New Decision: FHA (Sex Discrimination) (Curto v. A Country Place Cd’m. Ass’n.)

Michael Gelfand 4/27/2019

Harkening back to the rejection of the “separate but equal” discussion from Brown v. Board of Education, 347 US 483 (1954), Monday’s decision in Curto v. A Country Place Cd’m. Ass’n., Inc., Case No.: 18-1212 (3d Cir. April 22, 2019), applied the Federal Fair Housing Act to restrictions on the times women may use a condominium pool.

The Condominium is 55+ “age restricted” with a pool funded by members’ monthly maintenance fees. After pool renovations in 2011, the pool reopened with certain hours of use designated for only male or only female swimmers. The time restriction was to accommodate religious beliefs of “modesty” where members of one sex should not see the other sex in a state of undress. In 2016 the Association increased the number of sex segregated hours on a weekly basis to: 31.75 hours as “men’s swim”; 34.25 hours as “women’s swim”; and, 25 hours plus Saturday without restriction. Most weekdays after 4 pm and all weekdays after 6:45 pm were restricted only for men’s swim.

Challengers to the same sex swimming hours restriction included: a married couple, the wife suffering debilitating strokes and sought pool therapy with her husband; and, a woman who sought to swim with her family. The trial court granted summary judgment for the Association stating that the “gender segregated schedule applies to men and women equally.”

The Circuit Court of Appeals commenced with reciting the Fair Housing Act, Section 42 USC §3604(b), prohibiting certain housing discrimination, including discrimination on the basis of sex.

The pool time restriction discriminates by limiting use at different times based on sex. Significance was placed on restrictions on evening hours when women returning home from working during the day generally were not permitted to use the pool. The Court rejected a defense based on lack of Association malice when there was a showing a disparate impact. The Court focused on the “explicit terms of the discrimination.”

The Association apparently sought on appeal to justify the pool time restriction on religious grounds pursuant to the Religious Freedom Restoration Act (“RFRA”), 42 USC §2000(bb) et. seq., but also apparently did not raise that defense to the trial court. The Court noted that even if the RFRA was raised, the Association would not have standing to raise religious grounds as a defense because the Association does not have a religious purpose. Also, apparently the record did not have adequate evidence of religious beliefs.

The Appellate Court reversed and remanded for entry of judgment in favor of the Plaintiffs.

In our heterogeneous country, founded upon immigration literally for over centuries, from literally every “corner” of the globe, and with Emma Lazarus’ immortal words of The New Colossus etched into the tablet held by the Statue of Liberty, we will have more communities with residents that have differing religious observances. Thus, disagreements regarding common area uses based on religious observances are likely to increase.

Association counsel may need to inquire beyond the facts as presented, especially with the lurking issue of “disparate impact” undermining restrictions that may appear justified on their face, but which have an impact that crosses the line into unlawful discrimination.

By the way, this is not the first time appellate courts addressed use of condominium common elements for religious purposes. Neuman v. Grandview at Emerald Hills, Inc., 861 So. 2d 494 (Fla. 4th DCA, 2003), affirmed a condominium association’s prohibition of religious services because of the potential of conflicts between religious groups.

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

© 2019 Michael J. Gelfand

Michael J. Gelfand

Florida Bar Board Certified:

Real Estate Attorney

Condominium & Planned Development Law

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys

The only thing necessary for the triumph of evil is for good men to do nothing.

- Edmund Burke

New Decision: {Procedures and Real Estate Contracts (All Seasons Cd'm. v. Patrician Hotel

Michael Gelfand 4/26/2019

Requiring 100% of a condominium’s 106 unit owners to agree anything might be anticipated to doom the effort, and ultimately require judicial cleanup. Thus, ending up in appellate court may not be a surprise for the participants awaiting Wednesday’s decision in All Seasons Cd’m. Ann’n., Inc. v. Patrician Hotel, LLC, Case No. 3D17–132 & 3D17–130 (Fla. 3d DCA, April 24, 2019).

Lessons for the real estate transaction practitioner and the association practitioner are interspersed in the opinion. The dispute arose out of the Condominium Association’s board of directors’ approval of a Master Sales Agreement to sell the 106 unit Condominium, subject to consents from all unit owners or court approval to close. The Agreement included a “time of the essence” provision, a 60-day closing deadline and the following “proxy”:

Seller proxies his vote, and this document shall serve as such proxy, to the Board to vote in favor of any and all resolutions deemed necessary by the Board under the existing Declaration or By-Laws of the Association to consummate the Master Purchase Agreement, the sale of the Real Property, the plan of termination, or to commence and prosecute any legal action necessary to accomplish these matters.

When the buyer’s representative Nemni sought a 60-day extension, the Association’s president emailed a favorable response:

I indicated to Mr. Nemni that the Board after informal discussion decided [to] grant the 60 [day] extension and accept the amendment to closing date but we need to wait until next week to hold a board meeting to make it official.

Fifty-six days after the Agreement deadline for obtaining consents, the board of directors meet to unanimously approve five 60-day sale deadlines.

Approximately six months thereafter, the buyer agreed to transfer its interest in the Agreement. One month later the Association wrote that the Association would not exercise the last time extension, and terminating the contract because the Association could not obtain 100% of the owners approval.

The buyer’s assignee filed an action for specific performance in January 2012, accompanied by a lis pendens. Four and a half years later, in July 2016, the trial court entered findings of fact and conclusions of law in favor of the buyer assignee including specific performance relief and retaining jurisdiction to award damages.

The Appellate Court’s analysis begins with the recitation of two critical real property concepts. First, that specific performance is equitable in nature and requires that:

1) the plaintiff is clearly entitled to it,

2) there is no adequate remedy at law, and

3) the judge believes that justice requires it.

Clear entitlement in a specific performance context requires that:

… it must appear from the writing constituting the contract that the obligations of the parties with respect to [the] conditions of the contract and actions to be taken by the parties are clear, definite and certain.

Citations omitted. In other words, when seeking to enforce a contract to sell real property, the statute of frauds applies which requires a writing containing the essential terms of sale signed by the party against whom relief is sought.

Regarding the assertion that the board of directors had actual or apparent authority to agree to the extensions of time, the Court recited the elements of apparent authority:

(1) acknowledgment by the principal that the agent will act for him,

(2) the agent’s acceptance of the undertaking, and

(3) control by the principal over the actions of the agent.”

An apparent authority analysis must focus not on the subject of understanding of a recipient, but on the actions of the principle.

Concerning board of directors’ actual authority, while supplemental unit owner agreements consenting to the Master Sales Agreement provided the board of directors’ authority to vote for matters “deemed necessary to consummate the transaction,” that authority was limited and does not provide authority to take “any action” such as to amend contract provisions.

The Court took a further step noting that the contract language does not create a general power of attorney. A power of attorney must be “strictly construed” to “only grant those powers which are specified.”

Applying the statute of frauds, the Court noted that the Agreement’s language provided that the failure to obtain contracts within 60 days led to termination on its own terms, and that associations at board of directors meeting 56 days after the deadline could not revive a contract that had expired. The Agreement’s requirements that amendments be in writing does not allow oral modifications of the closing date.

Moving from broad real property law concepts to narrower Condominium Act requirements, the Appellate Court recited the Condominium Act’s prohibition of general proxy uses. A limited proxy form must substantially follow the form adopted by the Division. §718.112(2)(b), Fla. Stat. (2010), which form is DBPR Form CO6000-7. Thus, the contract language was found

In no way does the one-sentence proxy language of Paragraph 9(f), nor any other provision of the Supplemental Contract or Master Purchase Agreement, bear any resemblance or similarity to the sample proxy form adopted by the Division….

The assertion that the Condominium Act should not apply to the proxy text because the dispute involves the sale of the condominium building was rejected out of hand. In this discussion, the Court further noted that the board of directors may not vote by email.

This decision provides many lessons for real estate practitioners generally and in particular community association practitioners. In the community association arena, the decision addresses board of directors decision-making functions. By focusing upon mandatory procedures rejecting “informal” procedures in favor of decisions at an actual board of directors’ meeting, the court implicitly refused to allow an informal effort to bind the Association, and that decisions must be on a timely basis.

Reinforcing process, the Court expressly appears to be the first Florida appellate court interpreting the provisions of §718.112(2)(c), Fla. Stat. (2018) (2016) that the board of directors may not vote by email. The court also reinforces the limited proxy requirements of the Condominium Act. Though the subject matter of the proxy may not have been a typical unit owner vote, the general proxy prohibition was applied. Furthermore, associations must be in substantial compliance with the Division’s proxy form. Notably the Court did not state that the proxy must include the Division form’s exact language, perhaps allowing some flexibility.

For the general practitioner, whether in real estate transactions or contracts generally, the Court’s directions regarding authority, actual and apparent, are important, especially considering the different agents that an association may have and how an association may clothe an agent, particularly a manager or officer, in authority and the consequences of that authority. In this regard, there is the question of what type of responsibility does that agent have to the Association, and the importance of insurance and indemnity protections.

There is also the implicit warning that a contract whose deadline has passed cannot be extended by action after that deadline. In particular concerning real estate contracts, the statute of frauds must be considered.

One must wonder the impact of this dispute on the Condominium and its owner by the lis pendens and the litigation that is now into its seventh 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

© 2019 Michael J. Gelfand

Michael J. Gelfand

Florida Bar Board Certified:

Real Estate Attorney

Condominium & Planned Development Law

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys

The only thing necessary for the triumph of evil is for good men to do nothing.

- Edmund Burke


RPPTL visits Ave Maria School of Law

admin 4/4/2019

Thank you to the following RPPTL members who visited Ave Maria School of Law yesterday to meet with students. See the photos.
 
