attached to the Complaint as Exhibit B do not include restrictions on use or changes to common elements or amendments for changes to the common elements.

If this opinion stands it is feared that the opinion would provide a condominium unit owner a unilateral trap door to escape from the Condominium Act’s mandatory non-binding pre-suit arbitration requirement by just incanting the magical words “breach of fiduciary duty” regardless of whether an actual claim was alleged or if it was just a tangential rather than primary focus of a claim. In this case, a decision the issues revolve around use and limitations on change, the vote by one director with a potential conflict of interest and not named as a defendant appears tangential, and not primary to the claim.

You can see how this decision could gut the “mandatory” requirements of the statute because one would expect every unit owner bringing a claim would assert that the failure to follow the “governing documents” would be a breach of fiduciary duty if there was no “primary” involvement. Because a unit owner normally does not owe a fiduciary duty to the owner’s association, this would make the trap door swing in only one direction, relegating only condominium associations to the arbitration program, again, clearly contrary to the legislative intent.

No matter what one may think of the arbitration program as it creaks away a shadow of its former self, this end run around the program’s jurisdiction is not a suitable or efficient method of attacking the process.

Michael J. Gelfand

Past Chair

Real Property, Probate and Trust Law Section of The Florida Bar

Click www.RPPTL.com for Breaking News

About Florida’s Largest Substantive Law Section!

Note: This article is not legal advice. Statements and comments made are not those of The Florida Bar or the RPPTL Section. Decisions may not be final.

© 2018 Michael J. Gelfand

Michael J. Gelfand

Florida Bar Board Certified Real Estate Attorney

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys


New Decision: Business Records Exception (Jackson v. HFC)

Michael J. Gelfand 3/14/2018

Dear Committee Members:

Abracadabra! With a flick of the hand the admission of business records was simplified, at least within the jurisdiction of the Second District Court of Appeal following Jackson v. Household Finance Corp III, 43 Fla. L Weekly D261 (Fla. 2nd DCA, January 31, 2018). This decision likely will ease concerns within the First and Second Districts when planning how to lay a foundation for admission of records when management or administrators change, such as management companies or loan servicers.

While the mere incantation of statutory “magical words” will now pave the way for consideration of records in the Second District, the Court avoided comment on the policy implications which eventually must be addressed by the Florida Supreme Court because Jackson creates a conflict between with the Fourth District Court of Appeal.

HFC sought to introduce lender transaction records in a mortgage foreclosure action. HFC’s witness’s testimony mimicked word for word the regularly conducted business activities exception to the hearsay rule, §90.803(6) Fla. Stat. (2014). HFC’s witness did not explain how the witness obtained personal knowledge of record keeping systems. The trial court admitted the records.

Affirming, the Appellate Court set out a two part test for admission. Reviewing precedent, first, a proponent’s burden of proof for the admissions of a business record may be laid with the “magical words” reciting the text of the statutory exception of the hearsay rule. Once that predicate is established, then, second, if there is an objection to admission of the record the burden of proof shifts to the opponent to undermine the witness’s credibility. An example of an opponent’s strategy may be by demonstrating that the witness was unqualified by inadequate personal knowledge or otherwise.

The Jackson Court relied in part on Nordyne, Inc. v. Fla. Mobile Home Supply, Inc., 625 So. 2d 1283, 1288 (Fla. 1st DCA 1993). Nordyne recounted the testimony of the records custodian which when compared to the statutory hearsay exception, appears to track the statute’s text; thus, the testimony satisfied the statutory requirements and that court reasoned, should have been admitted. Therefore, though the term “magical words” was not utilized in Nordyne, that is apparently sufficient in the jurisdiction of the First District Court of Appeal. It is noted that the Second District doubled down on Jackson recently in Knight v. GTE Federal Credit Union, case no. 2D16-3241 (Fla. 2nd DCA, February 14, 2018).

The Jackson Court sought to distinguish and certified conflict with Maslak v. Wells Fargo Bank, N.A., vg190 So. 3d 656 (Fla. 4th DCA 2016), which in turn relied upon Sanchez v. Suntrust Bank, 179 So.3d 538 (Fla. 4th DCA, 2015). Thus, the Jackson decision will likely not have state wide application, especially within the jurisdiction of the Fourth District. Trial courts within the First District will likely follow Nordyne.

As a practical matter, this statute reinforces the teaching that proponents offering to introduce business records should have the hearsay exception statute ready to recite the magical words (not abracadabra!). Also, the Court reminds litigants of what may be overlooked, that business records may be admitted by a “certification or declaration,” without a live witness, so long as notice of an opportunity for inspection in advance is provided pursuant to §90.803(6)(c) and §90.902(11).

In conclusion, it appears that the broad approach for admissibility of business records that began with Glarum v. LaSalle Nat’l. Ass’n. 83 So.3rd 780 (Fla. 4th DCA 2011), continues. As to whether this trend stays true to the policy of ensuring genuineness and authenticity is a question apparently for another time.

We await word from the Supremes!

Michael J. Gelfand

Past Chair

Real Property, Probate and Trust Law Section of The Florida Bar

Click www.RPPTL.com for Breaking News

About Florida’s Largest Substantive Law Section!

Note: This article is not legal advice. Statements and comments made are not those of The Florida Bar or the RPPTL Section

© 2018 Michael J. Gelfand

Michael J. Gelfand

Florida Bar Board Certified Real Estate Attorney

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys

New Decision: Relinquished Dedications (Pelican Creek HOA v. Pulverenti)

Michael J. Gelfand 3/14/2018

The benefit of living on the edge was apparent, so to say, in Pelican Creek Homeowners, LLC v. Pulverenti, Case No.5D16-4046 (Fla. 5th DCA February 2, 2018).

In this case, the edge was platted property. Specifically the issues involved: Who owns real property dedicated in a plat to a county for street and easement purposes after the county relinquishes its dedicated rights? Are there special considerations when the dedicated area is just inside a plat’s boundary?

The HOA and some owners of lots within a plat sued to require removal of the Pulverentis’ dock and boathouse allegedly constructed on the Plaintiff owners’ property. The trial court facing dueling motions for summary judgment denied the Plaintiff owners’ motion, but granted the Pulverentis’ motion.

In brief review of the facts, a plat created in 1960 included Plaintiff owners’ lots, and dedicated to Brevard County a ten-foot drainage easement area along the north side of a canal on the plat’s “margin” which was just inside the plat’s boundary. In 1980, the County relinquished its right to the easement area. The dock and boathouse were constructed on this easement area in 2006. The Pulverentis apparently own property adjoining, but not within, the northern boundary of the plat.

Initially the appellate court differentiated between dedications created by statute and dedications by common law. The Court’s explanation is summarized as:

  • A common law dedication subjects property to a use easement; but, does not divest the owner of title.
  • A statutory dedication pursuant to §95.361 Fla. Stat. (2016) may vest title in the named political subdivision. Filing a map that refers to the dedication provides “prima facie evidence” of a statutory dedication and transfer of title to the political subdivision.

Here, the 1960 plat dedication does not refer to the statute or an intent to transfer; thus, there was no statutory dedication and title remained in the dedicator at the time of the dedication.

Pursuant to §177.085 Fla. Stat. (2016), codifying the common law rule, the transfer of property subject to a plat with a reservation for streets and easements creates a presumption that the abutting lot owners own to the center of the road or easement. Though the statute allows an exception when the dedicator files suit to reserve title, the dedicator did not timely do so.

When the dedicated area is not located between two lots, such as when the dedication is to an area within and bordering the edge of a plat, the “margin,” common sense dictates that the one adjoining lot within the plat retains ownership of the dedicated area, not just to the centerline.

Why? The Court recognized that a line must be drawn to avoid the impossibility of a parcel of land not having an owner upon relinquishment of the dedication. Two bases for their holding appear to be:

· A lot outside the plat should not enjoy half of the easement area because the lot outside the plat did not share a common grantor.

· A lot within the plat would enjoy the greatest benefit because the area adjoins the lots and would provide, in this instance, drainage for future maintenance.

Here because the Plaintiff owners’ lots are the closest to the easement area which is on the edge of a plat, the owners can be said to be the only property owners that contributed to the creation of the easement area. Also, when the County vacated the dedication, public policy supports the Plaintiff owners owning what appears to be an extension of their lots into the easement area, the easement area not being carved from the Pulverentis’ lot. As a result, the trial court’s summary judgment was reversed and remanded. Note that the Court’s textural description of the property indicates that a canal separates the Plaintiffs’ lots and the easement area, a distance that did not apparently impact the Court’s reasoning, but which might have an impact under other circumstances.

This decision is of interest to the practitioner as it contains a thorough explanation of the difference between common law and statutory dedications as well as differentiating tracts that bound a plat.

One question raised by the opinion’s choice of words is the difference between “revoking,” “abandoning” or “vacating” a dedication? The opinion utilizes these terms apparently interchangeably.

As is increasingly common, would the result have changed if the property adjoining the plat was owned by a common grantor/dedicator of the first plat? Developers of planned communities frequently plat one portion at a time, and adjoining plats will be created by a common grantor. As the opinion appears in part to rest upon the assumption that there is not a common grantor, the result could change under this scenario.

Though perhaps not at issue in this matter, but occurring in other developments are irregularly drawn lots, not perfect rectangles. When a lot line meets a dedicated area at a non-perpendicular angle, how should a lot’s property line extend in that dedicated area.

Further, while it would have been helpful, it apparently was not necessary for the Court to reach the question of what is the effect of a plat’s purported dedication to a non-public, private entity, such as a homeowners’ association.

Michael J. Gelfand

Past Chair

Real Property, Probate and Trust Law Section of The Florida Bar

Click www.RPPTL.com for Breaking News

About Florida’s Largest Substantive Law Section!


Note: This article is not legal advice. Statements and comments made are not those of The Florida Bar or the RPPTL Section

© 2018 Michael J. Gelfand

Michael J. Gelfand

Florida Bar Board Certified Real Estate Attorney

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys


New Decision: Laundry Contracts: Unlawful detainer (CSC ServiceWorks the Boca Bayou Cd’m)

Michael J. Gelfand 3/7/2018

Wednesday morning the Fourth District Court of Appeal issued what may be the year’s first real “condominium case” CSC ServiceWorks, Inc. v. Boca Bayou Cd’m Ass’n, Inc. case no. 4d 12-0974 (Fla. 4th DCA, March 7, 2018). Or at least it addressed a condominium situation.

The dispute harkens back to old English common law concepts which is especially appropriate as today over seventy of our peers are scheduled to sit for the Condominium and Planned Development Board Certification Exam which is based upon fundamental real property concepts!

The battleground may be familiar, a condominium’s laundry rooms. The warriors just as familiar, the “old” laundry machine company, the “new” laundry machine company, and the condominium association.

Boiled down to essentials, CSC ServiceWorks lease of the condominium’s laundry rooms contained a right of first refusal apparently for a new lease which survived for one year beyond the lease expiration. After a lease renewal period CSC continued to occupy the laundry rooms, paying the condominium association rent on a month to month basis for nearly two years.

Apparently because of owner complaints the Association began a bidding process for a new lease in which CSC participated. Commercial Laundry was selected to be the new lessee and sought CSC to remove CSC’s machines. CSC promised to schedule machine removal, but did not do so. After not responding to a second request for removal, CSC responded to a third advising that there would be scheduling, but again without follow up. Instead, a month after the initial request to remove the machines CSC asserted that CSC would exercise its right of first refusal.

In light of CSC’s refusal to remove its machines, the Association allowed Commercial to disconnect CSC’s laundry machines. CSC’s machines were left in the laundry rooms. Though CSC was never denied access to the laundry rooms when CSC refused to remove its machines the Association demanded removal and provided notice of intent to commence a tenant eviction action. CSC then removed its machines.

CSC filed numerous claims including an unlawful detainer claim that was severed and proceeded to jury trial. The jury rendered a verdict in the Association’s favor.

The appellate court affirmed in large part relying upon the unlawful detainer statute:

No person who enters without consent in a peaceable, easy and open manner into any lands or tenements shall hold them afterwards against the consent of the party entitled to possession.

§82.02(1) Fla. Stat. (2017). The court identified three elements for the cause of action:

(1) plaintiff was in peaceful possession of the property;

(2) plaintiff was ousted of actual possession of the property; and

(3) defendant withheld possession of the property from plaintiff without consent or legal process.

Quoting from Floro v. Parker, 205 So. 2d 363, 367 (Fla. 2d DCA 1967).

It appears from the opinion that as a matter of law that an ouster is not the simple act of disconnecting CSC’s laundry machines and moving the machines to an opposite side of the laundry rooms, but within the leased premises, remaining open to the tenant. CDC’s claimed right to maintain the connections was controlled by the lease which was not at issue in the unlawful detainer proceeding. The court further elaborated that the unlawful detainer action was “about actual physical dispossession of real property, not constructive or useful disposition.”

This decision reminds practitioners that it sometimes it bears looking beyond the Condominium or Homeowners’ Association Acts, and even beyond your client’s contract for remedies and relief, in this case, the common law incorporated into Florida Statutes Chapter 82. It is also of interest in this matter that the machines were disconnected after the lease expired and possession was on a month to month basis. There is also the Court’s legnthly recitation of the requests for removal and CSC’s apparent lack of follow through. Of course, would you really want a jury trial?

Good luck to the Certification Exam takers.

Have a great rest of the week.

P.S. I have some notes on decisions issued since the beginning of the year that will shortly be forthcoming.

Michael J. Gelfand

Past Chair

Real Property, Probate and Trust Law Section

of The Florida Bar

Click www.RPPTL.com for Breaking News

About Florida’s Largest Substantive Law Section!

______________________________________

Note: This article is not legal advice. Statements and comments made are not those of The Florida Bar or the RPPTL Section

© 2018 Michael J. Gelfand

Michael J. Gelfand

Florida Bar Board Certified Real Estate Attorney

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys

New Decision: Two Islands Dev v. Clarke (SLAPP)

Michael J. Gelfand 3/7/2018

What may be the first reported Florida appellate court decision applying the Homeowners’ Association Act’s SLAPP suit prohibition, §720.304 Fla. Stat. (2015), appeared recently in Two Islands Dev. Corp v. Clarke, Case No. 3D 16-388 (Fla. 3rd DCA, January 24, 2018).

Described as the fifth of a “series of cases” the facts were a bit long compared to the HOA law impact.

Setting: Miami-Dade County. A road from “Williams Island” connects by a bridge to the “South Island” and the road continues across another bridge to the “North Island”.

Appellants/Plaintiffs: Sought to develop on the North Island a 16 story two tower condominium.

Appellees/Defendants: Owners of single family residential homes on the South Island

Complaint. North Island development entities five count complaint against the South Island homeowners included claims for breach of covenant, specific performance and breach of duty of good faith and fair dealing alleging the South Island homeowners allegedly “have taken steps to protest or otherwise interfere with the development.” Wrongful conduct allegedly included “instituting lawsuits, lobbying city officials, and interfering and preventing a settlement of a settlement of a separate lawsuit creating delays and additional expenses and lost sales.”

Trial Court Disposition. Motions to dismiss an amended complaint were granted, including dismissing the three causes of action identified above because the defendants did not sign the covenants, the defendants are not parties and are not bound by the covenants, and “the litigation privilege and anti-SLAPP statute (§720.304, Fla. Stat. (2015)” applied to the claims asserted in the amended complaint.

Appellate Holding: Following a detailed analysis, the Appellate Court held that “South Island defendants were not parties or signatories” to the covenants and thus were not bound by the covenants. The South Island Homeowners Association apparently was a party to the covenants but that did not bind the individual owners, especially as the owners’ lots were excluded from the covenant.

The Appellate Court after announcing its affirmance of the trial courts dismissal on substantive grounds, noted at footnote 10 that an alternative ground of dismissal, the anti-SLAPP statute, was also an appropriate basis for dismissal.

It appears unfortunate that the Appellate Court did not provide additional detail regarding the anti-SLAPP factors. One might surmise from the summary nature of footnote 10 that that the Complaint’s allegations based upon the filing of a lawsuit and lobbying public officials lead as a matter of law to a SLAPP dismissal.

The relatively lengthy decision touched upon many areas that may also be of interest to litigators including: between an oral decision and entry of a written order, a Plaintiff may squeeze in a voluntary dismissal divesting the trial court of jurisdiction to enter the order which was the basis for reversing the trial court’s dismissal of the voluntary dismissed counts; and, the broad scope of the litigation privilege, protecting statements made in pleadings related to the litigation.Dear

Have a great day, and may the year be one of good health and peace.