Moderator:

Michael Sneeringer, Senior Associate, Porter Wright Morris & Arthur

 

Panelists:

Robert L. Lancaster, Principal, Cummings & Lockwood

Lisa Van Dien, General Counsel, London Bay Homes

Noelle Melanson, Shareholder, Melanson Law PA

TBA Fourth Annual Leon County Public School Legal Initiative

admin 3/30/2019
Tallahassee Bar Association collaborated with the Tallahassee Barristers Association in applying for a diversity grant from The Florida Bar that allowed the two voluntary bar associations to partner with Leon County Public Schools, the FSU College of Law, Discover Law Grant Program with the Law School Admission Council, Real Property Probate Trust Litigation Section of The Florida Bar, our Judiciary, and others to make the Fourth Annual Leon County Public School Legal Diversity Initiative happen again this year. The purpose of the program is to expose high school students to the diversity of the legal profession. The program allows students to get up close and personal with diverse attorneys in age, race, gender, and practice area.

The full-day event was held at various courts and the FSU College of Law. This innovative program allows students from Godby High, Lincoln High, Florida High, and Rickards High to get a behind-the-scenes look at the Leon County Circuit Court, Northern District of Florida U.S. Bankruptcy Court, and the First District Court of Appeal. After touring the various Courts the students conducted their own mock trials at the FSU Law and the day concluded with a speed networking lunch with judges, law students, lawyers and para-professionals from the local legal community.

TBA Event Chair Jami Coleman said, “The Leon County Public Schools Legal Initiative with the Tallahassee Bar Association, Tallahassee Barristers, FSU College of Law, Law School Admission Council, Real Property Probate Trust Litigation Section of the Florida Bar and the Florida Bar Diversity Initiative has proven to be a successful annual program. Thanks to all the collaborators and The Florida Bar grant we are able to host this event again!” 

Now accepting Fellows applications for 2019

admin 3/29/2019
Now accepting applications for 2019 Fellows. Learn more here

New Decision: Torts-Traffic and Causation (Seminole Lakes HOA v. Esnard)

Michael J. Gelfand 12/20/2018

Whether a homeowners’ association that permits a violation of restrictive covenants is liable for damages in tort was at issue in Wednesday’s decision by the Fourth District Court of Appeal in Seminole Lakes HOA, Inc. v. Esnard, Case No. 4D18-15 (Fla. 4th DCA December 19, 2018).

Faced with a “severe parking problem”, the Association permitted on street parking despite restrictive covenants requiring otherwise. The municipal code prohibited on street parking that interferes with the flow of traffic. Allowing on street parking occasionally prohibited two cars from traveling between car parked on both sides of the street.

Esnards, driving on a street that had cars parked on both sides stopped for some time to allow an approaching car to pass because only one car could travel between the parked cars. The stop was not a sudden or an emergency stop. The Esnards vehicle was rear-ended, totaling the car and causing damages to Mr. Esnard.

The Esnards sued the driver colliding from the rear, and the Association. The Association’s motion for directed verdict was denied. A jury verdict was in favor of the Esnards, apportioning risk between the other driver and the Association.

The appellate court recognized that proximate causation is normally an issue for the trier of fact to determine; however, whether there is an intervening cause causing injury is for the trial court to determine. Addressing what legal harm is “proximate” for this analysis:

If prudent human foresight would lead one to expect that similar harm is likely to be substantially caused by the specific act or omission in question. McCain v. Fla. Power Corp., 593 So. 2d 500, 503 (Fla. 1992).

The court also sited to another two-car collision situation where it was held that:

That the defendant’s conduct of permitting the parking condition was not a proximate cause of the plaintiff’s injury because it merely furnished the occasion for the plaintiff’s own negligence in stepping into oncoming traffic, noting that the plaintiff “chose [] to walk the shoulder of the road rather than the sidewalk on the other side of the same street.” Pope v. Cruise Boat Co., Inc., 380 So. 2d 1151, 1152-53 (Fla. 3d DCA 1980).

The appellate court continued its analysis relying on the “common experience that Florida drivers frequently encounter slow or stopped traffic which in turn requires the approaching driver to maintain a safe distance.”

As a result, the negligence of the approaching driver that rear-ended the Esnards “was not reasonably foreseeable.” The Associations failure to enforce the parking restrictions was not the proximate cause of injuries.

This decision indicates that an association’s failure to enforce its restrictions, and perhaps affirmatively allowing a breach to occur, does not strip the association of its legal defenses to a tort claim. Nevertheless, when considering foreseeability the purpose of the restriction is likely to be key. If the restriction was purely for aesthetics then lack of foreseeability may very well provide a substantial defense. Alternatively, if the covenant was in place to help ensure safe driving, then that would be another issue.

Thus, this decision should not be taken as carte blanche for associations to avoid enforcement of restrictions. Notably, this decision did not overrule or address decisions dealing with other tort situations, such as associations allowing bad dogs in a no dog community and the dogs then attack children. Also, particularly in the parking context and narrow streets, associations should consider before relaxing parking restrictions the ability of emergency vehicles to accessing streets.

Michael J. Gelfand

Past Chair

Real Property, Probate and Trust Law Section

of The Florida Bar

2 Scholarships available for Florida Bar Leadership Academy

admin 12/11/2018
$3,500.00 IS AVAILABLE TO 2 RPPTL SECTION MEMBERS!
Interested in participating in The Florida Bar Wm. Reece Smith, Jr. Leadership Academy?
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 $3,500.00 for out of pocket travel and hotel expenses incurred in attending the Leadership Academy.
2019 Leadership Academy applications are now available from The Florida Bar. Applicants must submit their Leadership Academy application to kfernandez@kfernandezlaw.com by Friday, December 14, 2018. The RPPTL Section Leadership Academy Committee will review the applications and then inform the nominee(s) of their selection for the potential scholarship.
A full explanation of the Florida Bar Wm. Reece Smith, Jr. Leadership Academy is available on the Florida Bar’s website athttp://www.floridabar.org/leadershipacademy.
Contact Kristopher Fernandez, (813) 832-6340,kfernandez@kfernandezlaw.com; Brian Sparks, (813) 739-6966,bsparks@gunster.com; or J. Allison Archbold, Esq.; (941) 960-8825,JAA@archbold.law, if you have questions regarding the RPPTL Section scholarships for The Florida Bar Wm. Reece Smith, Jr. Leadership Academy.

New Decision: Airbnb (City of Miami v. Airbnb)

Michael J. Gelfand 12/11/2018

Wednesday, the latest salvo in the short term leasing wars was issued. City of Miami v. Airbnb, Inc., Case No. 3D17-1213 (Fla. 3d DCA, December 5, 2018).

Airbnb and property owners sued the City of Miami for declaratory and injunctive relief claiming that the city’s “vacation rental ban” was by preempted by state law and the city’s enforcement was retaliatory. Airbnb asserted that the city’s code was preempted by § 509.032(7)(b) Fla. Stat. (2016). Further, that comments made at a city commission meeting stating that the city was “now on notice” of those who spoke out” was retaliatory.

The appellate court found that there were a number of issues raised within the preemption argument. First, preemption would not bar enforcement of the code because it was undisputed that the code was “identical in its material provisions” to the code existing before the statute’s adoption. The statute specifically stated that it “does not apply to any local law, ordinance or regulation adopted on or before June 1, 2011.”

On the other hand, the city’s “zoning interpretation” adopted in 2015, after the statute, is subject to preemption. The Interpretation sought to address the codes definition of the term “residential” as “land use functions predominately of permanent housing.” Because “predominately” is not “exclusive” then, significantly, “a mere incidental use for a short-term or vacation rental may not violate” the code. Thus, if the interpretation seeks to ban all short-term rentals or otherwise extends the impact of the code, the interpretations would be preempted and not enforceable. In this regard, the codes terms, prohibiting “bed and breakfasts,” “inn,” and “hotel” does not in and of itself prohibit short term rentals of a home, particularly because the codes definition of “lodging” is restrictive including that it be furnished with a minimum of 200 square feet the court recognized that under the circumstances, and in light of the limited record, a case by case fact intensive trial court inquiry may be required.

Separately, the injunction prohibiting name and address submission from speakers and requiring speakers to be notified they can speak unanonymously was vacated. Assuming that the requirements were “chilling” free speech, the injunction was overbroad. The appellate court held that there was a legitimate governmental interest at public hearings to have names and addresses and able to call speakers to speak, determine whether a speaker is a resident who would be impacted. The court also made a sweeping statement that “most public meetings do not offer the opportunity for governmental misuse of enforcement priorities….” Nevertheless, on remand a more narrowly tailored injunction might be appropriate.

A strong concurring and descending opinion would have remanded the overbroad vacation rental injunction for modification.

This decision reinforces the need for many associations to amend their restrictions to utilize specific language addressing Airbnb type arrangements if the community desires limitations. It is of interest that Airbnb’s co-plaintiffs are referred to as “renting” their properties. Apparently the label of “license” was abandoned, at least for these proceedings. Implicit in the decision is that leasing for a non-commercial use, such as a tourist lodging, falls within a residential use which would trigger the requirement under many covenants for an amendment if the short-term rentals are to be regulated.

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

Condominium & Planned Development Law

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys

The only thing necessary for the triumph of evil is for good men to do nothing.

- Edmund Burke


New Decision: Substitute Service (Benavente v. Ocean Village POA)

Michael J. Gelfand 12/2/2018

The pitfalls of substitute service were reinforced Wednesday, yet again resulting in a void judgment, unwinding an association’s lien foreclosure action, the resulting sale, and the certificate of title!

In Benavente v. Ocean Village POA, Inc., Case No. 4D18-1819 (Fla. 4th DCA November 28, 2018), the dispute arose in the context of a homeowners’ association’s assessment lien foreclosure action. The Association provided statutory pre-suit foreclosure notices to the homeowners at three addresses, one being the property in Ft. Pierce being foreclosed upon, and the two others in Key Biscayne. One of the owners signed a Certified Mail Return Receipt for the mailing to one of the Key Biscayne addresses.

You likely have anticipated what occurred next. The Association attempted to serve the owners only at the Ft. Pierce address, not either of the Key Biscayne addressed, including not the address where the Certified Mail Receipt was signed. The Association not being able to serve at the Ft. Pierce address still did not seek service at either of the Key Biscayne addresses.

Instead, the Association filed an affidavit for service by publication including the following:

4. That Affiant has made a diligent search, an honest and conscientious effort and inquiry and good faith efforts on information available to located [the Homeowners] by use of:

a. Process servers/investigators,

b. Computerized legal research and people trackers,

c. Skip traces, and

d. DBPR license searches.

5. That the residences of [the Homeowners] is unknown and attempts to track down [the Homeowners] at other known addresses reasonably available to Plaintiff have been unsuccessful.

When there was no response to publication a default final judgment of foreclosure was entered resulting in clerk’s sale and a certificate of title being issued to a third party.

The owners moved to vacate the certificate of title, certificate of sale, judgment, and defaults, and to quash service. The owners asserted that the Association knew the owner’s primary residence was in Key Biscayne, that the Association knew the Ft. Pierce property was only a rental property and that the Association had the owners’ email address. The trial court denied the Motion to Vacate and Quash.

The appellate court found that the “foreclosure” was void as a matter of law. First, the Affidavit “was facially defective,” relying on Martins v. The Oaks Master POA, Inc. 159 So. 3d 142, 145-46 (Fla. 5th DCA 2014), which held that the failure of an affidavit for service by publication to disclose alternative addresses created a fatal defect. Second, the failure to pursue the owner’s physical address shown on the signed Certified Mail receipt, or to utilize the owner’s email address known to the association, reflected the failure to conduct a diligent search.

The detail laid out in the opinion obviously cannot be ignored, undoubtedly intended to shout out to practitioners a loud reminder of the need to conduct a proper diligent search, and document the diligent search before seeking publication. This reminder is reinforced by the holding that an affidavit which is insufficient on its face results in a judgment that is void, not just voidable. The distinction being that a void judgment can be attacked at any time. Of course, this opinion is yet another similar decision in the community association area, demonstrating that association counsel cannot ignore the details of service.

The opinion also can serve as a tool to remind association clients to properly transmit owner location information to counsel. This includes not only alternative physical addresses, but also email addresses.

Question 1: In context of the Fair Credit laws: What vetting should occur before using an email address that is in an association’s file, but may not be confirmed to be just for the owner? Beware of a potential unintended trap.

Question 2: How would a third party be on notice the affidavit was facially defective? For example, a title examiner or homebuyer would not necessarily be on notice from the face of the affidavit that the plaintiff failed to list all known addresses. Title risks are apparent.

In passing, it is assumed that the association is a homeowners’ association. There is an inconsistency in the decision’s citation using “Ocean Village Property Owners” and the decision’s introductory paragraph which refers to “Ocean Village Homeowner’s Association.”

Of interest to appellate court geeks is the per curiam” signature. It has appeared that there has been an increase of per curiam opinions from the Third District Court of Appeal, including matters that were not particularly controversial. It is questioned what in particular regarding this opinion prompted the Fourth DCA to issue this opinion under a per curiam signature.

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: Common Area Invitee (Charterhouse v. Valencia Reserve HOA)

Michael J. Gelfand 11/30/2018

Perhaps it was the trial court analogizing the owners’ personal trainer to be like “a call girl sitting at a clubhouse bar” that peaked the appellate court’s attention, but if so, Wednesday the Fourth District Court of Appeals built upon that phrase to provide a valuable primer for classifying those who enter private property, to address regulation of personal service providers using common area, and to provide a reprise for the threshold for rulemaking in Charterhouse Assoc, Ltd., Inc. v. Valencia Reserve HOA, Inc., Case No. 4D17-2640 (Fla. 4th DCA November 28, 2018).

The Facts.

Property owner Charterhouse authorized the Browns to reside in Charterhouse’s property, and to exercise Charterhouse’s ownership rights within the Valencia Reserve association. The Homeowners Association’s property includes a fitness center which a “Declaration” (presumably a declaration of covenants) states is for the:

private use and enjoyment of the declarant, the Association, and the owners, and their family members, guests, invitees and tenants, but only in accordance with this Declaration.

(Emphasis added.) The Declaration also provides owners a non-exclusive easement in Association property.

The Association asserting it was acting pursuant to the Declaration’s authority to “provide owners with service [and] amenities” contracted with a third party to be the “exclusive provider of fitness services in the Association’s fitness center.” As a result of the contract, the Association enacted a rule prohibiting private trainers, instructors, physical therapists and massage therapists from working in the fitness center.

Relying upon the new rule, the Association prohibited the Browns from working with their personal trainer in the Association’s fitness center.

The Trial Court.

Charterhouse and the Browns filed an action against the Association seeking declaratory relief, injunctive relief and damages. The trial court granted the Association a partial summary judgment based on the rule.

What is an Invitee?

The appellate court seized upon the Declaration’s easement in favor of owners and “invitees.” The analysis began with a survey of the common law classifying those entering private property because there has been a shift in how the courts have defined an invitee, differentiating a licensee and a trespasser.

The “Economic Benefit Test” was originally utilized to define a person who provided a mutual economic benefit to the inviter and the invitee.

The shift was to the “invitation test” where the occupier of property allows the entrant to be used by visitors, either expressly or by reasonably implied invitation.

[T]he invitation test bases “invitation” on the fact that the occupier by his arrangement of the premises or other conduct has led the entrant to believe that the premises were intended to be used by visitors for the purpose which this entrant was pursuing, and that such use was not only acquiesced in by the owner or possessor, but that it was in accordance with the intention and design with which the way or place was adopted or prepared.

(Citations deleted.)

Applying this updated “invitation test,” the appellate court held that the Declaration specifically authorized invitees to use the fitness center. When an HOA property owner invites someone to the fitness center for companionship or personalized guidance, that property is used for a recreational purpose. Here the trainer was not seeking business from other residents nor was at the fitness center without the Browns. Thus the “economic benefit test” utilized by the trial court was improper.

Rule Making.

With that foundation, the appellate court examined the Association’s rule making process. Pulling out the well-worn favorite language of Beachwood Villas Cd’m. v. Poor, 448 So. 2d 1143 (Fla. 4th DCA 1984), the court held that the rule excluding a personal trainer who was an invitee contravened an express provision of the Declaration contrary to Beachwood, at 1145; thus, the Association did not have authority to adopt the rule. The Association’s intent could not save the rule.

Conclusion.

As survey, this decision is a valuable primer, assisting practitioners counseling association clients as to the limits of their authority to address invitees. In a different context, premises liability, the decision may have the unanticipated, but likely positive, consequence of clarifying the differentiation between a licensee, invitee and trespasser. Note of course, that the decision does not address the status of the holder of a written license or that other variation, an easement holder.

The decision will assist the practitioner when addressing an association which relies on its good faith regulatory efforts. The court summarily rejected intent as a factor when determining rule making authority.

Have a great 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

© 2018 Michael J. Gelfand

Michael J. Gelfand

Florida Bar Board Certified:

Real Estate Attorney

Condominium & Planned Development Law

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys

The only thing necessary for the triumph of evil is for good men to do nothing.

- Edmund Burke


New Decision: Judicial Recusal/Facebook (Law Offices of Herssein v. U.S.A.A.)

Michael J. Gelfand 11/26/2018

Paraphrasing Gertrude Stein’s a rose is a rose is a rose, Thursday the Supreme Court of Florida issued a fractured decision on whether a friend and friend in Law Offices of Herssein and Herssein, P.A. v. United Services Automobile Ass’n, Case No. SC17-1848 (Fla. November 15, 2018).

During a breach of contract action, the Herssein law firm moved to disqualify the trial court judge based in part on the judge’s personal “Facebook” page showing opposing counsel as a “friend”. The intermediate appellate court held that a Facebook friendship standing alone does not create a traditional “friend” denied the petition. Law Offices of Herssein & Herssein, P.A. v. United Services Automobile Ass’n, 229 So. 3d 408 (Fla. 3d DCA 2017). The Third District acknowledged that the Fourth District Court of Appeal required recusal when a trial judge was a Facebook friend with the prosecutor in the case before the trial judge, the Fourth District relying on a 2009 judicial ethics advisory committee opinion, Fla. JEAC Op.2009-20 (Nov. 17, 2009). Domville v. State, 103 So.3d 184 (Fla. 4th DCA 2012),

The Supreme Court began its analysis reciting the threshold for recusal grounded in Fla.R.J. Admin. 2.330, and case law threshold of whether “a reasonable prudent person in fear of not receiving a fair and impartial trial” and “the fear must be objectively reasonable.” The court differentiated a “traditional” friendship, utilizing dictionary definitions including characteristics of affection, esteem, respect, trust or intimacy, and recognized there is a “spectrum” of relationships and friendships. Traditionally, the “mere existence of a friendship between a judge and an attorney appearing before the judge, without more, does not reasonably convey to others the impression of an inherently close or intimate relationship. No reasonably prudent person would fear that she could not receive a fair and impartial trial based solely on the fact that a judge and an attorney before the judge are friends of an indeterminate nature.”

Tackling the new issues of technology created by Facebook, the court discussed that a Facebook friend is but a person who is “digitally connected, and is not the ‘functional equivalent of a traditional ‘friendship’” and may mean a relationships somewhere on the broad spectrum “from greatest intimacy to casual acquaintance.” The friending process “provides no significant information about the nature of any relationship between Facebook “friends’”.

In short, the mere fact that a Facebook “friendship” exists provides no significant information about the nature of any relationship between the Facebook “friends.” Therefore, the mere existence of a Facebook “friendship” between a judge and an attorney appearing before the judge, without more, does not reasonably convey to others the impression of an inherently close or intimate relationship. No reasonably prudent person would fear that she could not receive a fair and impartial trial based solely on the fact that a judge and an attorney appearing before the judge are Facebook “friends” with a relationship of an indeterminate nature.