Michael J. Gelfand

Past Chair

Real Property, Probate and Trust Law Section

of The Florida Bar

Click www.RPPTL.com for Breaking News

About Florida’s Largest Substantive Law Section!

______________________________________

Note: This article is not legal advice. Statements and comments made are not those of The Florida Bar or the RPPTL Section

© 2018 Michael J. Gelfand

Michael J. Gelfand

Florida Bar Board Certified Real Estate Attorney

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys

New Decision: Ice v. The Cosmopolitan Residences (Tortes and Agency)

Michael J. Gelfand 1/23/2018

Among the end of years decisions was one highlighting an association’s potential liability for the alleged wrongful conduct of the association’s manager, Ice v. The Cosmopolitan Residences on South Beach, A Condominium Association, Inc. Case No. 14-3999,42 Fla. Law L Weekly D 2604 (Fla. 3rd DCA, December 13, 2017).

Ice obtained title to a condominium unit as a result of the Condominium Association’s assessment lien foreclosure sale. His title was subject to a pending mortgage foreclosure action. Upon his being “surprised” at the lender’s 24-hour notice and writ of possession being posted on his door, Ice sought to remove some of his possessions, but was unable to secure storage for all.

From this point, what occurred apparently was greatly disputed. As this matter was an appeal from the granting of a motion to dismiss, the Court addressed Ice’s allegations which included the following:

  • The Association’s property manager instructed the Deputy Sherriff removing Ice’s property to place the property in the Condominium parking garage around which the manager placed barricade tape to provide caution and deter thieves.
  • The same day Ice discovered that the Association deactivated his access card preventing him from removing his property.
  • The Association’s security guard told Ice that he should contact management the next day for access to remove the property.
  • The Association’s property manager after the manager’s request for Ice’s couch and other items was refused by Ice, the manager stated that Ice could not access his property that the property was disposed, and if Ice returned he would be removed as a trespasser.
  • “A few days later” the Association’s security guard asked if he could have the property in Ice’s storage unit.

Ice also alleged that he never received any of his property. The court dismissed Ice’s Complaint with prejudice.

The dismissal of Ice’s conversion count was reversed. The Complaint alleged the Association’s intentional control over Ice’s property with an intent to possess some or all of Ice’s property. The alleged “quid pro quo” for Ice to turnover certain items in return for access was without a legal right. The property retained in the storage unit was never abandoned and for which Ice made demands and undertook to recover.

The Association’s defense based on the Landlord Tenant Act was not applicable because the situation did not involving the rental of a dwelling unit. Further, the exculpation provisions of §83.62(2) Fla. Stat. (2012), applies to the sheriff, landlord and landlord’s agent, not including the Association or it’s manager.

As the wave of the great recessions foreclosures may have crested, numerous writs of possession continue which have led to sheriffs removing and depositing property. Most associations do not want to see any person’s property deposited on the street in front of the condominium or a home. If an association allows the property to remain within the condominium or common area, then the association likely would want to take care not to violate the (former) owner’s right to possess his or her property. In this regard, association managers should be careful not to deprive owners of their rights or be seen to inappropriately bargain.

The dismissal as to the count seeking the breach of bailee’s duty was affirmed because the Association was not alleged to have obtained “independent, temporary, exclusive possession of the property from Mr. Ice.” The intervening efforts of the Deputy Sheriff appeared to prevent this claim from reaching fruition.

What is to be learned? Plan in advance. If a writ of possession is to be enforced, then associations should consider where would be best for property to be moved, of course in conjunction with law enforcement. Association’s should likely avoid taking possession or control. Personnel likely should be instructed not to bargain for the property.

Michael J. Gelfand

Past Chair

Real Property, Probate and Trust Law Section

of The Florida Bar

Click www.RPPTL.com for Breaking News

About Florida’s Largest Substantive Law Section!

______________________________________

Note: This article is not legal advice. Statements and comments made are not those of The Florida Bar or the RPPTL Section

© 2018 Michael J. Gelfand

Michael J. Gelfand

Florida Bar Board Certified Real Estate Attorney

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys


New Decision: Waverly 1 and 2 v. Waverly at Los Olas Cdm (Covenant Interpretation)

Michael J. Gelfand 1/23/2018

Continuing the end of year clean up, when faced with three different covenant provisions addressing the same issue, how would a court proverbially “split the baby” was addressed in Waverly 1 and 2, LLC v. Waverly at Las Olas Condominium Association, Inc., Case No. 4D16-2866, 42 Fla. L. Weekly D2569 (Fla. 4th DCA December 6, 2017).

Appellant, the Waverly LLC, owned two commercial units at the “mixed use” Condominium. The Waverly LLC apparently removed two $18,000.00 canary palm trees which were “appurtenant” to the owner’s condominium units. The Declaration provided in pertinent part as follows:

9.1 … no unit owner shall cause or allow any improvement or changes to… any landscaping… without first obtaining the written consent of the Board….

9.3 Anything to the contrary notwithstanding, the foregoing restrictions of this section 9 shall not apply to Developer owned Units or Commercial Units…. Additionally, each commercial unit owner shall have the right, without consent or approval of the Association, the Board of Directors or other Unit Owners, to make alterations….

17.4 The foregoing shall specifically not apply to the Owners or the Commercial Units specifically the Owner of Commercial Units expressly permitted….

After a non-jury trial the trial court found that the landscaping was a Common Element and that the commercial unit owners were required to obtain written consent before altering landscaping appurtenant to their unit.

The Court recited what we may commonly refer to as “judicial rules of interpretation” First priority is the intent of the parties which should be “discerned from within the ‘four corners of the document,’” quoting Emerald Pointe POA v. Commercial Const., 978 So. 2d 873, 877 (Fla. 4th DCA 2008). In addition, interpreted language must be “read in conjunction with the other provisions….” Royal Oak Landing HOA v. Pelletier, 620 So. 2d 786, 788 (4th DCA 1993). Finally, quoting again from Emerald Pointe “Where contractual terms are clear and unambiguous, the court is bound by the plain meaning of those terms.” 978 So. 2d at 877.

Thus, the “Notwithstanding” language of Article 9.3 governs, and the judgment reversed with directions on remind to enter judgment in favor of the owner!

This decision is helpful to the practitioner in re-enforcing the rules of judicial interpretation. Of further significance to the Association practitioner was the court’s commentary on the “rule of adverse construction.” This rule is invoked “where a contract is ambiguous, it will be interpreted against the drafter.” This is to be a “rule of last resort”, applied only if the party’s intent cannot be “conclusively determined.” citing again to Emerald Pointe at 878 n.1.

As we draft covenants, either originally as developer’s counsel or amendments as association counsel, this decision reminds of the potential problem of utilizing the “notwithstanding” language and taking to help ensure that the end result is clear, albeit recognizing that the true test may be decades latter and with absolute clarity of 20-20 hindsight.

Happy drafting!

Michael J. Gelfand

Past Chair

Real Property, Probate and Trust Law Section

of The Florida Bar

Click www.RPPTL.com for Breaking News

About Florida’s Largest Substantive Law Section!

______________________________________

Note: This article is not legal advice. Statements and comments made are not those of The Florida Bar or the RPPTL Section

© 2018 Michael J. Gelfand

Michael J. Gelfand

Florida Bar Board Certified Real Estate Attorney

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys


RPPTL New Items: Altman Contr. v. Crum & Forster (Chp. 558 and Duty to Defend)

Michael J. Gelfand 1/22/2018

Catching up on holiday reading, the Supreme Court of Florida’s decision on Altman Contractors, Inc. v. Crum & Forster Specialty Insurance Company, Case No. SC16-1420, 42 Florida Law Weekly S 960 (Fla. December 14, 2017), may seem to focus on narrow issues but is jam packed with tidbits for the office practitioner and the litigator whether your practice is limited to community association law, or a broader civil practice. Drawing our attention are the four opinions issued.

The opinion of a majority, four responded to the request from United States Court of Appeals for the Eleventh Circuit. The Supreme Court rephrased the certified question as follows:

Is the notice and repair process set forth in chapter 558, Florida Statutes, a “suit” within the meaning of the commercial general liability policy issued by C&F to Altman?

Altman Contractors, Inc. v. Crum & Forster Specialty Ins. Co., 832 F.3d 1318, 1326 (11th Cir. 2016). The court answered yes:

… because the chapter 558 presuit process is an “alternative dispute resolution proceeding” as included in the policy’s definition of “suit.”

The facts may appear pedestrian. Sapphire Condominium provided Altman numerous Chapter 558 notices of claim from April 2012 through November 2012 claiming over 800 defects. In January 2013 Altman provided its insurer Crum & Forster (“C&F”) notice of the claims and a demand for coverage. C&F declined to defend asserting that the notices did not constitute a “suit” under the policy.

Altman retained its own counsel. In August 2013 C&F provided a reservation of rights letter and C&F retained counsel to defend Altman. Altman objected to new counsel and demanded that Altman’s original counsel continue and that C&F reimburse for the expense of its counsel. Ultimately, Altman settled all of the claims, the Association not filing a lawsuit.

Altman filed a declaratory judgement action against C&F resulting in the District Court finding no policy ambiguity on the issue of coverage, denying Altman’s motion for partial summary judgment and granting C&F’s motion for partial summary judgment. Altman Contractors, Inc. v. Crum & Forster Specialty Ins. Co.,124 F. Supp. 3d 1272, 1275 (S.D. Fla. 2015).

Construing Chapter 558 Fla. Stat. (2012), in context of the policy, the court then quoted from the policy which defines a “suit” as not just a complaint filed in court:

“Suit” means a civil proceeding in which damages because of “bodily injury,” “property damage” or “personal and advertising injury” to which this insurance applies are alleged. “Suit” includes:

a. An arbitration proceeding in which such damages are claimed and to which the insured must submit or does submit with our consent; or

b. Any other alternative dispute resolution proceeding in which such damages are claimed and to which the insured submits with our consent.

Ultimately focusing on the “other alternative dispute resolution proceedings” language, and relying in part on Black’s Law Dictionary’s definition as “[a] procedure for settling a dispute by means other than litigation” the court held that the Chapter 558 proceedings fall under the policy’s definition of a “suit.”

On the path to this conclusion, the Court engaged in a number of interesting discussions. Harkening back to the Court’s decision in Raymond James Financial Services, Inc. v. Phillips, 126 So. 3d 186 (Fla. 2013) the Court revisited what constitutes a “civil proceeding.” Referring to only the statutory text, a “chapter 558 notice and repair process cannot be considered a “civil proceeding” because the process is voluntary, does not involved in adjudicatory body, or produce legally binding results.

The Court noted that §558.001 Fla. Stat. was amended to add that the benefits of the Act were extended to …. “the insurer of the contractor, sub-contractor, supplier, or design professional with the opportunity to resolve the claim through confidential settlement negotiations without resort to further legal process….” (Ch. 2015-165, § 1, Laws of Fla.). The Court did not comment that while insurers were provided an “opportunity” to participate, the statute does not expressly require the insurer to participate. The opinion does not comment as to why the legislature may have amended the law.

The Court was somewhat fractured. Four opinions were provided. A clear majority joined the courts opinion. Justice Lewis provided a concurrence and Justice Pariente separately provided concurring and descending opinions, as did Justice Lawson. These minority opinions considered whether the underlying policy provided coverage for the claim an issue that the majority opinion sidestepped when focusing only on the duty to defend.

How will this decision affect the community association, and likely other practitioners? This will focus on whether initiation of alternate dispute resolution processes such as, for example, mandatory pre-suit mediation provided by §718.311 Fla. Stat. trigger a duty to defend? This issue will send practitioners to review client’s policies.

What else? Of course, consider that the decision will provide insurers an impetus for insurers re-write their policies definition of a “suit.” Until then, consider what other ADR processes may trigger a duty to defend, of course depending upon your client’s policy provisions.

Thank you to Scott Pence, Chair of the RPPTL Insurance and Surety Committee for providing a heads up concerning the decision. For those that address insurance issues, you should consider joining the Insurance Committee. Check it out at www.rpptl.org.

Be certain to sign up for the Real Property and the Condominium certification review seminars scheduled in Orlando for February 9th and 10th.

Belated good wishes to all for a successful, healthy and positive new year.

Michael J. Gelfand
Past Chair
Real Property, Probate and Trust Law Section of The Florida Bar
Click www.RPPTL.com for Breaking News
About Florida’s Largest Substantive Law Section!

Note: This article is not legal advice. Statements and comments made are not those of The Florida Bar or the RPPTL Section
© 2018 Michael J. Gelfand

Michael J. Gelfand
Florida Bar Board Certified Real Estate Attorney
Florida Supreme Court Certified Mediator:
Civil Circuit Court & Civil County Court
Fellow, American College of Real Estate Attorneys

New Decision: It’s a lien! (Calendar v. Stonebridge Gardens Section III Cd’m)

Michael J. Gelfand 12/15/2017

A dissent occasionally rises to become law, and the author vindicated; however, usually that occurs decades later. Turnaround was evident in Wednesday’s decision by the Fourth District Court of Appeal in Calendar v. Stonebridge Gardens Section III Cd’m Ass’n, Inc., Case No. 4d 16-3393 (Fla. 4th DCA, December 13, 2017).

The issue in Calendar was whether when disbursing surplus sale proceeds a Florida condominium association that has not recorded a claim of lien has priority over the immediately former unit owner. The holding may have significant implications far beyond the tax sale context.

The court focused on the following Condominium Act language:

(5)(a) The association has a lien on each condominium parcel to secure the payment of assessments. . . . [T]he lien is effective from and shall relate back to the recording of the original declaration of condominium . . . . However, as to first mortgages of record, the lien is effective from and after recording of a claim of lien in the public records of the county in which the condominium parcel is located.

§718.116(5)(a) Fla. Stat. (2016). The juxtaposition of the last sentence lead the court to hold that “recording a claim of lien is not an absolute prerequisite to the enforcement of a lien for unpaid assessments.” The court commented that recording may only be of significance when the association’s assessment lien and a mortgage lien are contesting for priority.

In holding, the court sided with Judge Shepherd’s dissent in Aventura Management, LLC v. Spiaggia Ocean Cd’m Ass’n, 105 So. 3rd 637 (Fla. 3rd DCA, 2013). Readers of these missives may recall Judge Shepherd’s plaintive plea in response to the Aventura mortgage foreclosuire holding asking “What happens to the [association’s] lien?” Id. at 640. Judge Shepherd concluded:

. . . [I]t is apparent the fundamental purpose of the Legislature in promulgating section 718.116 was to assist condominium associations to be made whole in the collection of past due assessments, while at the same time not unduly impairing the value of collateral held by first mortgagees. In furtherance of this design, the Legislature has given condominium associations a statutory lien on each condominium unit over which it has jurisdiction, to secure payment of assessments without the necessity of filing a claim of lien in the public records, with the single exception of first mortgagees, where record notice is required. § 718.116(5)(a).

Id at 640. Thus, the condominium association without recording a lien had a lien in priority to the former’s owner claim, the lien

This decision raises a number of interesting questions for the practitioner and clients.

  • Whether to record a lien or not to record? Particularly because of the potential of mortgage issues, the answer would appear still to be yes. The “yes, record” would appear to be reinforced by the desire to avoid issues that may occur in Districts other than the Fourth District which issued the Calendar opinion, at least until, or if, the Supreme Court of Florida rules on the issue. There is also the practical advantage of record notice to stop disputes about notice cold. Further, there is that tantalizing adjective “absolute” modifying “prerequisite” as in recording is not an “absolute prerequisite” as quoted above. leaving the court’s field of play wide open as to when recording may be a prerequisite.
  • What is the vitality of the assessment lien after a mortgage foreclosure? The Calendar court also further quoted Judge Shepherd’s dissent which has caused the scratching of many heads when published originally:

The majority opinion . . . . first concludes, correctly in my view, that [the] Condominium Association’s statutory lien, afforded by section 718.116(5)(a), Florida Statutes (2008), “survives the foreclosure.” Maj. Op. at 5; see also Lassiter v. Kaufman, 581 So. 2d 147, 148 (Fla. 1991); Contos v. Lipsky, 433 So. 2d 1242, 1245-46 (Fla. 3d DCA 1983). . . .

Thus, we are still faced with the “conundrum” of if there is a lien that survives foreclosure, then what is the value of that lien particularly in light of Villas of Windmill Point II POA, Inc. v. Nationstar Mortgage, LLC, Case No.: 4D16-2128 (Fla. 4th DCA October 25, 2017), limiting the assessment liability of the lender’s grantee.