Thus, the Third District’s decision in Herssein was approved, rejecting the writ of prohibition, and the Supreme Court disapproved the Fourth District’s decision in Domville.

Justice Labarga concurred but “strongly urged judges not to participate in Facebook.”

Justice Pariente issued a strong dissent highlighting the requirement of confidence in a judge’s ability to appear neutral, noting that Facebook offers an option of “following” that is different from being a “friend,” stating “public trust and the impartiality and fairness of the judicial system is of upmost importance, this court should air on the side of caution.”

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!

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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

Condominium & Planned Development Law

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys

The only thing necessary for the triumph of evil is for good men to do nothing.

- Edmund Burke


New Decision: Attorney’s Fees & Retroactivity (Holiday Isle v. Destin Parcel 160)

Michael J. Gelfand 11/20/2018

Shazam or Frankenstein! When does claim on a covenant enforcement claim morph into a statutory claim? And, is there a back door to escape the strangle hold of unconstitutional impairment of contract defenses?

The First District Court of Appeal recently ruled that a de facto statutory claim may be created out of a covenant claim trigging entitlement to a prevailing attorney’s fee in Holiday Isle Improvement Ass’n., Inc. v. Destin Parcel 160, LLC, Case No. 1D17-5241 (Fla 1st DCA, October 15, 2018).

Background.

The attorney’s fee award at issue followed the covenant enforcement matter posted on September 17, 2018 in Holiday Isle Improvement Ass’n., Inc. v. Destin Parcel 160, LLC Case No. 1D17-2090 (August 30, 2018). The Association sought to require a developer to seek approval for construction plans. Because the covenant’s threshold for seeking approval was not met, that work was “commenced, erected or maintained,” the Association’s demand was premature and the summary judgment for the developer was affirmed.

The developer sought and was awarded attorney’s fee and costs, spawning this appeal.

Apparently the Association’s complaint alleged a violation of the covenant, expressly sought to declaratory relief pursuant to Chapter 86, Florida Statutes, the Declaratory Judgment Act, but apparently did not expressly state a claim pursuant to §720.305(1) Fla. Stat. (2013).

Fee Statute.

The appellate court held that the Association’s complaint was “a defacto action” pursuant to §702.305(1) because the Complaint sought the enforcement of the Association’s covenants. The appellate court explained that the statutes text provided that when a covenant claim seeks “redress” a prevailing party fee award would follow.

Setting out the exact manner in which the court emphasized the text assists in understanding the court’s holding, if not its rationale:

Each member and . . . and each association, are governed by, and must comply with, this chapter, the governing documents of the community, and the rules of the association. Actions at law or in equity . . . to redress alleged failure or refusal to comply with these provisions may be brought by the association . . . against:

* * *

(b) A member;

* * *

The prevailing party in any such litigation is entitled to recover reasonable attorney fees and costs ....

(Emphasis in Opinion, not in original).

This holding introduces a new concept, at least to community association litigation, the “de facto action.” In retrospect, and reading the fee statute strictly, the holding’s “de facto” creation may not have been necessary. It is suggested that the court could have simply held that the statute’s plain text applied to not only claims expressly pleading a statutory claim, but the statute also applied to a common law claim seeking redress of a breach of a covenant for which the last phrase in the above quote would provide a prevailing party fee basis. This suggestion is also consistent with the jurisprudence that attorney’s fees statutes are generally strictly construed as they are a derogation of the common law. See Willis Shaw Express, Inc. v. Hilyer Sod, Inc., 849 So. 2d 276, 278 (Fla 2003).

The opinion does state whether a statutory fees basis was alleged. This seems to be a strange omission, because if the statutory basis was pled, then the statute would have been implicated providing not just an implied or de facto basis, but an express, de jure basis.

Retroactive.

The court also held that the statute, adopted after the creation of the covenants, was not an unconstitutional retroactive impairment of contract. First, the court rationalized that the statute was applied only prospectively, the cause of action accruing after the statute became effective. Second, the covenants provided that remedies shall be “cumulative of all the remedies now or hereinafter provided by law,” thus, the covenants allowed remedies as of the time remedies were sought.

For the practitioner, the first rationale appears to fly in the face of earlier decisions holding that a right to attorney’s fee is a substantive right, and provision impacts substantive rights and cannot be retroactively applied. Interesting, the citation for the second half of the court’s rationale appears to contradict the first portion. Commodore Plaza at Century 21 Condominium Ass'n, Inc. v. Cohen, 378 So.2d 307 (Fla. App., 1979).

The second rationale is actually more compelling, the covenant’s own text stating: “the remedies herein stated shall be construed as cumulative of all other remedies now or hereafter provided by law” (emphasis added by court). Thus, especially if the claim for fees is made as special damages, not just as ancillary relief, this second rationale may be on firmer ground.

While the “cumulative of all other remedies” text is far from universal, the phrase does appear in a number of Declarations; thus, as always, a close reading of the text is de rigor!

Fin.

Best of wishes for a peaceful holiday period.

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

Condominium & Planned Development Law

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys

The only thing necessary for the triumph of evil is for good men to do nothing.

- Edmund Burke

New Decision: Public Adjusters (Gables Ins. v. Citizens)

Michael J. Gelfand 11/12/2018

When do the fees paid to a public adjuster exceed the Insurance Adjuster Law maximum in §626.854(11)(b) Fla. Stat. (2014), and whether that excess will invalidate the public adjuster’s employment agreement were at issue in Gables Ins. Recovery, Inc. v. Citizens Prop. Ins. Corp., Case Nos. 3D15-2320 & 3D16-87 (Fla. 3d DCA September 20, 2018). The Insurance Adjuster Law regulates insurance adjuster contracts, including prohibiting a public adjuster from obtaining more than twenty percent of the payments made on an insurance claim.

The contract terms were critical to the appellate court’s analysis. Homeowner Matusow and homeowner Difilippi, sought to recover water damage losses for their individual homes. In separate transactions with separate contracts each homeowner contracted with Gables Ins. Recovery, Inc., a public adjuster.

Homeowner Matusow contracted with Gables “to appraise, advise and assist” her claim, including hiring professional services of “appraisers, estimators, engineers and other experts reasonably needed….” after settlement efforts were unsuccessful. Matusow assigned Gables her entire claim, and also entered into a “Professional Services Engagement Agreement” which included an authorization for “filing of the claim in court.” Gables was entitled to recover attorney’s fees and costs in addition to the twenty percent recovery. The trial court granted Citizens a summary judgment based upon the statutory maximum payment, and related Florida Administrative Code Rule 69B-220.201(4)(d).

Homeowner Difilippi provided Gables a similar assignment and Professional Services Engagement Agreement, except that Gables was entitled to only ten percent of insurance proceeds recovered, but added fees and costs. The trial court granted Citizens’ motion for summary judgment similar to Matusow.

As a predicate, the appellate court discussed that the statute broadly defines “public adjuster” as including “negotiating for or effecting the settlement….” The homeowners’ agreements included as recovery efforts the filing of a lawsuit. Thus, filing of a lawsuit was just one part of the public adjuster’s efforts. The exception to the maximum fee for attorneys could not be utilized by Gables in light of Gables’ sworn statements and license was it that was a public adjuster, not asserting that it was an attorney. The court did not examine who would ultimately receiver the payment, for example the attorneys would receive some of all of the fees.

The Matusow agreements provided for payment to the public adjuster for attorney’s fees and costs in excess of the twenty percent payment on the face of the agreements; thus, the payments exceeded the statutory cap. As a result, the appellate court affirmed the summary judgment, holding that the assignment of claims to Gables Recovery was not valid, and without a valid agreement, Gables had no basis to bring a suit against Citizens.

The Difilippi agreements did not on their face indicate a fee greater than twenty percent. Thus, the appellate court remanded for a determination by the trial court to determine whether the the twenty percent cap would be exceeded.

A detailed dissent argued that the attorney’s fees would be paid to the attorneys, not the public adjusters, and that the statute while barring an excess fee did not state that an agreement with an excess fee would be invalid.

This decision cuts both ways for community associations. This decision, despite its seeming harshness should reinforce the maximum amount that associations must pay a public adjuster if one is retained. On the other hand, if litigation is anticipated, the agreements likely be carefully drafted to clarify how the claimant’s attorney is paid, whether through the public adjuster or directly from the client to the adjuster. This differentiation may have its greatest impact on smaller claims, perhaps resulting in unit owners relying more on their associations to pursue claims.

On a broader perspective the invalidation of the agreement may bring more attention to the decision. The majority and dissent vigorously argued this issue. It was unclear if the agreements had a severability provision. The dissent’s citations to preserve contracts may bear further review.

Many thanks to Doug Christy for providing the decision.

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

Condominium & Planned Development Law

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys

The only thing necessary for the triumph of evil is for good men to do nothing.

- Edmund Burke


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New Decision: Interest (Sterling Villages of PB Lakes v. Lacroze)

Michael J. Gelfand 11/6/2018

A decision addressing when interest accrues, originally issued on July 5, was significantly changed on re-hearing. In a condominium association lien foreclosure action the appellate court originally held that interest would be calculated from the date of the claim of lien.

In Sterling Villages of Palm Beach Lakes Cd’m Ass’n, Inc. v. Lacroze, Case No. 4D17-1385 (Fla. 4th DCA September 12, 2018), the Fourth District Court of Appeal granted a motion for re-hearing and withdrew its July 5, 2018, opinion. On re-hearing the court held that “prejudgment interest should be calculated from the date when unpaid assessments became due. The court relied on First Equitable Realty III, Ltd. V. The Grandview Palace Cd’m Ass’n, Inc., 246 So. 3d 445 (Fla. 3d DCA 2018), the decision upon which our earlier commentary was based. Many thanks to the appellate court for recognizing the need for re-hearing.

Michael J. Gelfand

Past Chair

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

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New Decision: Receivers (FNMA v. JKM Services)

Michael J. Gelfand 10/25/2018

The Third District Court of Appeal addressed receivers, generally in the condominium context, and specifically applying §718.116(6)(c), Fla. Stat. (2009), the Condominium Act’s assessment provisions in Federal National Mortgage Association v. JKM Services, LLC, Case No. 3D17-370 (Fla. 3d DCA October 3, 2018).

  1. The Background.

The background set in the midst of the Great Recession, should be familiar. Assessments for 90% of The Cedar Woods Homes Condominium’s 165 units were delinquent. A majority of the delinquent units were in foreclosure. Doing the math, that equals at least 75 of the 165 units. You would not be surprised to read that the lenders were “slow to prosecute” the foreclosures.

being protected by the “Safe Harbor Statute”, § 718.116(1)(b) (2014).

  1. The Receivership Litigation.

In 2009 the Association initiated a new legal proceeding in circuit court, not part of a pending matter or foreclosure, by filing an emergency petition for a receiver “to preserve and protect the condominium property.” The Association alleged that the Association appeared to be insolvent, and utility services would soon be terminated. The basis for a receiver was the above quoted statute which provided:

If the unit is rented or leased during the pendency of the foreclosure action, the association is entitled to the appointment of a receiver to collect the rent. The expenses of the receiver shall be paid by the party which does not prevail in the foreclosure action.

§718.116(6)(c) Fla. Stat. (2009). Neither the owner nor the mortgagee of any effected unit was joined in the proceeding when filed, the only parties being the Association and the Receiver. The trial court 2010 order granting the appointment of a receiver did not attach property descriptions of the units in question or place lenders on notice of the receivership.

  1. The Dispute.

Four years later, in 2014 a dispute arose when FNMA sought estoppel certificates from the Condominium Association for amounts due for three units FNMA obtained title following foreclosures. The Receiver’s response did not state an amount consistent with the “Safe Harbor Statute: §718.116(1)(b) Fla. Stat. (2014). but instead, the Receiver sought for the Association multiple years of past due assessments, Receiver fees, and attorney’s fees for the receiver’s attorneys.

In 2016, after negotiations did not resolve the dispute, FNMA moved to intervene in the receivership case, to terminate the receivership, to determine amounts due pursuant to the Safe Harbor Statute, and to compel an accounting. The trial court denied the motion based on FNMA’s delay in seeking relief, that the units were subject to the receivership, that the FNMA accepted the benefits of the receiver’s work, and that the “receiver amounts” were payable by the FNMA in addition to assessments.

  1. Intervention.

The appellate court first held that FNMA was entitled to intervene pursuant to Fla.R.Civ.P. Rule 1.230. FNMA merely taking title by virtue of a foreclosure sale does not moot its motion to intervene. Intervention should have been granted because FNMA had a direct interest in the three units subject to the receivership, and the Receiver claimed assessments due and a lien against the units. The appellate court notes that intervention is not being sought in foreclosure litigation, perhaps distinguishing from other precedent.

  1. Receivership.

The appellate court then held that the receivership orders were not valid against FNMA. The court interpreting the Condominium Act’s assessment receiver statute, remarked that the statute is to be “… read in context….” The assessment receiver statute has at least two trigger conditions: First, when there is a pending foreclosure of the condominium association’s lien for assessments; and, Second, when the receiver is to collect rent from the tenant occupying the unit in foreclosure. §718.116(6)(c) Fla. Stat. (2009).

The appellate court held that the Condominium Act’s assessment receiver statute is not triggered by a mortgage foreclosure proceeding or in post receiver appointment proceedings.

  1. Receiver Claims.

The receiver’s claims for compensation attorneys’ fees and costs are not enforceable against FNMA as the foreclosing mortgage lender. Building the foundation for the priority for claims, priority is governed by §28.222 (recording register), §695.11 (recording sequences) and, §695.01 (recording requirements).

Applying this foundation, FNMA’s mortgage liens, recorded in 2006 before the filing of the emergency petition for receiver, had priority over the Association’s liens except for the Safe Harbor Statute amounts and amounts accruing after FNMA’s Certificate of Title. Pursuant to the assessment receiver statute, the receiver’s claims are payable by the non-prevailing party. FNMA was not a party to the receivership claim and did not have an obligation to pay the receiver.

In this regard, the court noted that FNMA’s assessment liability was “clear,” limited to the Safe Harbor amount: “FNMA’s entitlement to the limitation as a loan purchaser and assignee of a final judgment of foreclosure obtained by a servicer on FNMA’s behalf is equally well-settled.”

The appellate court, perhaps seeking to soften its holding, concluded that there may be third parties who are liable, perhaps presuming that would be the unit owners who being foreclosed upon are more likely than not to be judgment proof. Nevertheless, “Due proceed required notice to the foreclosing first mortgagees before they could be taxed, after the fact, with receivership expenses for services they never sought or authorized.”

While the Association’s receivership effort was framed as “innovative and responsive to a crisis”, a lawsuit with no defendant or respondent did not involve the “traditional adversarial array of parties”; “As a result, the Receiver essentially became little more than an officious intermeddler vis-à-vis the foreclosing mortgage lenders….” In essence, “the Receiver served as a court-authorized property manager for certain units and also acted as an eviction and collection agency for the Association.”

  1. Receivers.

The appellate court, recognizing that the receivership was sought and appointed only pursuant to the assessment receivership statute took the opportunity to identify that:

Florida common law provides substantial authority for the appointment of a receiver to take custody of real property and embroiled in litigation in order to preserve and protect the property as the rights of the parties are determined. ­See, e.g., Metro-Dade Invs. Co. v. Granada Lakes Villas Condo., Inc., 74 So 3d 593 (Fla. 2d DCA 2011) see also Fla. R. Civ. P. 1.620.

Thus, the trial court under common law could have appointed a receiver for the units apparently independently of the assessment receivership statute. Furthermore, in a common law receivership to protect and preserve property the trial court has “considerable discretion in determining who shall pay the costs and expenses of receiverships” allowing receivership fees to be taxed as costs though where there are no assets, a separate action may have to be instituted to recover the costs.

This decision likely brings to a close the short lived and discredited “blanket receiver” concept. See Saga Bay Gardens Cd’m Ass’n, Inc. v. For the Appointment of Blanket Receiver, 127 So. 3d 800 (Fla. 3d DCA 2013). The decision appears carefully crafted to avoid the impression that lien assessment foreclosure receivers are only theoretical. The appellate court noted the many ways in which the Cedar Woods receivership proceedings here did not comport with the assessment foreclosure statute upon which the Association’s petition was based. There is no limitation provided by the court on the assessment receiver statute’s use in a lien foreclosure proceeding where there is adversarial proceeding, and the unit owner which is party entitled to rent and may be liable for expenses, is a party.

Interestingly, but for the estoppel letter request seeking monies far in excess of the Safe Harbor, the receivership might not have been disturbed, at least by these proceedings. It is unclear from the opinion how the holding impacts the receiver’s past efforts, but would certainly appear to limit the receiver’s prospective efforts. Though not apparently an issue these proceedings and thus not necessary for the court to address is who pays the receiver.

Many thanks to Shawn Brown and Mark Grant for swiftly providing a copy of the decision to my attention. Best for the coming week.

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

Condominium & Planned Development Law

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys

The only thing necessary for the triumph of evil is for good men to do nothing.

- Edmund Burke

New Decision: Chapter 558 & Repose Bar Time (Gindel v. Centex Homes)

Michael J. Gelfand 9/17/2018

On the table Wednesday was whether the 60 day mandatory pre-suit notice and opportunity to cure mandated by § 558.003 and § 558.004(1)(a) Fla. Stat. 2014 extends the Statute of Repose ten year deadline for filing a claim for a latent construction defect. The decision was Gindel v. Syntax Homes (Case No. 4D17-2149, September 12, 2018).

The timeline is straightforward:

  • March 31, 2004, homeowners closed and took possession of townhomes constructed by Centex.
  • February 6, 2014, homeowners provided a Chapter 558 pre-suit notice of defect to Centex.
  • May 2, 2014, after Centex notified the homeowners that Centex would not cure the alleged defects, the homeowners filed suit.

Reversing, the appellate court stated that the ten year Statute of Repose provided by §95.11(3)(c), Fla. Stat. (2014) began to run from the date of closing.

The key for the court was what is an “action.” The court quickly determined that their was no one size fits all definition. The reason is that different laws had different statutory definitions for “action”!

Chapter 558 continues to include the 60 day pre-suit notice of defect requirement, prohibiting the filing of a “action” “without first complying with the requirements of this chapter.” §558.004(1)(a), Fla. Stat. (2014).

The court held that the definition of “action” in the two chapters must be kept separate. The Statute of Repose definition of “action” in Chapter 95 is broader than the definition in Chapter 558, §95.11(3)(c)’s definition includes a “proceeding.” The “action” defined in Chapter 558 may not commence before the notice. Because an “action” cannot be filed before the notice, the notice is in essence a “proceeding” initiated as defined in Chapter 95 and thus is a “action” for the purpose of the Chapter 95 Statute of Repose.

As an independent basis for reversal, perhaps as dicta, the court commented that prohibiting the filing of an action until the pre-suit notice is provided which would have the effect of barring the claim would constitute an unconstitutional impairment to access of the courts.

The court distinguished Busch v. Lennar Homes, LLC, 219 So.3d 93, 96n.2 (Fla. 5th DCA 2017) which noted that tolling the Statute of Repose to allow time for a pre-suit notice was not an unconstitutional bar of access to the counts because of the stay right. Instead, the Gindel court stated that because the pre-suit notice requirement is mandatory, the developer should not be allowed to utilize the stay “as a sword against the homeowners” who “should not be penalized for rightly complying with the mandates of the [pre-suit notice] statute.”