  • Will this apply to homeowners’ associations? Similar language in the Homeowners’ Association Act, at least for post 2007 associations, may lead to the same result.

Michael J. Gelfand

Past Chair

Real Property, Probate and Trust Law Section

of The Florida Bar

Click www.RPPTL.com for Breaking News

About Florida’s Largest Substantive Law Section!

Note: This article is not legal advice. Statements and comments made are not those of The Florida Bar or the RPPTL Section

© 2017 Michael J. Gelfand

Michael J. Gelfand

Florida Bar Board Certified Real Estate Attorney

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys

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New Decision: Judicial Estoppel (Anfriany v. Deutsche Bank)

Michael J. Gelfand 12/8/2017

Clarity of a judicial doctrine appeared paramount in yesterday’s decision from the District Court of Appeal, Fourth District, in Anfriany v. Deutsche Bank National Bank Co., Case No. 4D 16-4182 (Fla. 4th DCA, December 6, 2017).

The doctrine addressed is judicial estoppel, a defensive tool that arises not from statute or the rules of civil procedure, but common law. The doctrine of judicial estoppel generally seeks to ensure that the legitimacy of court decisions is not undermined by a party winning in a first case which then seeks to win in a second case by taking a diametrically opposite position. The rule can be said to keep the parties honest when appearing before different judges.

The setting once again was a mortgage foreclosure action that seemingly went awry.

In short background,

2008: The Bank files its foreclosure action against the Anfrianys which was voluntarily dismissed without prejudice at an unstated time.

May 2011: Anfrianys’ bankruptcy counsel moves to tax attorney’s fees and costs against the Bank.

May 2012: The trial court grants the Anfrianys’ motion for entitlement to attorney’s fees and costs, reserving the determination of the amount if the parties could not agree.

May 2013: The Anfrianys’ bankruptcy counsel, not foreclosure counsel, files a voluntary Chapter 11 petition for relief; however, neither the petition’s statements nor schedules list any contingency claim assets, either when originally filed or when amended.

2014: The Anfrianys’ reorganization plan was confirmed, the Appellate Court remarking that Anfriany’s debts were not discharged.

October 2015: The Anfrianys move to determine the amount of attorney’s fees and costs in the state court foreclosure action.

September 2016: The Bank’s moves to vacate the fee entitlement order granted in May 2012, arguing that judicial estoppel barred Anfrianys’ claim for attorney’s fees and costs because the Anfrianys’ failed to disclose in the bankruptcy proceeding the entitlement to attorney’s fees and costs as a contingent unliquidated asset and thus “misled ‘the bankruptcy court and creditors to believe that he had fewer assets from which he could pay his creditors.’”

In granting the motion to vacate the entitlement order the trial court relied upon a federal court decision, In re. Coastal Plains, Inc., 179 F.3d 197 (5th Cir. 1999).

In reversing, the appellate court remarked, without a comparison of analyzed the difference between federal and Florida approaches to judicial estoppel.

Traditionally, judicial estoppel has required a mutuality of the parties and that the movant or claimant in the second claim is taking an inconsistent position that was successfully maintained in a first claim. Citing Blumberg v. USAA Cas. Ins. Co., 790 So. 2d 1061, 1066 (Fla. 2001), the court noted that in addition to the traditional factors:

… the position assumed in the former trial must have been successfully maintained. In proceedings terminating in a judgment, the positions must be clearly inconsistent, the parties must be the same and the same questions must be involved. So, the party claiming the estoppel must have been misled and have changed his position; and an estoppel is not raised by conduct of one party to a suit, unless by reason thereof the other party has been so placed as to make it to act in reliance upon it unjust to him to allow that first party to subsequently change his position. There can be no estoppel where both parties are equally in possession of all the facts pertaining to the matter relied on as an estoppel; where the conduct relied on to create the estoppel was caused by the act of the party claiming the estoppel, or where the positions taken involved solely a question of law.

(Citations omitted, italics in decision, additional emphasis added. ) (Blumberg, 790 So. 2d at 1066)

The Court explained that the “prejudice” requirement would be that which “would drive an unfair advantage or impose an unfair detriment on the opposing party if not estopped.” Citing Grau v. Provident Life & Acc. Ins. Co., 899 So. 2d 396, 400 (Fla. 4th DCA 2005). Applied to the current case, the Court recounted two elements relying on Blumberg:

“[t]here can be no estoppel where both parties are equally in possession of all the facts pertaining to the matter relied on as an estoppel.”

As a second requirement, there must be an “unfair advantage” or an “unfair detriment” on the “opposing party.”

In overview, in this time when frequently there are knee-jerk responses to court opinions, seeking to classify text as pro-debtor or pro-creditor, or otherwise, this decision appears to be a classic effort to provide guidance to trial courts and litigators. Thus, this decision should be a handy tool for the litigator. The decision interestingly implicitly draws comparisons to the doctrine of res judicata. The decision also declined to address whether the real party in interest was not the defendant owner or the owner’s attorney who may obtain the funds.

It is noted that the same Court simultaneously issued an opinion from Judge Gross which makes for very interesting reading, not because it necessarily outlines new legal doctrines, but because the Court reinforces in a context the Court described as “the underlying mortgage was passed around like the flu, giving rise to a complexity of ownership that frustrated the appellee’s attempts to demonstrate standing at trial,” the duty of a foreclosing bank to prove that it is the holder or holds a right to foreclosing note. Supria v. Goshen Mtg., LLC, Case No. 4D16-4356 (Fla. 4th DCA, December 6, 2017).

Michael J. Gelfand

Past Chair

Real Property, Probate and Trust Law Section

of The Florida Bar

Click www.RPPTL.com for Breaking News

About Florida’s Largest Substantive Law Section!

______________________________________

Note: This article is not legal advice. Statements and comments made are not those of The Florida Bar or the RPPTL Section

© 2017 Michael J. Gelfand

Michael J. Gelfand

Florida Bar Board Certified Real Estate Attorney

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys


ALM Nominations deadline Dec 15, 217

admin 12/7/2017
Deadline for ALM nominations is 12/15/17. More details and application

Apply for The Florida Bar Wm. Reece Smith, Jr. Leadership Academy

admin 11/20/2017
$3,500.00 IS AVAILABLE TO 2 RPPTL SECTION MEMBERS!
Interested in participating in The Florida Bar Wm. Reece Smith, Jr.
Leadership Academy? Two RPPTL Section scholarships cover out of pocket
travel and hotel expenses incurred in attending the Leadership Academy up to
$3,500.00.
 
WHAT IS THIS? The Florida Bar is accepting applications for the 20187 Leadership
Academy, a one-year multi-session training program designed to assist a diverse and inclusive group of
lawyers in becoming better leaders within our profession while enhancing their leadership skills.
 
HOW DOES IT WORK? In support of the Leadership Academy, the RPPTL Section will select up to 2 active
contributing members of a RPPTL Section Committee, to apply to the Leadership Academy as the
Section’s scholarship nominee. If a RPPTL Section nominee is chosen as an Academy Fellow, the
Section will reimburse the participant up to $3,500 for out of pocket travel and hotel expenses incurred
in attending the Leadership Academy. To receive the scholarship, the nominee(s) if chosen by The
Florida Bar as a Leadership Academy Fellow must agree to remain actively involved in the RPPTL Section
after the conclusion of the Leadership Academy.
 
TIMING? 2018 Leadership Academy applications will be available from The Florida Bar on
Thursday, December 1, 2017. To be eligible for the RPPTL Section scholarship(s), potential
applicants must submit a COPY of their Leadership Academy application to
rpptlapplications@gmail.com by Friday, December 15, 2017 (with a copy to
kfernandez@kfernandezlaw.com). The RPPTL Section Leadership Academy Committee will review the
applications and then inform the nominee(s) of their selection for the potential scholarship. The
nominee(s) must still submit the completed application to The Florida Bar for approval by The Florida
Bar Leadership Academy Committee.
 
A full explanation of the Florida Bar Wm. Reece Smith, Jr. Leadership Academy, is available on the
 
If you have any questions regarding the RPPTL Section scholarships for The Florida Bar Wm. Reece
Smith, Jr. Leadership Academy, please contact Kristopher Fernandez, (813) 832-6340,
kfernandez@kfernandezlaw.com or Brian Sparks, (813) 222-8515,
brian.sparks@hwhlaw.com; J Allison Archbold, Esq.; (941) 960-8825,

New Decision: Disclosures, Reliance and Construction Defects (Arlington Pebble Creek v. Campus Edge Cd’m)

Michael J. Gelfand 11/9/2017

Perversely, could sales disclosures protect the developer, not the buyer? Really, does anyone actually read that all stuff? Apparently not, if “stuff” means condominium sales disclosures. Monday’s decision by the the First District Court of Appeal in Arlington Pebble Creek, LLC v. Campus Edge Cd’m Ass’n, Inc., Case No.: 1D16-1347 (Fla. 1st DCA, November 6, 2017), involving claims of construction defects in a condominium conversion might make you think twice about the value, purpose, and who hides behind the disclosures.

Fraudulent misrepresentation and negligent misrepresentation claims were filed by the Condominium Association against Arlington Property. Arlington Property purchased apartments and created Arlington Pebble Creek to covert the apartments in to a condominium.

Jumping to the end, the appellate court reversed a final judgment based upon a jury verdict. The opinion does not state the judgment amounts, but this writer has been informed that there was a compensatory damage verdict of over $3,000,000, and two separate, independent punitive damage awards each in the amount of $250,000! The reversal was with directions to enter judgment in favor of the appellants/defendants below developer entities!!

What happened? Following transition/turnover, the Association discovered that the Condominium suffered extensive water intrusion damage to common areas. The repair work required a doubling of Association assessments levied upon unit owners.

Fraud or misrepresentation apparently became an issue when the developer entities dueling engineering reports were obtained and compared. The Condominium “Roth” Act conversion engineering report estimated the Condominium’s remaining lifespan at thirty-five to forty-five years, evaluating the structure’s functional soundness as “Good (localized deterioration).” Corresponding, the conversion disclosure budget listed less than $10,000 for building repairs.

As an apparent smoking gun, was Arlington Properties separate “property condition assessment” which it obtained near the time it acquired the apartment building, but not filed with the state or published to others. This report identified moisture intrusion and estimated structure/building estimate repair costs of $290,200.

The Association proceeded on claims of fraudulent misrepresentation and negligent misrepresentation made to the Association. The Appellate Court appeared to have no problem recognizing that there was a false statement of material fact and that the false statement was made knowingly, or that the developer entities should have known that the statement was false.

Nevertheless, the Appellate Court held that the Association did not prove two critical elements: intent to induce; and, injury. This was in spite of the testimony of the current president who owned a unit before turnover.

The catalyst for the Appellate Court was no proof of Association reliance on the false statements in the building report, whether in the turnover Association’s preparation of the budget or otherwise. The Association’s property manager at turnover provided testimony that he did not see the conversion report with the false statement. Further, in terms of damages, the increased assessments occurred without reliance on the misrepresentations.

How could no damages flow from the false statement, especially one concerning moisture intrusion in a Florida condominium? The answer likely lies in two areas: who has actually been damaged; and who relied on the misrepresentations. The Appellate Court noted (fn. 2) the Association acknowledgement that the claim was of misrepresentations to the Association, not unit owners.

The court further noted (fn.3) that the “the existence of a fraudulent statement does not in itself establish reliance on that statement.” While certainly providing a formula to reduce claims, this truism flies in the face of the purpose of the conversion report and the offering statement. The key likely is that reliance would be in the hand and mind of the buyer, now unit owner, not the Association.

How could unit owners have proceeded in a cost-effective manner? Even with the ease of pleading a Fla.R.Civ.P Rule 1.221 class action, there is still the historical reticence of Florida Courts to allow a class action for a fraud claim because of the reliance element of a fraud claim. Would the damaged areas be a subject for converter reserves? Perhaps not, but the opinion did not reach that issue.

One must wonder how did the Association obtain the previously undisclosed engineering report? Good sleuthing? Problem is what to do with the information once it is at hand?

One would presume that there was outrage when the dueling reports were compared. But what to do if the buyers merely used the disclosure statements to prop up the rear of a sofa, or hold down shelves in the rear of a closet? Do we paraphrase Benjamin Franklin, and others “for want of a nail … the horse…battle…war was lost? Now should we proclaim: For want of reading the offering circular, there was no reliance, with no reliance there could be no damages, for no damages, no judgment.

The practical lesson may be to encourage developers to throw everything into the disclosure because who actually reads it? And if there is a claim afterwards, it was disclosed!! Actually, many developer counsels appear to have been suggesting that the risk of losing a sale is well worth the cover from claims provided by a broad disclosure.

So consider what is the purpose of the disclosure?

In In closing, whether we observe Veterans Day by closing our offices or otherwise, take a moment with your families, friends and colleagues to recall those who sacrificed in uniform for our country’s ideals. Recall also the foundations of those ideals including an independent judiciary, and especially what propelled much of early voluntary immigration, seeking to flee the English Civil Wars and the civil strife between wars, based not only upon religious persecution, but also the Crown’s wrongful prosecution and punishment to coerce compliance, a special kind of treachery that our country’s leaders have eschewed for centuries. It is up to you to pass on the traditions of liberty, freedom and democracy, and the independent judiciary necessary to sustain the traditions!

Have a great holiday weekend.

Michael J. Gelfand

Past Chair

Real Property, Probate and Trust Law Section of The Florida Bar

Click www.RPPTL.com for Breaking News

About Florida’s Largest Substantive Law Section!

Note: This article is not legal advice. The decision addressed may not be final, and may be subject to further review. Statements and comments made are not those of The Florida Bar or the RPPTL Section.

© 2017 Michael J. Gelfand

Michael J. Gelfand

Florida Bar Board Certified Real Estate Attorney

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys

New Decision: What is an appurtenance (Silver Beach Towers v. Silver Beach Inv.)

Michael J. Gelfand 10/31/2017

When is an appurtenance not an appurtenance? That was the issue in last week’s decision in Silver Beach Towers POA, Inc. v. Silver Beach Inv. of Destin, LC, Case No.: 1D16-4555 (Fla. 1st DCA, October 18, 2017), involving whether a club membership defined by a developer as an “appurtenance” was an appurtenance that the Condominium Act prohibited from being separated from a unit.

Silver Beach Investments developed condominiums with two condominium Associations and the POA serving as the “Master Association.” The Master Association declaration provided that the condominium Associations were the Master Association’s members. Individual unit owners were defined as “Owners.”

The dispute focused upon the Club at Silver Shell’s which was located approximately a mile from the community. The Master Declaration provided that owners were non-equity members in the Club, that members could not terminate club membership except as part of a transfer to another owner and that “member in the Club shall be pertinent to the Unit upon which is based.”

Nevertheless, the Club’s facilities could be “available to the general public.” The Club was authorized to terminate an owner’s membership without notice, and in its discretion could unilaterally change Club dues and fees which were required to be collected by the Master Association.

In 2008 “turnover” was “completed” including transfer of title to common properties for the Master Association. In 2010 the Master Association’s Board of Directors amended the Declaration deleting the Club mandatory membership and fees and due provisions. In 2012 the developer and Club sued the Master and two condominium Association’s seeking to recover the unpaid dues and fees as well as declaring the Amendment invalid. The trail court granted the developer and Club’s Motion for Summary Judgement declaring that as appurtenances to the condominium units §718.110(4) prohibited the amendments as materially modifying or affecting appurtenances to a unit without the votes of all unit owners and reserving jurisdiction to determine issues of amounts due.

The appellate court first focused on what is an appurtenance. “A thing may be ‘appurtenance’ or annexed as something else, without qualifying as an ‘appurtenance to the unit’,” citing to Thiess the Island House Ass’n., Inc., 311 So. 2d 142, n.1 (Fla 2nd DCA, 1975). But, here the Club membership was:

  • Non-equity
  • Not exclusively for the unit owners
  • Terminable solely by the Club
  • Not common elements or condominium property

“The lack of any indica of ownership by Club members for…” appears fatal to the developers’ effort to not just label but treat Club membership as a Condominium Act defined “appurtenance” to a unit.

Second, the appellate court held that the Condominium Act does completely prohibit separating appurtenances without unanimous unit owner consent. The court quoted §718.110(4)’s preface “Unless otherwise provided in the declaration as originally recorded….” The Master Declaration did provide for amendment by the Members. Thus, the members being the condominiums’ Associations could proceed. The court also swiftly disposed of the developers’ assertion that it was entitled to personal notice of the Board of Directors meeting as the By-Laws only required personal notice to the Directors, and that posting was sufficient to provide notice to others.