The decision has the practical effect of extending the Statute of Repose for the Chapter 558 pre-suit notice period. The impact of the court’s pronouncement that the pre-suit notice period is mandatory, barring an early filed claim, may have no practical consequence as the statute expressly anticipates the potential for an early filed claim by authorizing a stay of litigation, though the stay is worded in response to an offer, § 558.004(7), which leads back to the stay discussion in Busch. Of course, if a defendant could show some prejudice by an earlier filing then that might create another story.

There is an interesting interplay between what statute should apply. The court applied without comment the 2014 statutes, the law in effect at the time the lawsuit was filed, not the statute in effect at the time of the sale when the defect apparently occurred. The earlier Statute of Repose provided for a fifteen year bar date. § 95.11(3)(c). It is noted that Fla. Laws 2006-145, Section 3) shortening the fifteen year Statute of Repose to ten years, stating that it would apply with a one year phase-in to all litigation commenced after July 1, 2006.

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

Condominium & Planned Development Law

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys

The only thing necessary for the triumph of evil is for good men to do nothing.

- Edmund Burke


New Decision: Springing Condominium Association Sprung (Dimitri v. Commercial Center of Miami Master)

Michael J. Gelfand 9/17/2018

The Third District Court of Appeal issued its mandate in Dimitri v. Commercial Center of Miami Master Association, Inc., Case No. 3D16-2549 (Fla. 3rd DCA, August 8, 2018).

The passage of time since the decision’s issuance may allow for calmer analysis, and perhaps to reduce the initial alarm spawned by the slip opinion’s publication.

As one initial consideration, the decision is not likely to impact the status of “master” condominium associations created after 1991.

Reversing thirty years of precedent, the status of many “Jungle Den” condominium “master associations” created before January 1, 1992, See Fla. Laws 1991-103 Sec 1 (PDF Volume 751/1084) is up in the air as a result of the Third District Court of Appeal’s decision. The appellate court addressed whether the Condominium Act’s 1991 amendment to §718.103(2), expanding the definition of “association” applies to a “master” association created before the January 1, 1992 effective date of the amendment, and whether a pre-1992 association that does not operate condominium property can be a condominium association even if the association is composed of only condominium unit owners.

Background.

No material fact appeared to be in controversy. The Association is described as a “master association for a group of buildings, each with its own sub-association.” The decision recited that the Association was “formed” in 1982 “under” a recorded “Declaration of Covenants, Restrictions and Easements for the Commercial Center of Miami.” The Articles of Incorporation stated that the Association was a “corporation not-for-profit under Chapter 617.” Appellant “Dimitri owned six commercial condominium units located in one of the sub-associations.” The Association apparently does not govern or administer condominium property.

The dispute was triggered by what likely was first presented as a rather pedestrian conflict. The Association rejected Dimitri’s March 2015, request to inspect specific Association official records. Dimitri’s request was stated to be pursuant to the Condominium Association Act’s Official Records process in §718.111(12), Fla. Stat. (2014). After the denial, Dimitri sought declaratory and injunctive relief, including a declaration that the master association was subject to the Condominium Act. The trial court granted the Association’s motion for summary judgment.

No Retroactive Application of Definition

A substantial portion of the appellate court’s discussion focuses upon whether the amended statutory definition has retroactive application. The appellate court found that the 1991 amendment to the Condominium Act expanded the definition of an “association” to include:

in addition to any entity responsible for the operation of common elements owned in undivided shares by unit owners, any entity which operates or maintains other real property in which unit owners have use rights, where membership in the entity is composed exclusively of unit owners or their elected or appointed representatives and is a required condition of unit ownership.

§718.103(2), Fla. Stat. (1992 Supp.); Fla. Laws 1991-103 §1 (PDF Volume 751/1084). The court reasoned that because the 1991 Law did not expressly provide for retroactive application and, perhaps more persuasive for the court, the Law expressly stated as an effective date that it “shall take effect January 1, 1992,” there was no clear expression of a legislative desire for retroactivity. Thus, the court held that the new definition of “association” in §718.103(2) Fla. Stat. (1991) did not apply retroactively.

1982 Definition Not Applicable

Continuing, the appellate court addressed whether the 1982 version of the Condominium Act applied to the Association, 1982 being the association’s year of incorporation. The court focused on the statutory “association” definition which was limited to “operation of the condominium,” which in term was “a term of art.” Thus, because the Association does not solely administer condominium property the court determined that §718.103(15), Fla. Stat. (1981) does not apply.

The Dimitri court supported its focus solely on the administration of “condominium property,” by citation to the Florida Supreme Court’s decision of Siegel v. Div. of Fla. Land Sales, 479 So.2d 112 (Fla 1985). The Dimitri decision stated that “the Florida Supreme Court did not find the test [constituency and function] to be persuasive or helpful in Siegel” remarking that the Third District’s use of those tests, at 453 So. 2d 414 (Fla. 3rd DCA 1984), was overturned by the Florida Supreme Court.

In addition, the Dimitri court derided the constituency and function tests as being “administrative interpretations” from the Department of Business and Regulation. Because the language of the statute, presumably §718.103(2) Fla. Stat. (1982), was plain and unambiguous an agency interpretation would not be utilized.

Precedent Crumbler?

In the wake of Dimitri’s issuance, many commented that the opinion is, to say the least, inconsistent with Downey v. Jungle Den Villas Rec. Ass’n., Inc., 525 So. 2d 438 (Fla 5th DCA 1988). Long before the 1991 amendment to the Act, Jungle Den adopted the “constituency” test and the “function” test to determine whether a “master” type association is to be considered a condominium association.

The constituency test asked “whether the recreation association's "membership is comprised of only condominium unit owners, and only condominium unit owners have rights in the property administered by the Association”

The function test asked whether the association maintains or operates condominium property.

Id. at 440-441. The Jungle Den court was concerned that consumers would be left unprotected by crafty drafting undermining the legislative intent behind the Condominium Act.

The legislative intent of the requirement in section 718.110(4) of unanimous approval of any material alteration or modification of the appurtenances to a condominium unit should not be vulnerable to circumvention by the simple act of setting up an ostensibly independent corporation empowered to perform some of the functions of a condominium association but without the unit owner protection provided by chapter 718, Florida Statutes.

Id. at 441. (Footnote omitted.) It should go without saying that Jungle Den, predating the 1991 amendments to the Condominium Act, did not base its reasoning upon the 1991 amendments.

Jungle Den owed its conclusion to what the Fifth District Court of Appeal saw was a practical application of the Act. In essence, a developer’s labeling of a project should not take precedence over what actually was the status of the Towers of Quayside Association. The Dimitri court should have been well aware of Jungle Den’s rational because the Dimitri opinion begins with a reference to Jungle Den. In perhaps irony, the Fifth District recognizes that the issue is one that “has vexed” the courts!

Dimitri’s reliance on the Florida Supreme Court’s decision in Siegel appears misguided because Siegel’s facts showed that the association there could not meet either the constituency test or the function test. In Siegel, non-condominium unit owners and non-condominium property could be subject to the association. Thus, the Florida Supreme Court’s statement of legislative intent with facts which could have not created a “Jungle Den condominium” was purely dicta.

The Dimitri court’s choice of phrases likely will not reassure readers. A condominium association is not created pursuant to Chapter 718 or the other community association laws. The distinction being that a condominium association is created by the corporate acts and governed by Chapter 718.

Concerning the statutory amendment’s effective date of the 1992, it is questioned whether that is legislative guidance because all bills now have effective dates which state when they can be enforced, not consistently stating whether there is retroactive impact.

Stepping back a bit further for analysis, the Dimiti court’s confusion may be foreshadowed by the court’s terminology. For example, the court stated that the association “was formed” “under the recorded declaration of covenants…” not the articles of incorporation. A condominium association is not created pursuant to Chapter 718 or the other community association laws. The distinction being that a condominium association is created by the corporate acts and governed by Chapter 718. Furthermore, the decision speaks of Dimitri owning units in “one of the sub-association.” This is as opposed to being a member of a sub-association or owning a unit in a condominium.

This decision is certainly going to reverberate in many ways, first directly as to the administration of the master associations. It will be interesting also what becomes of the definition of a “master association.” Second, in terms of statutory retroactive impair analysis will there now be an evaluation of whether the statute is procedural or provides remedies, or just rely on the effective date?

Finally, stepping way back, this decision is a reminder that a seemingly minor situation, a request for records, can have astounding implications. But why was this dispute about access to records not mediated or arbitrated?

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!

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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

Condominium & Planned Development Law

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys

The only thing necessary for the triumph of evil is for good men to do nothing.

- Edmund Burke

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New Decision: Premature Alteration? (Holiday Isle v. Destin Parcel 160) [Corrected Subject Line]

Michael J. Gelfand 9/17/2018

Whether obtaining a governmental developmental order and talking about proceedings triggers an association’s alteration approval process was at issue in Holiday Isles Improvement Ass’n, Inc. v. Destin Parcel 160, Case No. 1D17-2090, August 30, 2018).

Apparently, the Association was entitled to enforce covenants requiring building plans to be approved for work “commenced, erected or maintained.” Destin Parcel 160’s predecessor in title had “produced some construction plans and obtained a development order.”, and Destin Parcel “talked publicly about proceeding.” Destin Parcel’s refused to submit plans to the Association, at least in part asserting that plans were not finalized and no building permits had issued.

When Destin Parcel refused to provide plans in response to the Association’s demand, the Association sought declaratory and injunctive relief. The trail court granted Destin Parcel a summary judgment.

The appellate court held that the Association’s demand to review the plans was “premature.” When the trigger for obtaining approval is couched in terms of “commenced, erected or maintained”, it is unreasonable to interpret that language to require submission of plans that are either incomplete, non-final, or when the owner has not made a final decision to proceed.

Short and sweet, the decision may give pause to drafters of restrictions. Thresholds for action are desired to clearly set forth the threshold for submission. For example, seeking an alteration approval upon erection or maintaining would appear to be somewhat late, the key being approval before any work commences.

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

Condominium & Planned Development Law

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys

The only thing necessary for the triumph of evil is for good men to do nothing.

- Edmund Burke


New Decision: Air Rights (Sterling Breeze Owners’ Ass’n v. New Sterling Resorts)

Michael J. Gelfand 9/17/2018

Swiss cheese like apertures underlay the recent decision in Sterling Breeze Owners’ Ass’n, Inc. v. New Sterling Resorts, LLC, Case No. 1D17-1553 (September 5, 2018).

Sterling Breeze’s developer declared and constructed a 22-story condominium, including 145 residential units. The Declaration expressly excluded four ground-floor “Associated Commercial Parcels” referred to as “ACPs” to which the developer retained fee simple ownership. Attached to the Declaration was an “Associated Commercial Parcels Easement and Reservation” between the Association and developer which specified that the ACP’s “would be used for commercial purposes in the building” and the ACP’s owner would maintain the interior and be responsible for ACP’s expenses including utilities.

Six years after the Declaration was recorded the Association sued to nullify the Reservation asserting that the ACPs were “airspace” not able to be privately owned separate from the condominium, seeking declaratory relief, quiet title and unjust enrichment for the expenses of utilities and maintenance. The trial court granted New Sterling, the ACP owner, summary judgment on the declaratory relief and quiet title claims, and after a bench trail awarded unjust enrichment damages of $332,752.93 to the Association.

The Appellate Court began its analysis with the Condominium Act’s definition of “land” as including “airspace” above the surface and

if so defined in the declaration, the term “land” may mean all or any portion of the airspace….”

§718.103(18) Fla. Stat. Thus, the Condominium Act contemplates that a declaration of condominium may exclude certain portions of airspace from the condominium.

The appellate court reversed the quasi-contract unjust enrichment award. The ACP Agreement attached to the Declaration created express obligations from the ACPs owner to the Association for the expenses sought. When a contract addresses the exact issue, a quasi-contract claim cannot proceed.

It is assumed, but interestingly the court does not expressly state, that the statute relied upon is the 2008 version which has the same language as the current version. Also interesting, the court cites for the proposition that “common law yields when it is inconsistent with state law” the Florida Supreme Court’s decision in Maronda Homes, Inc. of Fla. v. Lakeview Reserve HOA, Inc. 127 So. 2d 1258, 1268 (Fla. 2013), even though the Florida Legislature rejected the substantive holding regarding implied warranties for common area construction essential to habitability,. Fla. Laws Chapter 2012-161 Section 3, Maronda at 1271.

Those with interest in the right to buy thin air should read up on Marty Schwartz’s informative “It’s Up In The Air: Air Rights in Modern Development, 89 Fla. Bar. J. No. 4 at page 42 (April 2015), as well as §193.0237 Fla. Stat. (2018) allowing for separate parcel tax identification numbers, and thus taxation, for air parcels, which was drafted in large part by Burt Bruton and Marty.

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

Condominium & Planned Development Law

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys

The only thing necessary for the triumph of evil is for good men to do nothing.

- Edmund Burke


New Decision: Mortgage Foreclosures: No Limitations Bare (Gonzalez v. FNMA)

Michael J. Gelfand 8/8/2018

“Having your cake and eating it too!” This may be a fair reference to Wednesday’s decision from the Third District Court of Appeal in Gonzalez v. Federal National Mortgage Ass’n, Case No. 3D17-1246 (Fla. 3rd DCA, August 1, 2018).

First, the critical facts in very short summary. The Borrowers defaulted on their mortgage and note in April 2007. The lender’s initial mortgage foreclosure complaint was dismissed for, as the court noted, a reason not clear in the record.

On June 12, 2013 a new mortgage foreclosure was filed alleging borrowers’ default from June 1, 2007, and that the plaintiff was exercising its right to accelerate all amounts due. A bench trial resulted in a judgment of foreclosure including apparently monies due more than five years before the filing of the “new” 2013 complaint.

The Third District cited Bartram v. US Bank Nat. Ass’n, 211 So.3d 1009 (Fla. 2016), for the:

The right to file a subsequent foreclosure action – and to seek acceleration of all sums due under the note – so long as the foreclosure action was based on a subsequent default, and the statute of limitations had not run on that particular default.

Id. at 1021 (Emphasis added by court). Thus, the Third District relied on Bartram to allow a lender to recover judgment for “old” installments that otherwise would be extinguished by the statute of limitations merely by filing a complaint accelerating all installments of the debt and alleging a default within the limitations period!

The Third District acknowledged conflict with the Fifth District’s recent decision in Velden v. Nationstar Mortgage, LLC, 234 So.3d 850 (Fla. 5th DCA 2018). Thus, the stage is set for the Supreme Court to rule, undoubtedly after three of the Bartram judges rotate off the Supreme Court at the beginning of next year.

Recognizing that Supreme Court review may be lengthy, and that there may also be similar appeals on the dockets of other DCAs, we are apparently going to enter an area of great uncertainty on this issue.

While we wait for the Supreme Court to address the conflict, it likely is worth re-reading Bartram. The Third District’s interpretation is questioned. Strangely, the Third District did not quote the certified question of great public importance as rephrased by the Supreme Court:

Does acceleration of payments due under a residential note and mortgage with a reinstatement provision in a foreclosure action that was dismissed pursuant to Rule 1.420(B), Florida Rules of Civil Procedure, trigger application of the statute of limitation to prevent a subsequent foreclosure action by the mortgagee based on payment defaults occurring subsequent to dismissal of the first foreclosure suit?

Bartram, 211 So.3d at 1012 (Emphasis added). As the Bartram court laid out the facts, the initial mortgage foreclosure action was dismissed on May 5, 2011. Id. at 1014.

The issue in Bartram was simply, in essence, the right to deaccelerate and proceed anew as if acceleration had never occurred in the first place. The Supreme Court allowing a lender to “seek acceleration of all sums due” did not appear to provide any green flag that to “seek” would mean all defenses are waived merely because the magical wand of acceleration passed over the case.

The Gonzalez decision is anticipated to lead to absurd results. Consider a lender failing to file an action to enforce a note with installment payments and an acceleration provision until more than five years after the initial installment default. If there was a suit just for that initial payment, the statute of limitations would presumably bar that claim. Was it the intent of Gonzalez that all a lender would have to do to breathe life into an installment payment extinguished because of a limitations period, would be to accelerate, no matter how long after the default. This would have the practical effect of erasing a statute of limitations application until only five years after the last installment payment was due.

In addition, the Gonzalez decision appears to turn on its head the rational of Bartram, that under the mortgage text acceleration does not occur until judgment is entered. The Third District’s rational could be read to mean that when a lender accelerates all defenses are extinguished! The Gonzalez court does not quote from the mortgage and note acceleration provisions however, if the Gonzalez’ terms are similar to the Bartram terms, then acceleration and the rights that flow from it cannot occur until the entry of judgment which would not retroactively breathe life into installments extinguished five years before the complaint was even filed.

As the time for re-hearing rapidly comes to a close we will see if a motion is filed.

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

Condominium & Planned Development Law

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys

The only thing necessary for the triumph of evil is for good men to do nothing.

- Edmund Burke


New Decision: Unilateral Mistake (DePrince v. Starboard Cruise Services)

Michael J. Gelfand 8/8/2018

Last Wednesday, the Third District Court of Appeal sitting on en banc resolved a conflict between itself and the other four District Courts of Appeal, holding that rescission of a contract based on a unilateral mistake does not require inducement as an element of proof. DePrince v. Starboard Cruise Services, Inc., Case No. 3D16-1149 (Fla. 3rd DCA, August 1, 2018).

Boiling the facts down to the essence, cruise ship passenger DePrince visited the ship’s jewelry store operated by Starboard and inquired for a fifteen to twenty carat loose diamond. After the store communicated with its land-based vendor, the store provided DePrince and his partner Crawford whom was a certified gemologist, pricing of $235,000.00 to $245,000.00. The salesperson did not realize that the vendor’s quote was per-carat, not total; however, Crawford the gemologist checked with DePrince’s sister whom warned “that something was not right because the price for a diamond of that size should be in the millions and recommended not buying the diamond.” Nevertheless, DePrince bought the diamond using his American Express card. Shortly thereafter when Starboard realized its mistake it reversed the credit card charges to cancel the transaction.

DePrince sued to enforce the sale contract. Starboard defended on the basis of unilateral mistake. After two trials and two appeals the Third District Court of Appeal sat en banc on the issue of what are the elements of unilateral mistake. Procedurally, the en banc court commented that it is not bound by the District’s precedent but is “allowed to take a fresh look”. The court would be bound by Supreme Court precedent to which it cited Maryland Cas. Co. v. Krasnek, 174 So.2d 514, 542 (Fla. 1965), which held that a contract may be rescinded based upon unilateral mistake.

The en banc court found three reasons to recede from its earlier precedent requiring inducement as an element:

1. Inducement is inconsistent with Krasnek. Supporting citations in Krasnek were to contracts rescinded based on unilateral mistake without inducement. Perhaps more important, the facts recited in Krasnek did not include inducement; thus, inducement could not have been a basis for the decision.

2. The Supreme Court’s most recent discussion of the unilateral mistake test in In re Standard Jury Instructions – Contract & Bus. Cases, 116 So.3d 284, 323-24 (Fla. 2013) included instruction that did not include inducement, citing an earlier Third District decision, Penn Nat'l Mut. Cas. Ins. Co. v. Anderson, 445 So.2d 612, 613 (Fla. 3d DCA 1984).

3. The other four District Courts Appeal interpreted Krasnek to be consistent with the lack of an inducement element.

Moving forward, the court held that the three elements for setting aside a contract on the basis of unilateral mistake of material fact are

:

1. The mistake was not the result of an inexcusable act of due care;

2. Denial of release from the contract would be inequitable; and,

3. The other party to the contract has not so changed its position and reliance on the contract that rescission would be unconscionable.