The remand to the trial court included directions for a determination of damages to the Club for fees and dues accruing before the amendments affective date.

There are many lessons from this decision:

This decision re-enforces the need to look beyond labels. While “appurtenances” may seem sacrosanct, whether the label meets statutory pre-requisites may have to be considered.

Note also that statutory protections for appurtenances is subject to the declaration’s original amendment provisions. Note in particular in homeowners’ association communities many declarations do not have an express prohibition on changes to voting rights or assessment percentages; thus the “unless otherwise provided in the governing documents…” text in §720.306(1)(b-c), may allow the members to undertake significant changes. Developer counsel, consider this when drafting your next set of governing documents.

When reviewing the Club (or developer!) retained rights concerning Club membership shown by the above bullet points, there may be a lesson to developers regarding what could colloquially be referred to as “over-writing” covenants. How many times have we seen a contract or covenant that is so over-reaching that the terms become unenforceable. Remember the saying “pigs get fat and hogs get slaughtered!”

The decision does not address whether the developer declared the Master Association to be subject to the Condominium Act. It is interesting that the developer invoked the condominium act, usually a fate worse than death for developers, to defend its treatment the Club memberships as an appurtenance. If the project was marketed as a condominium and the prospectus was reviewed by the Division of Condominiums, it would be interesting to know whether the Division issued a deficiency notice concerning the retention of Club rights and effort to label memberships as an appurtenance.

Michael J. Gelfand

Past Chair

Real Property, Probate and Trust Law Section

of The Florida Bar

Click www.RPPTL.com for Breaking News

About Florida’s Largest Substantive Law Section!

Note: This article is not legal advice. Statements and comments made are not those of The Florida Bar or the RPPTL Section

© 2017 Michael J. Gelfand

Michael J. Gelfand

Florida Bar Board Certified Real Estate Attorney

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys

New Decision: Tax Lien Priority (Miami-Dade County v. Lansdowne Mtg)

Michael J. Gelfand 10/31/2017

Potentially increasing lender risks and thus the cost of financing, the Third District Court of Appeals clarified to the chagrin of many lenders the consequences of an improper homestead real property tax exemption in Miami-Dade County v. Lansdowne Mtg, LLC, Case No.: 3D 16-1046 (fla. 3rd DCA, October 18, 2017).

When dealing with priority of claims, the chronology is frequently important:

· September 2007: Lansdowne’s mortgage was executed and recorded;

· January 2014: County tax lien recorded as a result of a determination of improper homestead benefits; and,

· May 2015: Lansdowne files a mortgage foreclosure action including the county as a defendant.

The trial court granted the Lansdowne’s Motion for Summary Judgement pursuant to the priority of lien recording statute, §695.01(1) Fla. Stat. (2015).

The appellate courts analysis recognized the priority provided by the recording statute but noted exceptions, one being:

[a]ll taxes imposed pursuant to the State Constitution and laws of this state

shall be a first lien, superior to all other liens, on any property against which the

taxes have been assessed . . . .” See City of Palm Bay, 114 So. 3d at 928.

§197.122(1) Fla. Stat. (2015). The court differentiated the statutory authority for the “priority” of the lien, as opposed to the authority for when a lien “attaches” to real property. Thus, the court rejected the lender’s assertion that the statutory exemption structure does not subordinate the tax lien to the previously provided mortgage. The attachment statute prevails:

The lien herein provided shall not attach to the property until the

notice of tax lien is filed among the public records of the county

where the property is located. Prior to the filing of such notice of lien,

any purchaser for value of the subject property shall take free and

clear of such lien. Such lien when filed shall attach to any property

which is identified in the notice of lien and is owned by the person

who illegally or improperly received the homestead exemption. . . .

§196.161(3) Fla. Stat. (2015) (emphasis added).

Thus, there appears to be a race to the courthouse between the taxing authorities and others. This decision likely will encourage buyers and lenders of property for which a homestead tax exemption is claimed to undertake a minimum review of the basis for claiming the exemption. Title insurance may also be of added importance to provide protection to the lender/purchaser.

A couple of extra considerations: In light of the above quote that the “purchaser” takes free and clear, how the court will treat a lis pendens? Please note that this only address the homestead tax exemption, not the devise or creditor claim homestead provisions.

Michael J. Gelfand

Past Chair

Real Property, Probate and Trust Law Section

of The Florida Bar

Click www.RPPTL.com for Breaking News

About Florida’s Largest Substantive Law Section!

Note: This article is not legal advice. Statements and comments made are not those of The Florida Bar or the RPPTL Section

© 2017 Michael J. Gelfand

Michael J. Gelfand

Florida Bar Board Certified Real Estate Attorney

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys

New Decision: Safe Harbor (Villas of Windmill Point II v. Nationstar)

Michael J. Gelfand 10/31/2017

Whether a voluntary grantee is entitled to recognition of its grantor’s mortgage foreclosure “safe harbor” was at issue in last week’s decision in Villas of Windmill Point II POA, Inc. v. Nationstar Mortgage, LLC, Case No.: 4D16-2128 (Fla. 4th DCA October 25, 2017). The decision affirmed a final summary judgement, subject to remand to correct a calculation error.

Nationstar, as agent of Fannie Mae, sued the POA, seeking compliance with the Safe Harbor provisions of §720.3085(2)(c) Fla. Stat. (2011), declaratory relief and damages.

A brief derogation of title is appropriate:

· Fanny Mae held a mortgage on the property.

· CitiMortgage became the holder of the first mortgage.

· CitiMortgage foreclosed, including the borrower and the Association as defendants.

· CitiMortgage obtained a foreclosure judgment leading to a sale resulting in CitiMortgage taking title.

Thereafter CitiMortgage deeded the property to Fanny Mae.

Reciting the HOA Act’s “safe harbor” provisions:

Notwithstanding anything to the contrary contained in this section, the liability of a first mortgagee, or its successor or assignee as a subsequent holder of the first mortgage who acquires title to a parcel by foreclosure or by deed in lieu of foreclosure for the unpaid assessments that became due before the mortgagee’s acquisition of title, shall be the lesser of….

§720.3085(2)(c) (2011) (emphasis in decision), the court held that:

Here, although Fannie Mae was not “a first mortgagee, or its successor or assignee as a subsequent holder of the first mortgage who acquire[d] title to a parcel by foreclosure or by deed in lieu of foreclosure”1 under section 720.3085(2)(c), Fannie Mae does indirectly benefit from the safe harbor provision because, under section 720.3085(2)(b), it is jointly and severally liable with the prior parcel owner, CitiMortgage, for all unpaid assessments due up to the time of transfer of title, and CitiMortgage did qualify for the safe harbor provision.

(Emphasis in decision.)

In other words, the Association cannot pull the safe harbor out from under the subsequent grantee.

This decision re-enforces the prevailing view of Association counsel and in doing so helps avoid what otherwise would be unnecessary and costly disputes for Associations. It is noted because of the similarity in language that it is likely that this decision will also be applicable to condominium Associations pursuant to 718.116. The court appeared be very carefully outlining the transfer of title perhaps indicating that the court was not going to re-evaluate the safe harbor requirement that the holder of the mortgage take title.

Michael J. Gelfand

Past Chair

Real Property, Probate and Trust Law Section

of The Florida Bar

Click www.RPPTL.com for Breaking News

About Florida’s Largest Substantive Law Section!

______________________________________

Note: This article is not legal advice. Statements and comments made are not those of The Florida Bar or the RPPTL Section

© 2017 Michael J. Gelfand

Michael J. Gelfand

Florida Bar Board Certified Real Estate Attorney

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys

New Decision: Taxation, Improvements and Leaseholds (Beach Club Towers HOA v. Jones)

Michael J. Gelfand 10/16/2017

Wednesday the First District Court of Appeals addressed whether the remainder of a leasehold upon which a condominium was declared is to be included in the condominium’s units’ ad valorem tax valuation. In Beach Club Towers H.O.A. v. Jones, Case No. 1D15-5886 (Fla. 1st DCA, October 11, 2107), the property owner/leasehold remainder holder was a county which created special circumstances, and further, the decision justified a second look see for commentary concerning whether a condominium may be declared upon a leasehold.

Short and sweet background: Beach Club Towers is a condominium located in Escambia County. The United States conveyed the land to Escambia County with a condition that the County retain legal title. After a number of leases and subleases the Condominium developer obtained a sublease and declared the Condominium which included “an undivided leasehold interest in the underlying land.” The master lease provides for renewal “for an additional ninety-nine (99) years, terms and conditions to be renegotiated at such time.”

Focusing on “who owns the land” the opinion swiftly shifted to the concept of “equitable ownership” of the leasehold as described in the First District Court of Appeal’s earlier decision in Accardo v. Brown, 63 So. 3d 798 (Fla. 1st DCA, 2011) approved in Accardo v Brown, 139 So. 3d 848 (Fla. 2014).

The Supreme Court held that, because the leases in the land were “perpetually renewable,” the condominium owners owned a equitable title to the land and were liable to pay ad valorem property taxes. Id. at 856.

Slip at 4. The Court held that Accardo was inapplicable because in Accardo “the primary hallmarks of equitable ownership” were different. In Accardo the lease could be renewed upon nominal consideration “or to otherwise exercise perpetual “domination over the property.” In this instance, the lack of an automatic renewal distinguished the potential perpetual domination.

Onto the Condominium Act issues, the Court rejected the County’s assertion that the land underlying a condominium must be declared as part of the Condominium, apparently meaning the fee simple interest. The County relied upon Section 718.104(4)(s)(c) Fla. Stat., which the Court noted requires a statement of the underlying property submitted to condominium ownership. Instead, the Court relied upon Section 718.104(1) Fla. Stat. which it noted expressly acknowledges the creation of a condominium upon a leasehold.

Further, the Court commented that the Condominium Act does not change the exempt treatment of property. Section 718.120(1) Fla. Stat., only requires that each condominium parcel must be assessed separately from other parcels. Essentially, the underlying fee does not have to be included in the units valuation if a leasehold.

In reviewing the opinion, of critical significance is the fee owner being a county. Generally county land is exempt from ad valorem taxation. There are a number of condominium and homewowners’ communities that are declared on land owned by and leased from a political subdivision that would otherwise be exempt from ad valorem taxation. Note however the critical provisions of a lease which may provide the functional equivalent of taxation. Where a leasehold is owned by a person or private entity, then one may see that the landlord includes in the lease a requirement that the tenant pay ad valorem taxes as a pass through.

There was a vigorous dissent; however, the dissent was primarily based upon whether there was equitable ownership. The dissent seemingly assuming that the renegotiation text mandated the renewal, an assumption that the majority opinion rejected.

A couple of matters of interest. First, of course, is the reminder that a name does not dictate the type of ownership. The “homeowners association” name still requires a review of the governing documents because, as the opinion reported, the property was a condominium. Second, is the import of a requirement to negotiate an extension of time and how does that obligate the parties. This decision assumes that such a duty does not mean that the parties must renew which may raise secondary issues.

Michael J. Gelfand

Past Chair
Real Property, Probate and Trust Law Section of The Florida Bar
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© 2017 Michael J. Gelfand

Michael J. Gelfand

Florida Bar Board Certified Real Estate Attorney
Florida Supreme Court Certified Mediator:
Civil Circuit Court & Civil County Court
Fellow, American College of Real Estate Attorneys

P Please consider the environment before printing this e-mail

New Decision: Electronic Docketing on Rehearing (Emerald Coast Utilities v. Bear Marcus Pointe). Email Protocols

Michael Gelfand 10/9/2017

Hear Ye, Hear Ye! If you are used to traditional methods of communication wise up quickly, or get out of the way before your client, and you, personally, have a very bad experience.

Doubling down on last month’s stern e-mail technology lesson to attorneys on Friday the First District Court of Appeal denied appellant’s motion for rehearing, rehearing, and for certification in Emerald Coast Utilities Authority v. Bear Marcus Pointe, LLC, Case No. 1D15-5714 (Fla. 1st DCA, October 6, 2017).

Instead, a substitute opinion went far beyond a tweak here and there. Adding pages to its original opinion, the court reinforced its directive that counsel’s e-mail systems must be designed to do more than just deliver most email, and do more than implying that attorneys need to know how their messages are handled if they have a shot at claiming a failure amounts to excusable neglect. Two duties of care were projected.

Counsel has a duty to have sufficient procedures and protocols in place to ensure timely notice of appealable orders. This includes use of an email spam filter with adequate safeguards and independent monitoring of the court’s electronic docket. In cases where rendition of an appealable order has been delayed for a significant period of time, it might also include the filing of a joint motion for a case management conference to ensure that the order has not slipped through the cracks. Odom & Barlow made no effort to do any of these things, reflecting an overall pattern of inaction and disengagement.

One duty involves the need to have a properly working e-mail system. The second duty described is for an attorney to move the court’s docket when there is no apparent reason for delay.

Driving home that this is not a new issue, a five year old Alabama decision was used seemingly to flog the technologically inept:

An inability to manage an office e-mail system to properly receive notices of filing does not qualify as excusable neglect.

Crocker v. Child Dev. Sch., Inc., No. 3:10-CV-759-WKW, 2011 WL 4501560, at *5 (M.D. Ala. Sept. 29, 2011). Nailing down the message, citing to the Southern District of New York:

The fact is that all sorts of things go awry in the electronic universe in which we now live, and lawyers are obliged to protect their clients’ interests even if that requires something more than blind reliance on the proper and timely transmission, receipt and filing of computer generated electronic mail. Thus, even if one were to characterize as excusable the error attributed to the IT staff, the lawyer’s failure to check the docket sheet, knowing that he had a motion pending before the magistrate judge and that an adverse recommendation would have to be objected to within fourteen days of its entry, was not.

Pinks v. M & T Bank Corp., No. 13 Civ. 1730(LAK), 2014 WL 2608084, at *1 (S.D.N.Y. June 5, 2014).

The message seems to be: no more reliance on the same methods of snail mail, not to say that waiting for the town crier to bring you news is definitely passé. Further, perhaps to ensure catching your attention, old methods maybe below the standard of care.

The concept of an attorney pushing the trial court’s docket is new, at least in print. Each of us has recounted the year waiting for a judgment or order, and being hesitant to make another call to the judicial assistant out of concern of creating a fear of retribution. While not absolutely mandating a duty to call out the judge, respectfully of course with a proper motion, the substitute opinion places pressure on the Bar’s rules committees to set a process that will inevitably become a standard of care.

In essence, the District Court announces that the time for pussyfooting around the electronic age has ended. If you are participating in the legal system you literally must be up to speed and connected!

In other words, the unsupported assertion that my spam folder ate my important e-mail will no longer fly! The courts want the technological equivalent of the chewed document, and perhaps proof that not only did you feed the monster recently, but fed it well!

The original decision can be found at: Emerald Coast Utilities Authority v. Bear Marcus Pointe, LLC, ___ So. 3d ___, 42 Fla. L Weekly D 1753, (Fla. 1st DCA, August 10, 2017).

Many thanks to Susan Spurgeon for providing the decision on rehearing promptly. [Obviously she has been monitoring her email!]

Have a great week.

Michael J. Gelfand

Past Chair

Real Property, Probate and Trust Law Section

of The Florida Bar

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About Florida’s Largest Substantive Law Section!

______________________________________

Michael J. Gelfand

Florida Bar Board Certified Real Estate Attorney

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys

Citizens Begins taking claims in Big Pine Key on Wednesday

Neil B. Shoter 9/20/2017
Press Release_Big Pine Key_Keys response

New Decision: Derivative Action (Collado v. Baroukh)

Michael J. Gelfand 9/18/2017

The strict enforcement of conditions precedent to a derivative action in a condominium association context was addressed in Collado v. Baroukh, Case No:. 4D 16-2075 (Fla. 4th DCA, August 30, 2017). In remanding the Court commented upon the circumstances for when a fiduciary duty exists and when an election claim is moot.

As with many other disputes, this matter began, at least as reported by the Court, when a condominium unit owner demanded Association records pursuant to §607.07401(2) Fla. Stat. (2016). The Association denied access because the Association was not a Chapter 607 corporation. The owner then corrected the demand on October 7, 2015, by citing §617.07401 Fla. Stat. (2015). To the second demand the Association responded that “it would consider appointing an independent committee to investigate the owners’ allegations at the next Board of Directors meeting.” On December 14, 2015, the owner filed a complaint pursuant to Section 617.07401. The trial court dismissed the verified claim complaint without leave to amend.

The appellate court held that as a not-for-profit corporation the owners’ October 7, 2015, letter was a new demand triggering the statute’s 90 day waiting period. Further the verified complaint failed to allege that the demand was refused or ignored, or that the waiting period would cause irreparable harm. Thus, failure to comply with the statutory requirements required dismissal, in addition to convoluted pleading without detail which apparently violated Fla. R. Civ. P. Rule 1.420(b).

The Court did note that leave to amend should not be prematurely denied; thus, the case was remanded to allow for an amended complaint. In doing so the court noted that a claim for breach of fiduciary duty against the Association was improper because there is no fiduciary duty citing Tower House Cd’m, Inc. v. Millman, 475 So. 2d 674, 676 (Fla. 1985). Similarly claims against certain directors individually would have to be dismissed as the court held that they may be liable only “in the representative capacity for breach of fiduciary duty as officers and directors” citing Section 617.0834 Fla. Stat. (2016). Apparently, the complaint did not allege any office-holding status.

A challenge to the including directors on a ballot due to term limits was declared moot because the election occurred; however, the eligibility of directors may still be challenged.

The moral to this story may be the consequences of over-litigating. The opinion does not explain why a records request turned into a derivative action. The court did not take the opportunity to educate the parties as to the mandatory arbitration provisions; however, if the plaintiff was determined to bring this as a breach of duty damages tort claim, then the plaintiff lives with the result.

Michael J. Gelfand

Past Chair

Real Property, Probate and Trust Law Section of The Florida Bar

Click www.RPPTL.com for Breaking News

About Florida’s Largest Substantive Law Section!

Note: This article is not legal advice. Statements and comments made are not those of The Florida Bar or the RPPTL Section

© 2017 Michael J. Gelfand

Michael J. Gelfand

Florida Bar Board Certified Real Estate Attorney

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys

New Decision: Law Firm Defective Email (Emerald Coast Utilities Authority v. Bear Marcus Pointe)

Michael Gelfand 9/18/2017

Is your firm’s email system and the firm’s docket monitoring procedures a trap for your clients and you? This is not a “condo case” but it should grab your attention.

A firm’s email system configuration and the firm’s court docket monitoring process lead the First District Court of Appeal to affirm the denial of a motion for relief of judgment. The opinion in the Emerald Coast Utilities Authority v. Bear Marcus Pointe, LLC, ___ So. 3d ___, 42 Fla. L Weekly D 1753, (Fla. 1st DCA, August 10, 2017), may become a case study for attorneys and their firms’ administrators.

In gross summary, Bear Marcus Pointe’s motion for attorney’s fees, was heard in January 2013. Over a year later, no order had been entered. In the interim Bear Marcus Pointe’s counsel assigned a paralegal to check the Court’s website every three weeks to confirm whether any orders were entered. In response to Bear Marcus Pointe’s attorneys request for a joint motion for a case management, conference, the Authority’s attorney “categorically refused to join such a motion.”

Shortly before a status conference was to occur, an order was entered awarding attorney’s fees. The Authority’s asserted that its law firm did not receive the order and was not aware of the order until Bear Marcus Pointe began execution efforts.

The opinion recited a cascade of expert testimony at trial regarding the processes necessary for an effective email system. This includes:

Not being configured to drop and permanently delete emails perceived to be spam without alerting the recipient of the deletion;

Online backup system; and,

Email logs.

Pursuant to Fla. R. Civ. P. Rule 1.540(b), the Court focused on whether there was excusable neglect. No mistake was apparent because there is no proof that the emailed order from the Court was intentionally deleted. Instead, the Court found that the Authority’s law firm’s server was deliberately configured in such a way that it could delete legitimate emails as spam without notifying the recipient, despite Odom & Barlow being warned against this configuration.

Further the law firm was warned against the configuration, and the law firm rejected recommendations for a third-party vendor and online backup system.” Thus,

Based on this testimony, the trial court could conclude that [law firm] made a conscious decision to use a defective email system without any safeguards or oversight in order to save money. Such a decision cannot constitute excusable neglect.

Citation deleted. The court also made specifically commented that the law firm could have undertaken, as its opposing counsel did, a check of the website on a regular basis.

This decision may raise the bar for those who have not been technologically astute. The appellate court took cognizance of the lack of a properly configured email system, including appropriate spam filters and backups. In addition, the court implicitly recognized the ease of taking advantage of the court’s online services.

Moving forward, it may appear now that when counsel is waiting for an order or for an event that presents a type of “drop dead” deadline, that the appropriate court’s docket be regularly checked. As a practical matter, it may also behoove attorneys to cooperate on docket review.

One may also wonder why the trial court just did not accept at face value counsel’s representations as potentially within the trial court’s discretion and instead embarked on what must have been a long hearing.

Michael J. Gelfand

Past Chair

Real Property, Probate and Trust Law Section of The Florida Bar

Click www.RPPTL.com for Breaking News

About Florida’s Largest Substantive Law Section!

Note: This article is not legal advice. Statements and comments made are not those of The Florida Bar or the RPPTL Section

© 2017 Michael J. Gelfand

Michael J. Gelfand

Florida Bar Board Certified Real Estate Attorney

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys

New Decision: Bankruptcy: Anti-Modification of Lien (In Re: Hock)

Michael Gelfand 9/18/2017

Whether a Chapter 11 plan may modify a mortgage upon the Debtors’ principal residence which contains leaseholds was at issue in In Re: Hock, Case No: 14-32157-BKC-PGH, Chapter 11, US BKY, SD Fla., August 15, 2017. (Unfortunately, I do not have a non-copyrighted link, thought I understand it is on Westlaw.) The Debtors’ historical Delray Beach property included a main house in the front which was the Debtors’ residence, and a carriage house in the back which included three units. Two of the units were leased continually since the debtors purchased the property over 10 years earlier. The third unit was vacated after seven years of occupancy by a single tenant.

US Bank held a first mortgage that originally contained a primary residency which was deleted by a “1-4 Family Rider.” Legacy Bank held a second mortgage.

The Debtors moved to value the property, to determine the secured status of Legacy Bank’s second mortgage, and to modify the rights of both lenders. Hock asserted that the mortgages exceeded the value of the property rendering at least a portion of Legacy Bank’s claim as unsecured.

The Court’s analysis turned upon the Bankruptcy Code requirement that in Chapter 11 a plan may

… modify the rights of holders of secured claims, other than a claim secured only by security interest in real property that is the debtor’s principal residence.

11 U.S.C. §1123(b)(5) (Emphasis applied by Court). If the Code is unambiguous the Court should not undertake further interpretation; thus, the Court determined no ambiguity. The term “secured only” modifies the term “security interest” not modifying “real property.”

The term “debtor’s principal residence” is not exclusively the debtor’s principal residence, but may be a residence that includes incidental nonresidential property. As a result, the Code section 1123(b)(5) does not allow Debtors to modify US Bank’s first mortgage because US Bank’s claim is secured only by a security interest in real property that is debtor’s principal residence. Legacy Bank’s second mortgage may be solely unsecured for which another evidentiary hearing would have to be scheduled.

The Court generously acknowledged that this issue has not been addressed by the U.S. 11th Circuit, and that different conclusions have been reached between Florida Districts, and even between judges within the Southern District of Florida. Perhaps the Court is foreshadowing that this matter will or should be addressed by a District Court and then the 11th Circuit!

Michael J. Gelfand

Past Chair

Real Property, Probate and Trust Law Section

of The Florida Bar

Click www.RPPTL.com for Breaking News

About Florida’s Largest Substantive Law Section!

Note: This article is not legal advice. Statements and comments made are not those of The Florida Bar or the RPPTL Section

© 2017 Michael J. Gelfand

Michael J. Gelfand

Florida Bar Board Certified Real Estate Attorney

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys

Court Closure State Wide Friday, and time extensions to Monday

Michael J. Gelfand 9/6/2017

Attached is Chief Justice Larbarga’s Administrative Order, No. AOSC17-46, announcing the closure of all court’s statewide on Friday, and a corresponding extension of most time limits for deadlines falling from the close of business on Thursday, September 7, 2017, until the close of business on Monday, September 11, 2017.

Note that most firms in south Florida will be closed Friday, and many for a good portion of on Thursday.

May all who are the path of the storm find safe shelter, fortitude and calm. May everyone find patience and understanding.

 

Michael J. Gelfand
Past Chair
Real Property, Probate and Trust Law Section of The Florida Bar
Click www.RPPTL.org  for Breaking News
About Florida’s Largest Substantive Law Section!
Note: This article is not legal advice. Statements and comments made are not those of The Florida Bar or the RPPTL Section
© 2017 Michael J. Gelfand

New Decision: Covenant Cancellation (Victorville West, LP v. The Inverrary Ass’n.)

Michael J. Gelfand 8/24/2017

Fore!

Just as a golfer warns of a pending shot, yesterday the Fourth District Court of Appeal warned golf course and other Florida property owners to beware when seeking to dissolve covenants based on “changed circumstances” such as unprofitability, addressing the threshold for cancelling a covenant, the application of the Doctrine of Unreasonable Restraints on Alienation to an automatically renewing covenant, and when does the statute of limitations run on a claim to cancel a covenant. Victorville West LP v. The Inverrary Ass’n Inc., Case No. 4D16-2266 (4th DCA August 23, 2017)

THE ISSUE & POSTURE.

Though the Victorville opinion addressed three distinct matters, the court defined the issue, what likely for many is the main issue, as:

Whether a property owner may cancel a restrictive covenant when that covenant has become financially onerous.

Following a non-jury trial, Victorville’s claim was found to be time-barred, that the covenant remained beneficial to the surrounding community, and the covenant would not be vacated.

THE FACTS.

In 1971, the Inverrary golf course was encumbered by a restrictive covenant requiring the course to “be used solely for recreational purposes.…” Perhaps with wishful thinking, the covenant limited the club roster, if there were 1,500 golf memberships, then non-Inverrary residents could not be admitted as members. The covenant was binding for twenty-five years, followed by ten year successive renewals, unless amended, modified or terminated by the owners of two-thirds of the land.

In 2006, Victorville purchased the golf course “SUBJECT TO… all covenants… listed in the Public Records of Broward County, Florida.” [Recall in twenty-twenty hindsight that 2006 was an auspicious year to purchase Southeast Florida real property.] Membership “significantly” dropped after the purchase.

The Inverrary Association refused to cooperate with Victorville’s request for a vote to change the covenant. In perhaps a classic South Florida response, community members:

Indicated they like the golf course, even if they did not have a membership, because it provided a tranquil view, prevented overcrowding, and preserved the nature of the community.

It appears the community wanted the golf course, but did not want to pay for it!

COURT’S ANALYSIS.

Cancellation.

The appellate court’s test to cancel the restrictive covenant is summarized as:

  1. Whether the original intent of the parties can be carried out despite alleged material changed circumstances; or,
  1. Whether changed conditions frustrated the object of the covenant without fault or neglect on the party seeking to be relieved.

See Essenson v. Polo Assocs., 688 So. 2d 981, 984 (Fla. 2nd DCA 1997). Reciting the trial court’s factual findings, the covenant continues to benefit the dominant estate which was the residential properties. This benefit was preserving the character the community including the pleasant view.

Despite Victorville’s argument, the covenant’s text did not show an intent for the course to be profitable. Citing Essenson, cancellation should not occur just to accommodate the best or most profitable use of property. The trial court’s decision on this issue was affirmed.

Restraint on Alienation.

The covenant was not an invalid restraint on alienation. The covenant’s duration was not perpetual because of the ability to terminate by the two-thirds vote. Further, there is no restriction on “the type of alienation precluded” or “the size of the class precluded from taking.” The trial court’s decision on this issue was affirmed.

Limitations.

A claim begins to run when the action may be brought. The claim was not present when the covenant was created, or upon Victorville’s purchase, clarifying the court’s holding in Harris v. Aberdeen POA, 135 So. 3d 365, 368 (Fla. 4th DCA 2014). Not until “a substantial change in circumstances” occurred would the action accrue and the statute of limitations start to run. The trial court’s statute of limitations holding was reversed; however, that did not provide effective relief to Victorville in light of the affirmances on the first two issues.

CONCLUSION.

Cancellation hung on the specific text of the covenant. The covenant was not conditioned on profitability. Instead, the condition for termination was an owner vote. Without expressly saying, the District Court of Appeal would not re-wrtie the covenant to save an investor from what ultimately became a bad deal.

Reinforcing this conclusion is the Court’s determination that “nothing in the covenant shows that its intent is for the golf course to be a profitable enterprise.” That may be so, but assuming that the golf course was a for-profit effort, this quote may cause consternation regarding what some would say is an “obvious” assumption. The Court may be signaling that if it is important, then write it down.

The decision, also without expressly saying, shifted the focus from the servient estate, the restricted party, to those the covenant was intended to benefit, the “dominant estate,” in this case the residential owners. The dominant estate just wanted their view and ambiance.

In the long run, communities are experiencing their golf courses shuttering and literally becoming brown fields. Whatever the desire on ambiance, in the midst of all this, whatever are your prejudices for or against owners, developers and golf courses, there is the ultimate question of how does a golf course remain green and manicured if there are not enough paying members/players funding maintenance. Covenants with strict provisions may force owner operators and their lenders to depreciate the valuation of their investments or close, and perhaps deed the property to their lender. Of course, if there are covenants in the drafting stage, it is anticipated that the fine print will become more friendly to operators. Finally, it is noted that in many golf course communities the covenants have terminated by the passage of time and what happens to the green space shifts to a zoning forum, a largely political matter for county or municipal governing boards.

Remember all eagles, no bogeys.

Michael J. Gelfand
Past Chair
Real Property, Probate and Trust Law Section of The Florida Bar
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New Decision: Freedom of Speech (Fox v. Hamptons at Metrowest)

Michael Gelfand 7/26/2017

Friday the Fifth District Court of Appeal addressed in a condominium association harassment and nuisance context pre-publication restraints as penalty for contempt in Fox v. Hamptons at Metrowest Cd’m. Ass’n., Inc., Case No. 16-1822 (Fla 5th DCA, July 21, 2017).

In sum, the decision does not extend “Constitutional free speech” rights to condominium unit owners to injure associations or association volunteers. The decision does not address an association’s authority, if included in a covenant, to restrict speech.

The Association’s injunction claim alleged that Mr. Fox, a resident of the Hamptons at MetroWest:

…engaged in a continuous course of conduct designed and carried out for the purpose of harassing, intimidating, and threatening other residents, the Association, and its representatives.

The parties settled resulting in a Final Judgment ordering the parties to comply with the settlement agreement and retaining jurisdiction to enforce. The terms of the agreement were not recited in the opinion.

Thereafter, the trial court granted the Association’s Motion for Contempt. Instead of simply enforcing the settlement agreement, the trial court’s civil contempt order entered penalties apparently beyond what was agreed and beyond what was incorporated in the final judgment.

The trial court’s expansive order required Fox to:

· Stop posting, circulating, and publishing any pictures or personal information about current or future residents, board members, management, employees or personnel of the management company, vendors of the Hamptons, or any other management company of the Hamptons on any website, blog, or social media.

· Take down such information currently on any of his websites or blogs.

· As punishment, not start any new blogs, websites or social media websites related to the Hamptons or the Association.

Fox appealed.

Despite first impressions by many readers, the decision was not a loss for the Association as the decision affirmed without comment enforcement of the settlement agreement’s terms. Only penalties not included in the settlement agreement were reversed. The appellate court seemingly could stopped there, the reversal on the excessive portion of the Judgment merely on procedural grounds.

But the appellate court continued, detouring to State and Federal constitutional “Freedom of Speech,” Amend. I, U.S. Const.; Art. I, § 4, Fla. Const., and further citing to decisions that court crafted injunctions are subject to freedom of speech constraints, Alexander v. United States, 509 U.S. 544, 550 (1993). Near v. Minnesota ex rel. Olson, 283 U. S. 697, 712 (1931) (“…suppression is accomplished by enjoining publication….”). The court explained there are boundaries demarcating constitutional protection, including “obscenity, defamation, fraud, incitement, true threats, and speech integral to criminal conduct”, but a speaker’s “public criticism of his business practices” is protected from prior restraint, including judicial injunctions. The court remarked that businesses and associations are not powerless to respond, and do not just have to take it. Instead, if there is damage the civil or criminal proceedings are the remedy.

[a] free society prefers to punish the few who abuse rights of speech after they break the law than to throttle them and all others beforehand.

Citations omitted.

The opinion is less than a direct First Amendment decision. The determination that the trial court’s penalties went beyond the settlement agreement, and no less affirming the penalties for violating the agreement, would lead one to conclude that the remainder of the opinion was pure dicta. This is especially as courts are usually directed to avoid constitutional issues unless necessary.

Perhaps reinforcing the nature of the dicta, Quail Creek P.O.A., Inc. v. Hunter, 538 So.2d 1288 (Fla. 2nd DCA 1989), was not cited. Note that the Quail Creek decision reversing a summary judgment invalidating a “For Sale” sign restriction was also limited:

…very simply hold that neither the recording of the protective covenant in the public records, nor the possible enforcement of the covenant in the courts of the state, constitutes sufficient "state action" to render the parties' purely private contracts relating to the ownership of real property unconstitutional.

The Quail Creek court expressly sidestepped whether there was state action.

There have been at least two so-called “flag case” decisions from Florida’s Federal District Courts. Many readers have focused on one, Gerber v. Longboat Harbour North Condominium, 724 F. Supp. 884 (MD Florida, 1989), in which one could conclude that the District Court was annoyed (the writer’s wording) that the case was pursued after the Florida Legislature granted flag display rights, albeit after the initial alleged violation. In turn this may have provoked the Court:

This Court cannot agree with its conclusion that judicial enforcement of racially restrictive covenants is state action and judicial enforcement of covenants which restrict one's right to patriotic speech is not state action. Enforcement of private agreements by the judicial branch of government is state action for purposes of the Fourteenth Amendment, as the Highest Court in the land declared it to be in Shelley; it cannot be said that the terms of the agreement either increase or decrease the extent to which government is involved. It is an exercise in sophistry to posit that courts act as the state when enforcing racially restrictive covenants but not when giving effect to other provisions of the same covenant.

Id. at 886-887. The District Court doubled down on re-consideration, vacating the summary judgment referenced above, except reaffirming the state action holding. Gerber v. Longboat Harbour North Condominium, Inc., 757 F. Supp. 1339 (M.D. Fla. 1991).

Another Federal District Court took the opposite stance, Murphree v. Tides Cd’m. at Sweetwater, Case No. 3:13-cv-713-J-34MCR (M.D. Fla. 2014), and rejected that enforcement of a flag covenant amounted to state action in the condominium context. Murphree cited to Loren v. Sasser, 309 F. 3d 1296, 1303 (11th Cir. 2002) which included a “For Sale” sign covenant dispute and held that private enforcement of a private covenant was not state action sufficient to invoke the remedies of The Civil Rights Act, 42 U.S.C. § 1983, and commented that Shelley v. Kraemer, 334 U.S. 1, 19-20, 68 S.Ct. 836, 845, 92 L.Ed. 1161 (1948), has not been extended beyond race discrimination contexts. Id. at 1303. Interestingly, Loren did not cite to Gerber.

Noting that this issue has not been addressed by the United Stated Eleventh Circuit, nor the United States Supreme Court, there have been significant questions whether the Gerber decision on the politically charged flag waiving issue would survive further review. This is perhaps a more interesting question in the post-Citizens United era in which the First Amendment is seen as more protective.

Florida appellate courts have not cited Gerber with enthusiasm. Gerber was been distinguished in Latera v. Isle Mission Bay Homeowners, 655 So. 2d 144 (Fla. 4th DCA, 1995), (No constitutional right to satellite dish.).

Pre-dating many of these decisions is White Egret Condominium, Inc. v. Franklin, 379 So. 2d 346 (Fla. 1979), which held that when found in a condominium

age limitations and restrictions may be enforced if reasonably related to a lawful objective and not applied in an arbitrary or discriminatory manner.

Interestingly, the decision reinforced basic covenant law citing Hidden Harbor Estates, Inc. v. Norman, 309 So.2d 180, 181-82 (Fla. 4th DCA 1975) and did not address the state action component as part of an equal protection analysis which would appear to be different from a freedom of speech analysis. The one citation that did not involve a state actor was a California decision that did not address the U.S. Constitution.

Michael J. Gelfand

Past Chair
Real Property, Probate and Trust Law Section of The Florida Bar
Florida Bar Board Certified Real Estate Attorney
Florida Supreme Court Certified Mediator:
Civil Circuit Court & Civil County Court
Fellow, American College of Real Estate Attorneys

RPPTL New Decision: Short Term Rentals, VRBO (Santa Monica Beach P.O.A. v. Acord)

Michael J. Gelfand 4/30/2017

Dear Colleagues

Florida community associations verses “vacation rental” owners. The battle is now joined!

Hot off the presses, the first appellate court decision between these dueling interests was issued Friday morning!

The decision, exceedingly narrow, is still instructive. Santa Monica Beach P.O.A. v. Acord, Case No. 1D16-4782, (Fla. 1st DCA, April 28, 2017), addressed a “VRBO” short term home rental. Vacation Rentals By Owner is somewhat similar to AirBnB, at least in terms of the use of a property. Among the distinctions is the relationship between the owner and internet company and very significantly how money is handled between them.

The facts are short and sweet. The Acords listed homes (plural) on the VRBO website and proceeded to rent. The Association, and, interestingly, its board of directors, sought a declaratory judgment that the Acords’ “short term rentals” violated the Santa Monica Beach subdivision restrictive covenants which stated:

Said land shall be used only for residential purposes, and not more than one detached single family dwelling house and the usual outhouses thereof, such as garage, servants' house and the like, shall be allowed to occupy any residential lot as platted at any one time; nor shall any building on said land be used as a hospital, tenement house, sanitarium, charitable institution, or for business or manufacturing purposes nor as a dance hall or other place of public assemblage.

(Emphasis added by the Court.). The Association asserted that the Acords advertised transient facilities, obtained transient rental licenses in the name “Acord Rental,” and had to collect and remit state sales and local bed taxes. The trial court granted a motion to dismiss with prejudice finding that the rental use was residential, not a business.

The First District Court of Appeal helpfully started its analysis by framing the novel Florida issue:

… whether short-term vacation rentals violate restrictive covenants
requiring property to be used only for residential purposes and
prohibiting its use for business purposes….

Focusing upon the restrictive covenant’s limited text, the Court identified the threshold as the actual use, not the duration of the rental, and implicitly not examining advertising or organization.

Citing with agreement other decisions, the Court reasoned that a rental, even rentals for a profit, in-and-of-itself, does not transform a home’s use from residential to either business or commercial. The Acords’ tenants were eating and sleeping in the homes and that use is residential. Apparently there was no allegation of a business use by the occupant tenants. Thus, the Court distinguished other decisions which found improper uses based upon the frequency of use and types of uses, as well as the difference in covenants, and affirmed the trial court’s dismissal.

Dicta addressed drafting a short term rental restriction. Based upon the premise that leasing restrictions

…are not favored and to be strictly construed in favor of the free and
unrestricted use of real property…

(citations omitted), the Court stated that an “explicit prohibition” was necessary, a restriction would not be implied. (Emphasis in original). Further dicta encouraged “explicit language” where a “question is common and predictable.”

The decision did not address why the individual directors were plaintiffs. Are they now liable as parcel owners for attorney’s fees? The decision did not state the actual duration of the rentals, a day, a week, or otherwise. The decision did not indicate any outward adverse manifestations of the rentals. These matters likely were not relevant in the context of a claim focused on a narrow restriction.

Looking forward, where do associations go from here? The starting point if short term rentals are to be prohibited, the covenants should be restricted. A mere “no business use” limitation is not sufficient. Simply stated, if you desire to prohibit something, then have a covenant that addresses text the issue.

If the covenants are perhaps too brief, then consider amending to add a short term limitation. Consider other covenant tools that would serve a community’s valid goals which tools may include limitations on who can own, how many can own, registration of guests and vehicles. Perhaps limits on what can be advertised in conjunction with other restrictions.

What can associations do in the interim? Surrendering is not an option when there are blights and disturbances. Concentrate on a rental’s negative impacts. If there is too much noise, blight, lack of maintenance, trash, improper parking, or other annoyances, then focus on those manifestations and how they may trigger other use restriction violations.

Consider recommending other avenues of assistance. Are municipal or county codes violated? Call code enforcement! Is there a significant disturbance of the public welfare and peace, or endangerment of minors or others? Call law enforcement! Are taxes properly remitted? Call the Tax Assessor! Is the property shown as homestead? There may be grounds for the Property Appraiser to re-evaluate the Parcel Card!

More formal tools are available: fining, pre-suit mediation/arbitration and court. The tenant may be far away, but no tenant wants to receive formal demands while on vacation.

Of course, each tool or option requires a careful examination of the situation.

Kudos to: Condominium and Planned Development Committee Chair Sklar for the Court’s call out to his February Florida Bar Journal Article: Bill and RPPTL Legislative Co-Chair Steve Mezer for their discussion Friday afternoon at Stetson Law School; and, to Committee Vice-Chair Ken Direktor for coordinating a very practical CLE Friday covering many new topics which you can access through www.RPPTL.org.

 

Michael J. Gelfand

Florida Bar Board Certified Real Estate Attorney

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County CourtMichael J. Gelfand

Immediate Past Chair

Real Property, Probate and Trust Law Section

of The Florida Bar

image002.png@01D01152.BB680010" >

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About Florida’s Largest Substantive Law Section!

Note: This article is not legal advice. Statements and comments made are not those of The Florida Bar or the RPPTL Section

© 2017 Michael J. Gelfand

RPPTL Sponsors Minority Mentoring Picnic

Jesse Friedman 2/13/2017

On Saturday, February 4, 2017, the Real Property, Probate & Trust Law Section of the Florida Bar was again a sponsor of the Kozyak Foundation's Annual Minority Mentoring Picnic (the "MMP"), held at Amelia Earhart Park in Hialeah, Florida. The MMP is the Kozyak Foundation's premiere event and gives every law student, lawyer, or judge who attends the opportunity to connect with or serve as a mentor or mentee, supporting the Foundation's goal of mentoring as a means to foster diversity and inclusion in the legal profession.

The Real Property, Probate & Trust Law Section of the Florida Bar is dedicated to diversity and inclusion. Hung Nguyen and Jesse Friedman co-chaired the RPPTL Section's sponsorship of the MMP. Section members helped make the event a true success by volunteering of their time and energy at the RPPTL tent. At the RPPTL tent, attendees were able to learn about the benefits of the Section and upcoming meetings, meet RPPTL members, join the Section, take away recent issues of ActionLine and other fun Section-branded goodies, and most importantly - engage in mentorship. This year's 13th Annual MMP and the Section's involvement was the most successful yet!

New Decision: Selective enforcement-Flooring (Laguna Tropical the v. Barnave)

Michael Gelfand 2/1/2017

Wednesday the Third District Court of Appeals narrowed two significant defenses to enforcement actions, selective enforcement and waiver/estoppel in Laguna Tropical, a Condominium Association, Inc. v. Barnave, Case No. 3D16–1531 (Fla. 3d DCA, January 25, 2017).

At issue was the enforcement of two restrictions. The declaration of condominium prohibited:

A unit owner from altering, modifying or replacing the interior of a unit without the prior consent of the Association’s Board of Directors.

Another provision specifically applicable to flooring captioned “noise” stated:

Unless expressly permitted in writing by the Association, no floor covering shall be installed in the units other than any carpeting or other floor covering installed by the Developer. In any event, each unit owner shall have the duty of causing there to be placed underneath such floor covering, so as to be beneath such floor covering and the concrete slab, generally accepted and approved materials for diminution of noise and sound, so that the flooring shall be adequately soundproof.

(Footnote deleted.) It is unclear whether the noise rule was part of the declaration or adopted pursuant to the declaration because the Court stated that the rule was “under the recorded Declaration of Condominium.”

You know what happened next. The second story unit owner replaced her unit carpeting with laminated flooring. The following year, the decision does not provide better specificity, the resident in the unit below the now laminated floor complained about noise. After an unsuccessful arbitration filing and mediation, the Association sought injunctive “and other” relief against the owner and tenant. After a nonjury trial, the owner prevailed. The Association appealed.

There was an important threshold consideration, the burden of proof. Thus, the court commenced by holding that the unit owner bore the burden of proof for the defense of selective enforcement and the defense of waiver or estoppel. “[T]he Owner assumed of the burden of proof as to each of these issues.”

On the substantive issue, it helps to understand the condominium’s somewhat unusual design. There are 94 units: 11 were only upstairs “units;” 11 were only “downstairs” units; and the remaining 72 units first and second floor units.

This configuration was relevant to the selective enforcement defense because owners of upstairs and downstairs units who installed hard flooring upstairs would presumably not complain about their own flooring. Similarly, hard flooring installed by in a downstairs unit normally would not generate flooring complaining.

Thus, the Court focused on complaints actually made to the Association. The flooring restriction “is plainly intended to avoid noise complaints.” The Association enforced the noise rule when there was a complaint by a downstairs owner. Because there were no complaints that were not acted upon, the apparent existence of hard flooring that did not generate a complaint did not constitute no selective enforcement!

Concerning the waiver or estoppel argument, the court held that the president’s communications to the unit owner could not constitute an alteration of flooring approval. The declaration required written approval by the board of directors, not one of the officers.

The final judgment was reversed and remanded for “enforcement of the flooring restrictions as sought by the Association.”

This decision should assist association enforcement efforts. Procedurally, this reinforces that owners have to prove their defenses. Substantively, when a restriction is intended to protect neighboring owners from nuisances such as noise, it appears that if there is no complaint then the Association’s failure to enforce does not automatically create a selective enforcement defense. While it may be inviting to extend this relaxed concept to all types of restrictions not immediately enforced by the Association, it would appear that this holding may be limited to restrictions protecting others, perhaps not applying to general restrictions that impact the community such appearance restrictions. Finally, though because the owner failed to introduce the actual email communications upon which the waiver/estoppel claim was based if there is a clear approval procedure in the declaration that is not followed, an oral statement in violation of procedure cannot be reasonably relied upon by an owner.

Michael J. Gelfand

Florida Bar Board Certified Real Estate Attorney

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County CourtMichael J. Gelfand

Immediate Past Chair

Real Property, Probate and Trust Law Section

of The Florida Bar

image002.png@01D01152.BB680010" >

Click www.RPPTL.com for Breaking News

About Florida’s Largest Substantive Law Section!

Note: This article is not legal advice. Statements and comments made are not those of The Florida Bar or the RPPTL Section

© 2017 Michael J. Gelfand

RPPTL SECTION STARTS BICYCLE CLUB

Robert Swaine 1/30/2017

The RPPTL Section recently formed a bicycle club bicycle rides at upcoming Executive Council meetings. Both causal and experienced cyclists are invited to join in on the fun. Custom Riding Reptile bike jerseys are available for order now!

Are you a cyclist? Wanna try?

Marty Solomon and others have formed the RPPTL Riding Reptiles Bicycle Club, and you are invited to join for FREE. The club will work to organize bike rentals and bike routes at upcoming Executive Council meetings.

Don’t feel like wearing spandex? Not a problem. There will be groups and ride routes for normal people who just want to go for a ride, as well as the Mike “Big Ring” Bedke die-hard group. The point is, this is an opportunity to ride in new cities with friends at your own pace. We are going to start with Deb Goodall’s Austin meeting. If you are interested in participating, please RESIST THE URGE TO RESPOND TO THIS EMAIL and email Marty at msolomon@carltonfields.com<mailto:msolomon@carltonfields.com>.

If you are a cyclist, you will definitely want to purchase the custom Riding Reptile jersey that Marty designed. You can view the logo on the attachment and purchase your jersey from the link below within the next 20 days. Orders should be delivered by March 9, unfortunately not in time for the Austin rides.. You can view the logo on the attachment and purchase your jersey from the link below within the next 20 days. Orders should be delivered by March 9, unfortunately not in time for the Austin rides.

Your online store is ready for ordering at: http://shop.jakroo.com/RPPTL-Reptiles

New Decision: Mortgage Lien (Heartwood II v. Dori)

Michael Gelfand 1/27/2017

Whether a mortgage with a correct legal description can be foreclosed if the deed to the mortgagor/borrower contained a defective legal description was at issue and Heartwood II. LLLC v. Dori, Case No. 3D1-2576 Fla. 3d DCA, January 11, 2017). The trial court dismissed the lender’s mortgage foreclosure action and reformation action.

Two instruments were involved a deed to Mr. Dori and a mortgage from him to the lender. The deed would make a title underwriter cry. The legal description in the deed to Dori stated as a legal description:

Unit 918, Mirador 1200, a Condominium, together with an undivided interest in the common elements, according to the Declaration of Condominium thereof, as recorded in Official Records Book , Page , of the Public Records of Miami-Dade County.

This Commitment will be endorsed at the time of the recordation of the Declaration of Condominium to complete the legal description.

The unit’s street address was stated.

The same date Dori obtain the deed, he executed the mortgage for unit which is the subject of the foreclosure action. The mortgage contained the proper legal description, including the recording book and page numbers missing from the deed, and including the same street address.

The deed likely was created by copying the legal description from the title commitment which was created before the declaration of condominium was recorded. The court also surmised that the mortgage has the correct legal description because the mortgage was created by the lender.

The lender’s complaint sought to foreclosure the mortgage and to reform the deed’s legal description. Dori answered admitting that he owned the property, and not raising any affirmative defense concerning the deed’s legal description. The lender’s unopposed motion for leave to amend to add the deed’s grantor was denied because the case was set for trial the following month.

The ultimate bottom line was that as Dori acknowledged ownership and there was no dispute that the mortgage contained the proper legal description, the mortgage was valid. The result was that the matter was remanded, not just for further proceedings, but for entry of a judgment of foreclosure. The lender at its option could pursue the reformation action.

Interestingly, the appellate court did not address whether the deed is adequate. Normally, the test is whether the deed provides sufficient identification of the property. In this instance the name of the condominium and the unit was present together with the street address which might have been a sufficient identification of the property; thus, alleviating the need to reform. In the same regard, if the deed was not sufficient, then the foreclosure action should not have been allowed proceed without naming the owner of property.

Michael J. Gelfand

Florida Bar Board Certified Real Estate Attorney

Florida Supreme Court Certified Mediator: Civil Circuit Court & Civil County Court

Michael J. Gelfand

Immediate Past Chair

Real Property, Probate and Trust Law Section of The Florida Bar

Click www.RPPTL.com for Breaking News

About Florida’s Largest Substantive Law Section!

Note: This article is not legal advice. Statements and comments made are not those of The Florida Bar or the RPPTL Section

© 2017 Michael J. Gelfand

New Decision: Mortgage Lien (Heartwood II v. Dori)

Michael Gelfand 1/27/2017

Whether a mortgage with a correct legal description can be foreclosed if the deed to the mortgagor/borrower contained a defective legal description was at issue and Heartwood II. LLLC v. Dori, Case No. 3D1-2576 Fla. 3d DCA, January 11, 2017). The trial court dismissed the lender’s mortgage foreclosure action and reformation action.

Two instruments were involved a deed to Mr. Dori and a mortgage from him to the lender. The deed would make a title underwriter cry. The legal description in the deed to Dori stated as a legal description:

Unit 918, Mirador 1200, a Condominium, together with an undivided interest in the common elements, according to the Declaration of Condominium thereof, as recorded in Official Records Book , Page , of the Public Records of Miami-Dade County.

This Commitment will be endorsed at the time of the recordation of the Declaration of Condominium to complete the legal description.

The unit’s street address was stated.

The same date Dori obtain the deed, he executed the mortgage for unit which is the subject of the foreclosure action. The mortgage contained the proper legal description, including the recording book and page numbers missing from the deed, and including the same street address.

The deed likely was created by copying the legal description from the title commitment which was created before the declaration of condominium was recorded. The court also surmised that the mortgage has the correct legal description because the mortgage was created by the lender.

The lender’s complaint sought to foreclosure the mortgage and to reform the deed’s legal description. Dori answered admitting that he owned the property, and not raising any affirmative defense concerning the deed’s legal description. The lender’s unopposed motion for leave to amend to add the deed’s grantor was denied because the case was set for trial the following month.

The ultimate bottom line was that as Dori acknowledged ownership and there was no dispute that the mortgage contained the proper legal description, the mortgage was valid. The result was that the matter was remanded, not just for further proceedings, but for entry of a judgment of foreclosure. The lender at its option could pursue the reformation action.

Interestingly, the appellate court did not address whether the deed is adequate. Normally, the test is whether the deed provides sufficient identification of the property. In this instance the name of the condominium and the unit was present together with the street address which might have been a sufficient identification of the property; thus, alleviating the need to reform. In the same regard, if the deed was not sufficient, then the foreclosure action should not have been allowed proceed without naming the owner of property.

Michael J. Gelfand
Florida Bar Board Certified Real Estate Attorney
Florida Supreme Court Certified Mediator: Civil Circuit Court & Civil County Court

Michael J. Gelfand
Immediate Past Chair
Real Property, Probate and Trust Law Section of The Florida Bar
Click www.RPPTL.com for Breaking News
About Florida’s Largest Substantive Law Section!
Note: This article is not legal advice. Statements and comments made are not those of The Florida Bar or the RPPTL Section
© 2017 Michael J. Gelfand

New Decision: Lis Pendens (Ober v. Town of Lauderdale By-the-Sea)

Michael Gelfand 1/25/2017

It Lives! What? The lis pendens statute!

This morning the Fourth District Court of Appeal granted a motion for rehearing in Ober v. Town of Lauderdale By-the-Sea, Case No.: 4D14-4597 (Fla. 4th DCA, January 25, 2017) This decision withdrew the panel’s decision in Ober v. Town of Lauderdale By-the-Sea, 41 FLW D1978, Case No.: 4D14-4597 (Fla. 4th DCA, August 26, 2016), substituting with a new decision arriving at the opposite conclusion, reversing and remanding.

The decision is of significant importance to real estate practitioners because the decision reinstates the vitality of the lis pendens statute.

The Facts.

The appeal arose from a quiet title action following a lengthy, seemingly nondescript foreclosure action with the following chronology:

November 26, 2007 - Bank files Complaint accompanied by a Lis Pendens recorded pursuant to §48.23, Fla. Stat.;

September 22, 2008 - Final Judgment of Foreclosure which expressly retained jurisdiction “to enter further orders that are proper including, without limitation, a deficiency judgment.” (Note: quote obtained from the Record on Appeal, not in decision)

July 13, 2009 through October 27, 2011 - the Town records seven code enforcement liens against the foreclosed property allegedly resulting from post-judgment violations;

September 27, 2012 – Bank is the high bidder at the clerk’s sale and subsequently transfers the property to Ober.

Examining the express language of the lis pendens statute, the statute provides in pertinent part:

[T]he recording of . . . notice of lis pendens . . . constitutes a bar to the enforcement against the property described in the notice of all interests and liens . . . unrecorded at the time of recording the notice unless the holder of any such unrecorded interest or lien intervenes in such proceedings within 30 days after the recording of the notice. If the holder of any such unrecorded interest or lien does not intervene in the proceedings and if such proceedings are prosecuted to a judicial sale of the property described in the notice, the property shall be forever discharged from all such unrecorded interests and liens.

Section 48.23(1)(d), Fla. Stat. (2014) (Emphasis in decision). The Court acknowledges that “foreclosures are unlike many civil lawsuits,” and that the lis pendens statute addresses “all interests and liens,”

The court held that the Town’s liens, recorded between the entry of final judgment and the judicial sale were discharged. The holder of a lien arising before a judicial sale must seek to intervene in a pending foreclosure action concerning the property within the statutory thirty day window. The court believes that this holding is consistent with the text in Florida Rules of Civil Procedure form 1.996(a) foreclosing liens.

The court reflects on how we arrived at this point.

The practical problem in this case is the long lag time between the foreclosure judgment and the foreclosure sale. Resolution of the competing interests—of the Town, the lending and title insurance industries, property owners, and buyers at foreclosure sales—is in the province of the legislature.

This is yet one more call to the Legislature to redress the gross inequities creating hardships and problems plaguing the legal system when lenders fail to timely proceed with foreclosures. In this regard, recall that these foreclosures are not delayed just a week, a month, a year, two years or three years. Instead, there are many years of delays.

Perhaps the courts lament to the Legislature may prompt action, being heard better than individual property owners, hardworking families and retirees, who have pleaded for assistance for nearly a decade over the lender delay problem. Perhaps now that another group is hurt, municipalities, there will be action, speeding up the process or alternatively reimbursing associations bearing the burden of protecting the lenders’ security.

A substantive issue of note, the gap of time between the judicial sale and issuance of a certificate of title. Ober did not contest the attachment of liens claimed to have been perfected after the judicial sale. This gap may be significant, particularly concerning the start of a chain of title for examination purposes.

The list of counsel of record includes a significant handful of Section members. This includes Ober counsel’s Manny Farach. The court called out recognition to the Florida Land Title Association’s brief, one of the authors being Marty Solomon.

The opinion’s rationale may sound familiar to readers as it paralleled discussions at Section meetings, and including the Section’s Amicus Brief ably drafted by Kenneth Bell, John Little and Robert Goldman to whom we provide great thanks for their continuing, steadfast and excellent efforts.

Michael J. Gelfand

Immediate Past Chair

Real Property, Probate and Trust Law Section of The Florida Bar

Click www.RPPTL.com for Breaking News

About Florida’s Largest Substantive Law Section!

Note: This article is not legal advice. Statements and comments made are not those of The Florida Bar or the RPPTL Section

© 2017 Michael J. Gelfand

NEW DECISION: LIEN V. MORTGAGE FORECLOSURES (JALLALI V. KNIGHTSBRIDGE VILLAGE HOA ON REHEARING WITH ATTACHMENT)

Michael Gelfand 1/12/2017

The new year includes a reprise, a rehearing decision issued in Jallali v. Knightsbridge Village HOA, Inc.¸ Case No. 4D-15036 (Fla. 4th DCA, January 4, 2017). The decision addresses an association’s ability to file an independent action to foreclose a lien while a mortgage foreclosure action protected by a lis pendens is pending, a very meaty issue, so plenty of analysis.

THE FACTS.

To bring new readers up to speed, and as a quick reminder to those on line last year, the quick sequence of events which spans two separate foreclosure actions, lien and mortgage, and appeals of each:

2007: Parcel owner Jallali’s first mortgagee filed a mortgage foreclosure action including as defendants the owner and the condominium association.

2011: The mortgage foreclosure still pending (surprised?), the Association filed a lien foreclosure naming the owner as a defendant, but not the lender.

2014: A final judgment in the Association’s lien foreclosure action was per curium affirmed. Jallali v. Knightsbridge Village HOA, Inc.¸ 185 So.3d 1251 (Fla. 4th DCA, 2017). It is unclear when the final judgment was entered, but that is not relevant, except that judgment was apparently before the mortgage foreclosure judgment which was also in 2014. Jallali v. Christina Trust, 184 So.3d 559 (Fla. 4th DCA, 2016).

After entry of the mortgage foreclosure judgment, the owner moved to vacate the Association’s final judgment of foreclosure relying upon US Bank Nat’l Ass’n. v. Quadomain Cd’m. Ass’n, 103 So. 3d 1977 (Fla. 4th DCA, 2012). The trial court denied the motion to vacate.

DIGRESSION: QUATOMAIN.

As a quick very short summary, Quadomain addressed an association lien foreclosure based on a lien, both filed after US Bank filed a re-foreclosure action with a supplemental notice of lis pendens. The association named as a defendant lender US Bank, and (surprise!) US Bank did not respond and was defaulted. The trial court denied US Bank’s motion to vacate, the motion asserting that the trial court not having jurisdiction because of the Bank’s lis pendens. Reversing, the Quadomain court held:

the only way to enforce a property interest that is unrecorded at the time the lis pendens is recorded is by timely intervening in the suit creating the lis pendens — all other actions are barred.

* * *

Accordingly, the court in the Association's lien foreclosure action did not have jurisdiction to foreclose the lien. If the Association wanted to recover its unpaid Association fees, it was statutorily required to intervene in the re-foreclosure action as prescribed in section 48.23(1)(d).

(Citations omitted.)

THIS APPEAL.

Back to the appeal of the Association’s lien foreclosure judgment. The original decision was issued in January 27, 2016. A rare successful rehearing resulted in the Association prevailing, affirming the trial court’s order denying the owner’s motion to vacate the final judgment of foreclosure. In this January, 2017, decision the appellate court denies the owner’s motion for rehearing. To allow readers an easy method to follow and observe what was changed from June, attached is a red-line comparison of the June 2016 decision with the January 2017.

JUNE REHEARING.

In the first rehearing decision, June of last year, the appellate court referred to Quadomain’s concluding jurisdiction” text as “dicta,” and distinguished the decision on the basis that the Association in Jallali was not seeking to foreclose the first mortgagee’s interest. In addition,Quadomain did not address the impact of the Association’s declaration of covenants, a recorded instrument, and that:

Moreover, we note that, in the context of this case, a lis pendens recorded by a mortgage holder serves to protect the mortgage holder from liens unrecorded at the time of the filing.

(Emphasis in original.)

THIS, JANUARY 2017, DECISION.

This decision provides clarity to the June 2016 decision on rehearing by explaining how the lien foreclosure proceeding is not an interest barred by the lis pendens statute. The declaration of condominium which created the lien right was recorded before the lis pendens. The declaration “constitutes a recorded interest and thus takes the case out of the purview of Section 48.23 Fla. Stat.” Thus, because the declaration contained a relation-back provision, the Association was not pursuing an interest that was unrecorded at the time of the notice of lis pendens which would otherwise be barred by the lis pendens if there was no intervention.

ERRATA.

The decision reinforces the cry that “Quadomain is dead” at least to the extent of allowing associations to file an independent action to foreclose during the pendency of a first mortgagee’s foreclosure. This ability is especially important as we have seen that many first mortgage lenders have stalled, whether intentionally or otherwise and an association is stuck between a proverbial “rock and hard place” as it is and does not need to additional issues arise as Quadomain reported.

Manny Farach in a posting to the Real Property Litigation Committee list-serve recognized that two of the three panelists in the decision Jallaliwere panelists in the recent decision of Ober v. Town of Lauderdale by-the-sea, 41 Fla. Law. W. 198, Case No.: 4D-144597 (Fla. 4th DCA, August 24, 2016). The Ober decision held that a town’s code enforcement lien recorded after a final foreclosure judgment, but before the issuance of a certificate of sale, was an enforceable lien against the property pursuant to the lis pendens statute, Section 48-23 Fla. Stat. It is noted that the RPPTL Section has filed a rare amicus brief in the Ober court seeking re-hearing because of the adverse impact of the decision and the apparent improper limitation of the effectiveness of a lis pendens in a foreclosure through only a final judgment, not to the end of the case which ususally is the certificate of title.

There has been a question as to whether the Jallali decision conflicts with Ober. The January 2017 rehearing in Jallali decision identifies that the interest at issue, the declaration was created before the lender’s lis pendens which differentiates Ober where the interest, the town’s claim of lien was not created until it was recoded after the final judgment.

The Jallali determination that the declaration of condominium is a recorded real property interest raises other interesting consequences for the association practitioner. Primary is that the rational would presumably support a lis pendens as of right for in communities recorded covenant enforcement matter. Quite some time ago Tetrault v. Calkins, 79 So. 3d 213 (Fla. 2d DCA, 2012), indicated that a restrictive covenants was not an interest in property sufficient to support a lis pendens without bond, a decision that was criticized, and seemingly challenged by 100 Lincoln Rd SB, LLC v. Daxan 26 (FL), LLC, 180 So. 3d 134 (Fla. 3rd DCA, 2015) (citing §48.23(1)(b)), and now the determination in Jallali.

Of course, there is always the need to “read the documents.” Importantly the declaration language in Jallali apparently contained express relation-back language. Not all declarations have that language. It may be appropriate for associations to review their declaration’s lien language and perhaps suggest amendments, taking careful note not to violate protected first mortgagee rights or run afoul of Fannie Mae underwriting guidelines.

Michael J. Gelfand

Florida Bar Board Certified Real Estate Attorney

Florida Supreme Court Certified Mediator: Civil Circuit Court & Civil County Court

Immediate Past Chair

Real Property, Probate and Trust Law Section of The Florida Bar

Click www.RPPTL.com for Breaking News

About Florida’s Largest Substantive Law Section!

Note: This article is not legal advice. Statements and comments made are not those of The Florida Bar or the RPPTL Section

© 2017 Michael J. Gelfand

New Decision: Ripeness/Enforcement (Zweig v. Il Villaggio Cd'm)

Michael Gelfand 1/12/2017

Kicking off the year is a decision from Florida’s Third District Court of Appeals addressing when a unit owner’s challenge to a neighbor’s alteration plans was ripe. In Zweig v. Il Villaggio Cd’m. Ass’n., Inc., Case No. 3D16-934 (Fla. 3d DCA, January 4, 2017) Ms. Zweig sought an injunction to prohibit the Association from approving the “vertical unit combination” of two neighboring units. The trial court granted the Association’s motion for summary judgment.

Though the Association allowed the neighboring unit owner to commence structural feasibility testing, the neighboring unit owner did not apply for Association permission to combine the units. As the court commented, an application may not be filed, or if filed the application may not be approved. If an application was not properly approved then there may be sufficient legal remedies to address a harm. Thus, the complaint was “too attenuated.”

Interestingly, the decision does not address the role of Mandatory Pre-Suit Arbitration pursuant to §718.1255. Especially as there is no indication of a motion for a temporary injunction or emergency, there does not appear to be a reason why this dispute was not heard in arbitration.

This decision is of interest as it draws a line for associations that are frequently threatened by parcel owners, in essence requiring the threatening owner to wait until the application process plays out until the end. Presumably, at that point, if construction is imminent, then the threatening owner can seek a temporary injunction.

Michael J. Gelfand

Florida Bar Board Certified Real Estate Attorney

Florida Supreme Court Certified Mediator: Civil Circuit Court & Civil County CourtMichael J. Gelfand

Immediate Past Chair

Real Property, Probate and Trust Law Section of The Florida Bar

Click www.RPPTL.com for Breaking News

About Florida’s Largest Substantive Law Section!

Note: This article is not legal advice. Statements and comments made are not those of The Florida Bar or the RPPTL Section

© 2017 Michael J. Gelfand

New Decision: Lenders Lien for Insurance Proceeds (Alvarez-Mejia v. Bellissimo Prop.)

Michael Gelfand 1/12/2017

A straggling brief holding over from last year, this considers a decision addressing a mortgage lender’s ability to retain casualty insurance proceeds and an owners consistency in representations to the lender and insurer were at issue in Alvarez-Mejia v. Bellissimo Prop., LLC, Case NO.: 3D15-1258 (Fla. 3d DCA, December 28, 2016).

The owner’s mortgaged property was damaged by fire. Similar to many mortgages, the owner’s mortgage included a “property insurance” provision that stated:

Unless Lender and Borrower otherwise agree in writing, any insurance proceeds, whether or not the underlying insurance was required by Lender, shall be applied to restoration or repair of the Property, if the restoration or repair is economically feasible and Lender’s security is not lessened. . . . If the restoration or repair is not economically feasible or Lender’s security would be lessened, the insurance proceeds shall be applied to the sums secured by this Security Instrument, whether or not then due, with the excess, if any, paid to Borrower.

Also similar to many mortgages, the owner’s mortgage also provided that the lender:

shall have the right to hold the insurance proceeds until Lender has had an opportunity to inspect such Property to ensure the work has been completed to Lender’s satisfaction. . . .

The owner’s licensed contractor initially estimated the repairs to be $98,717. In reliance on this estimate the insurer issued checks for $94,162.52, the check payees including the owner and the lender. The lender obtained an appraisal of the exterior of the home at $90,000, less than the repair estimate. The lender asserted that considering the property’s value and the repair estimate, it was not economically feasible to undertake repairs. Alvarez-Mejia then provided a revised repair estimate of $53,117.

In response to the lender continuing to retain the insurance proceeds the owner sued the lender for breach of contract, breach of an implied covenant of good faith and fair dealing, a declaratory judgment, and unjust enrichment. The trial court granted the lender’s motion for summary judgment finding “that it was not economically feasible to repair the property because of the cost to repair was greater than the value of the property.”

The appellate court reversed the summary judgment. The owner’s affidavit submitting the revised repair estimate indicated that the repair was economically feasible. The lender failed to provide an estimate of the property’s value after the requested repairs; thus, the lender did not fulfill the lender’s burden to rebut the owner’s responding assertions.

A vigorous dissent attacked underlying evidentiary issues, and in particular whether the owner properly authenticated the revised affidavit which if not admissible would leave only the original repair estimate which exceeded the home’s value.

This decision highlights what many overlook, a lender’s ability to impound insurance proceeds. The court did not comment upon, but the mortgage provisions purports to allow the lender to not only withhold the proceeds until construction starts, but to withhold the proceeds until after construction. Impounding proceeds may create a cash flow problem for some owners and associations, especially if the owner is unable to have a contractor that will “float” the work until the completion of all work, or obtain and pay for a loan. Impoundment provisions may take on a new significance when counsel negotiates repair contracts for casualty work expected to be paid from insurance proceeds.

The majority decision is silent concerning the practical contradiction between owner’s original repair estimate utilized to obtain insurance proceeds, and the “revised” estimate utilized to justify disbursement from the lender. Does this silence acknowledge a double standard for repair estimates, allowing high estimates to insurers and low estimates for lenders and others. Will looking the other way be allowed when good faith estimates are submitted for issuance of permits and permitting fees? Traditionally, a party cannot offer a witnesses affidavit after a deposition testimony, the affidavit submitted to contradict the testimony. One must wonder what the justification for allowing dueling estimates.

I still have one decision from last year to follow up. An oldie but goodie. More to come.

Michael J. Gelfand

Florida Bar Board Certified Real Estate Attorney

Florida Supreme Court Certified Mediator: Civil Circuit Court & Civil County CourtMichael J. Gelfand

Immediate Past Chair

Real Property, Probate and Trust Law Section of The Florida Bar

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© 2017 Michael J. Gelfand

Save Calusa Trust v. St. Andrews Holdings, Ltd

Manuel Farach 1/9/2017

When does a local government ordinance become a restrictive covenant that is subject to being extinguished through application of the Marketable Record Title Act, Florida Statute section 712.01 et. seq.? That was the question in Save Calusa Trust v. St. Andrews Holdings, Ltd., 193 So. 3d 910 (Fla. 3d DCA 2016), where the Third District Court of Appeal held that a restrictive covenant imposed by government as part of development order is not subject to and cannot be extinguished by the Marketable Record Title Act.

I. Facts

This case begins in 1967 when a developer sought to create a golf-course in Miami-Dade County. The real property was zoned General Use (“GU”), which did not permit a golf course, so the developer sought and obtained an “unusual use” that same year with the County's Zoning Appeals Board (“ZAB”) adopted a resolution with the condition that a restrictive covenant be recorded that limit the future use of the property to a golf course. This first developer sold to a second developer who, in fact, recorded a restrictive covenant as follows:

The aforedescribed property may only be used for the following purposes:

A golf course and for the operation of a country club which may include a clubhouse, pro shop, locker rooms, swimming pools, cabanas, liquor, beer and wine facilities, dining room facilities, parking, tennis courts, putting greens, golf driving ranges and all other uses incidental thereto.

These restrictions shall continue for a period of ninety-nine years unless released or revised by the Board of County Commissioners of the County of Dade, State of Florida, or its successors with the consent of 75% of the members of the corporation owning the aforedescribed property and those owners within 150 feet of the exterior boundaries of the aforedescribed property.

“[t]hat restrictive covenants running with the land in proper covenant form, meeting with the approval of the Zoning Director, be recorded to ensure that the golf course be perpetually maintained as such....”

Save Calusa, 193. So. 3d at 912.

The property was developed as a golf course, and a “ring” of 140 homes were built around the golf course. These owners in the “ring” paid no dues for the maintenance of the golf course and did not otherwise maintain the course. Id. at 912 – 23. This arrangement stayed in place until the golf course closed in 2011. A later developer sought to re-develop the golf course, and to no one’s surprise, failed to get 75% of the “ring” homeowners to approve the proposed change. Accordingly, the county refused to let the newest developer change the zoning of the parcel. Id at 913. This litigation followed.

II. Case

Rather than filing an administrative challenge to the county’s decision, the owner of the now defunct golf-course filed suit seeking to invalidate the deed restriction under the Marketable Record Title Act (MRTA) and joined the “ring” homeowners and the county. The trial court entered a detailed summary judgment finding for the developer that the restrictive covenants were barred by MRTA. The homeowners and the county appealed to the Third District.

III. Analysis

The Third District reversed and held that the use restrictions were exempt from MRTA:

While we are not unsympathetic to Owner's arguments, we cannot so readily divorce the covenant from the governmental approval process that spawned it. The record reflects that ZAB's approval of Developer's unusual use application for the golf course acreage was final administrative agency action. ZAB's unusual use approval was not a recommendation to the County Commission, but rather, a final approval conditioned on the recordation of the restrictive covenant. The record clearly reflects that the ZAB Resolution imposed a condition that a restrictive covenant be generated and recorded. As the unusual use approval was final as of August 16, 1967, the date of the ZAB Resolution, so was the prescribed restrictive covenant. That the Developer's successor took seven months to record the restrictive covenant is of no significance.

Id. at 915.

In other words, the Third District held the fact that the restrictive covenant arose out of the governmental approval process imbued it with the ability to withstand extinguishment under MRTA since it was now a government regulation. This decision has created a great deal of concern among some because almost all planned subdivision restrictions are created through a “governmental approval process” and could conceivably be exempt from MRTA. The concern is that MRTA is intended to clear land titles and there should be no exceptions to its extinguishment provisions other than those specifically set forth in the statute. Moreover, the Save Calusa opinion contains some imprecise language that restrictive covenants imposed by government do not constitute defects in marketable, a position rejected by most real estate practitioners. The landowners sought discretionary review in the Florida Supreme Court, but its petition was rejected.

IV. Conclusion

It remains to be seen whether Save Calusa Street will be a “one-off” opinion that is limited to its facts, or whether later courts will adopt its view that government-approved restrictive covenants as being exempt from MRTA’s extinguishment provisions. Real estate practitioners are cautioned to be aware of the case and its facts as it has created uncertainty in the application of MRTA.

New Decision: Validity of Amended Covenants (Van Loan v. Heather Hills POA)

Michael Gelfand 1/6/2017

Transforming a voluntary “recreational and shareable neighborhood association” into a mandatory association restricting use was the subject in Van Loan v. Heather Hills POA, Inc., Case No. 2-D 15-5430 (Fla. 2d DCA, December 30, 2016). Issues raised included the authority to amend recorded covenants and the consequences of an overly broad or otherwise improper recorded instrument.

The background facts reach back literally half a century:

1967: The Heather Hills subdivisions were created, each subdivision restricted by separately recorded plat and restrictive covenants. The covenants reserved the right to amend to the developer or the developer’s successors. No association was mentioned.

1969: The POA was incorporated as a voluntary organization for the “purpose of promoting recreational and charitable interests for those living in Heather Hills.”

2012: The POA amended its articles of incorporation to provide that “the record title holder of all lots [in Heather Hills] shall be members” and changing the corporate purpose to “managing and operating Heather Hills” as “a community intended and operated” as ‘housing for older persons.’” The amended articles of incorporation were filed with the Florida Secretary of State but not apparently recorded.

An “Additional Declaration of Covenants, Conditions[,] and Restrictions” were recorded in the county’s public records which included an “over 55 community” restriction, and stated that the covenants were “applicable and binding upon the lots of all consenting property owners situated in Heather Hills” and also stated that “the owners who consent to and join in this Declaration do hereby impose upon the lots, blocks[,] or parcels of such owners in Heather Hills … and all members of the POA“ the restrictions. (Emphasis in decision).

The plaintiff lot owners brought an action for declaratory relief, quiet title and slander of title, all of which the trial court dismissed.

The appellate court focused on the apparent contradiction in the amended declaration, which stated it applied to those who consented and “all members of the POA.” The court remarked that there is no indication as to which owners consented. The court held that the amended declaration which stated that it would run with the land contained a “ambiguity” and that the amended declaration placed “a cloud on the titles of the Homeowners’ Lots.”

Concerning the authority to amend, the court recited that the original covenants did not mention an association or delegate the right to amend to third parties. Thus:

Because there is no express delegation of authority to the [POA] to amend the restrictive covenants, the restrictive covenants can only be amended by the consent of all the property owners in the subdivision.

Thus, the court held that a cause of action for declaratory relief was sufficiently stated.

The court also held that a quiet title claim was stated, building upon the above holdings that the plaintiff homeowners owned the property in controversy, that a cloud on title exists, that there are facts that give the cloud on title apparent validity, and that the alleged facts show the restriction is invalid.

Concerning the slander of title claim, the dismissed complaint alleged that the POA falsely declared to the public that POA membership was mandatory, posted signs that the community was age restricted and distributed fliers with the same alleged false statement. The homeowners’ claimed they suffered damage by loss of value in the lots and inability to convey clear title without the asserted approval of the POA. The appellate court held that the lack of clarity in the amended covenants “results in the appearance that the homeowners’ lots are subject to the amended restrictive covenants.” Thus, a cause of action for slander of title was stated.

In hindsight, this decision reinforces the need for caution when attempting to create a mandatory association to enforce existing covenants, or to convert a voluntary association with covenants, to a mandatory association. A recorded instrument may slander title leading to damages. The facts also indicate a need to confirm that the person or entity signing the new covenant instrument has the authority to do so, both in terms of a right confirmed by a chain of title and whether the original restrictions permit the substantive changes.

Interestingly, the decision does not indicate and does not address whether a statute of limitations issue was pled. Noting that the amended covenants were recorded in 2012 and that there were three complaints filed, the original complaint, and amended complaint and a second amended complaint, there may have been a relatively short period of time between the recording of the amended covenants and filing of the suit which seemingly would have avoided a statute of limitations defense. Otherwise, if there was a sufficient passage of time, there may have been a valid limitations defense under Harris v. Aberdeen, POA, Inc., 135 So. 3d 365 (Fla. 4 DCA, 2014) as well as Hilton v. Pearson, ___ So. 3d ____ Fla. 1st DCA, 2016; Silver Shells Corp. v St. Maarten at Silver Shells, 169 So. 3d 197 (Fla. 1st DCA, 2015) which under these decisions could have breathed life into the covenants.. Also interesting is the court’s recitation that both plaintiffs and defendant agree that the amended restrictive covenants did not apply to the Plaintiffs/

Many thanks to Mr. Christy, Ms. Hartley and Mr. Holtsberg for providing the decision.

Best wishes for a new year.

Michael J. Gelfand

Florida Bar Board Certified Real Estate Attorney

Florida Supreme Court Certified Mediator: Civil Circuit Court & Civil County Court

Michael J. Gelfand

Immediate Past Chair

Real Property, Probate and Trust Law Section of The Florida Bar

New Decision: Validity of Amended Covenants (Van Loan v. Heather Hills POA)

Michael Gelfand 1/6/2017

Whether a mortgage with a correct legal description can be foreclosed if the deed to the mortgagor/borrower contained a defective legal description was at issue and Heartwood II. LLLC v. Dori, Case No. 3D1-2576 Fla. 3d DCA, January 11, 2017). The trial court dismissed the lender’s mortgage foreclosure action and reformation action.

Two instruments were involved a deed to Mr. Dori and a mortgage from him to the lender. The deed would make a title underwriter cry. The legal description in the deed to Dori stated as a legal description:

Unit 918, Mirador 1200, a Condominium, together with an undivided interest in the common elements, according to the Declaration of Condominium thereof, as recorded in Official Records Book , Page , of the Public Records of Miami-Dade County.

This Commitment will be endorsed at the time of the recordation of the Declaration of Condominium to complete the legal description.

The unit’s street address was stated.

The same date Dori obtain the deed, he executed the mortgage for unit which is the subject of the foreclosure action. The mortgage contained the proper legal description, including the recording book and page numbers missing from the deed, and including the same street address.

The deed likely was created by copying the legal description from the title commitment which was created before the declaration of condominium was recorded. The court also surmised that the mortgage has the correct legal description because the mortgage was created by the lender.

The lender’s complaint sought to foreclosure the mortgage and to reform the deed’s legal description. Dori answered admitting that he owned the property, and not raising any affirmative defense concerning the deed’s legal description. The lender’s unopposed motion for leave to amend to add the deed’s grantor was denied because the case was set for trial the following month.

The ultimate bottom line was that as Dori acknowledged ownership and there was no dispute that the mortgage contained the proper legal description, the mortgage was valid. The result was that the matter was remanded, not just for further proceedings, but for entry of a judgment of foreclosure. The lender at its option could pursue the reformation action.

Interestingly, the appellate court did not address whether the deed is adequate. Normally, the test is whether the deed provides sufficient identification of the property. In this instance the name of the condominium and the unit was present together with the street address which might have been a sufficient identification of the property; thus, alleviating the need to reform. In the same regard, if the deed was not sufficient, then the foreclosure action should not have been allowed proceed without naming the owner of property.

Michael J. Gelfand

Florida Bar Board Certified Real Estate Attorney

Florida Supreme Court Certified Mediator: Civil Circuit Court & Civil County Court

Michael J. Gelfand

Immediate Past Chair

Real Property, Probate and Trust Law Section of The Florida Bar

Click www.RPPTL.com for Breaking News

About Florida’s Largest Substantive Law Section!

Note: This article is not legal advice. Statements and comments made are not those of The Florida Bar or the RPPTL Section

© 2017 Michael J. Gelfand

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