The court also favorably quoted from Anderson recognizing that when there is a mistake there is undoubtedly some negligence; however, that does not always mean that there is a “inexcusable act of due care.”

Thus, the en banc panel vacated the panel opinion in the case, DePrince v. Starboard Cruise Servs, Inc., 43 Fla. L. Weekly D171 (3rd DCA January 17, 2018), and related cases were receded from, judgment for Starboard being affirmed.

This decision will undoubtedly increase the use of the defense of rescission for a unilateral mistake, particularly in the Third District. By aligning itself with the other districts, the Third District appears to remove the potential of the Florida Supreme Court exercising conflict jurisdiction to revisit the Krasnek decision. There is always the potential of certification of great public importance; however, with all five Districts aligned providing greater certainty in this area of the law, the need for certification would seem to be reduced.

Of course, after reading the decision it is hard to repress the temptation to recite “don’t leave home without it.”

Best wishes for a great week.

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

Condominium & Planned Development Law

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys

The only thing necessary for the triumph of evil is for good men to do nothing.

- Edmund Burke


New Decision: FAR/BAR “As Is” Contract Interpretation (Diaz v. Kosch)

Michael J. Gelfand 8/6/2018

Affirming an $850,000 fee judgment in a residential real estate contract dispute, a guaranteed attention grabber, introduced a trail blazing decision outlining real estate transaction does and don’ts. .” Diaz v. Kosch, Case Nos. 3D17-1498 & 3D17-1621 (Fla. 3rd DCA June 13, 2018).

Identifying the Buyers as “attorneys with substantial experience with real estate transactions and title matters” pulls transactional attorneys and litigation counsel into the well written opinion which graciously, and correctly, comments on one of the RPPTL Section’s outstanding products, painstakingly reviewed and updated continuously:

“The “as is” residential real estate contract developed jointly by the Florida Realtors and The Florida Bar reflects a middle-of-the-road form intended to reduce the legal fees that could be incurred if purchase contracts started from scratch for each transaction. The form reflects a wealth of experience with both successful and failed transactions among professional realtors and real estate attorneys.”

Thus, the Third District Court of Appeal recently affirmed a final summary judgment, arising from a $2.850 million residential real estate contract, ending the Buyers’ fraud and other claims in “a bitter and ‘no hold’ lawsuit against the sellers.” Diaz v. Kosch, Case Nos. 3D17-1498 & 3D17-1621 (Fla. 3rd DCA June 13, 2018).

The short form chronology is:

March 2012. Sellers list their residence for sale. Sellers’ “Owners Property Disclosure Statement” “prominently discloses” that the information is “to the best of Owner’s knowledge,” disclaims any “warranty” and warns that “it is not a substitute for any inspections or warranties.” The Disclosure covers sixteen different areas, marked “no” as to any permitting or toxic substance issues. A buyer is “encouraged to thoroughly inspect” the property, and repeats the Owners’ disclaimers.

Spring 2012. Buyers walk through the property.

September 2012. Utilizing The Florida Realtors and The Florida Bar’s “As Is Residential Contract for Sale and Purchase” the parties contracted for a $2,850,000.00 sale with an initial $50,000.00 deposit and a $235,000.00 additional deposit to be paid at the end of the ten day right of inspection period. The Contract’s “standard” provision’s addressed integration, modification, radon gas, permits and seller disclosures, together with a ten day right of inspection and the Buyers right to terminate by the end of that period.

Apparently, on day nine of the ten day inspection period, Buyers notified their broker of potential permitting issues. The following day, day ten of the ten day inspection period, the Buyers, e-mailing “for settlement purposes only,” accused the Sellers of “active misrepresentations” claimed “diminished value” and threatening “legal fees and litigation with the facts present here could easily be in the hundreds of thousands of dollars and of course during the litigation, the property will not be marketable” which the appellate court parenthetically, if not tongue in cheek, remarked that the Buyer’s communication was “presciently, as it turned out.”

The Buyers made the second deposit stating it was “with full rights reserved.” A week and a half later Buyers e-mailed a Notice of Termination, not claiming a seller breach nor inability to procure financing. The sellers confirmed that they imposed no conditions on release of the deposit however, it appears that the Buyer’s broker required a release!

October 2012, a Buyer which the court referred to as “litigation attorney Richard Diaz” listed four issues: Significant amount of unpermitted work; presence of mold and radon gas requiring significant remediation; As Is contract does not protect a seller from fraud; and, a broker’s obligation “to inform any prospective buyer everything you know.” In response, Sellers confirmed no claim to the deposit.

Two weeks thereafter Buyers sued Sellers. Eventually proceeding on their fourth amended complaint, after significant discovery, and Buyers’ depositions the court granted summary judgment for brokers and the sellers and awarded $850,000.00 in attorney’s fees and costs.

The appellate court ruled that contract paragraph 12(c) regarding inspections, was “unambiguous.”

Right to terminate without penalty. At the end of the inspection, a buyer has two choices: Either a written notice of cancellation before expiration triggering an immediate return of the deposit to the buyer; or, the contract goes hard requiring the buyers’ second deposit. The contract does not provide a “conditional tender” of the additional deposit.

The court helpfully explains that the contract creates “a path to closing the transaction.” After the inspection period is completed, there is: a walk through the day before closing; and, between the inspection period and closing seller has a duty to provide certain documents and information. The duty to provide documents is not triggered until after the inspection period is over. Buyers right to cancel is not an “open-ended extension” to investigate records or documents, especially light of the contract’s “time is of the essence” provision. Nevertheless, the appellate court goes out of its way to note that the Sellers paid over $32,000.00 to “permitting consultants” to assist with these issues, including meeting with the Buyers.

The court also laid out a path for extending the inspection/cancelation time period. Unremarkably, the extension period could have been extended by the parties’ written agreement. The court also remarks that there could be an extension of the inspection/cancellation period by the buyer “furnish additional consideration beyond that required by the existing agreement. [To this commentator it is certainly understandable that additional consideration should support an agreement, it is unclear how the decision leaps from additional consideration, in and of itself, without an agreement to an inspection period extension. Particularly because there was no mention in the decision of actual additional consideration this language may be considered dicta].

Radon: Beginning with the State statutory radon gas disclosure, and then that the Buyers were “experienced real estate attorneys familiar with radon tests” the decision markedly states the Buyers did not undertake testing during the inspection period, could have inspected, and did not establish that radon or the permitting matters were not observable.

Waiver: Waiver was not deemed to be an issue because “following accusations of fraud,” the accuser may not “justifiably rely” on the representations of the accused, and substantive negotiations aimed at resolving the dispute.” Citations deleted.

Claim to the Deposit: Anticipatory repudiation excused the Sellers from scheduling a closing or even demonstrating the traditional “ready, willing, and able to close.”

The appellate court summed up the Buyers’ efforts as seeking “to avoid losing the Property to a backup buyer, while simultaneously attempting to preserve a claim to reduction in the purchase price.” Buyers’ conduct just “exacerbated” the situation when they launched the bitter, no holds barred lawsuit.

The “moral” to this “story” may be first, at the negotiation stage, not to “reinvent” the “wheel”. The praise heaped upon the AS IS contract form, quoted at the top, could embarrass its drafters except that they deserve significant praise for their volunteer efforts, literally consuming hundreds of hours each year seeking to anticipate intricate issues to protect Florida’s citizens and investors. Proclaiming the text unambiguous, at least in the circumstances provided, transactional counsel will likely be looking to the Contract’s language. Noting the copyright on the form, please always provide recognition to the drafters!

The decision provides significant guidance regarding conduct surrounding the inspection period. Especially in the face of “bullies,” the decision will seem heaven sent. On the other hand, when a buyer keeps pushing the envelope, this will assist buyer counsel’s efforts to educate a buyer/client that limitations will be enforced and that the threats of expensive litigation likely will not be availing. For litigation counsel this decision will be handy to oppose claims if not in a motion to dismiss, then at the summary judgment level, including fraud claims.

Certainly, this decision will remind everyone of the adage attributed to President Abraham Lincoln. “Honest Abe”, known because of his reputation epitomizing professionalism, remains a hallmark standard for all attorneys. His applicable adage in this circumstance, of course, is “an attorney who represents himself has a fool for a client.” Enough said.

Knowing which version of the “AS IS” contract was utilized would assist practitioners to no end. We would know if the contract form text is the same as what might be in front of us. Though not stated in the opinion, it appears from the Miami-Dade Clerk’s docket that the contact attached to the complaint is the 2012 revision, bearing “Rev 8/10©2010 Florida Realtors and The Florida Bar.”

Many thanks to Fred Jones for bringing the decision to my attention immediately (delays in reporting of course mine) and to Marty Schwartz for also reminding. Kudos of course belong to Fred Jones and the committee members and other chairs, reviewing contract provisions selflessly to assist practitioners.

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

Condominium & Planned Development Law

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys

The only thing necessary for the triumph of evil is for good men to do nothing.

- Edmund Burke


New Decision: Deficiencies/Forum Shopping (Dyck-O’Neal v. Lanham)

Michael J. Gelfand 8/6/2018

Resolving a conflict among the districts concerning which forum has jurisdiction for a mortgage foreclosure deficiency judgment was at issue in Dyck-O’Neal, Inc. v. Lanham, 17 Fla. L. Weekly S278, Case No. SC17-975 (Fla. July 5, 2018).

A mortgage foreclosure judgment expressly reserved jurisdiction concerning a deficiency. A deficiency was not sought in the same forum. Instead, Dyck-O’Neal, the assignee of the mortgage and note, filed a separate legal action against the borrower seeking a deficiency judgment. The trial court granted judgment for the borrower but based solely on the validity of an assignment of the mortgage and note. The First District Court of Appeal quashed the trial court’s judgment concluding that the foreclosure court, not the court where the money claim was newly filed, had jurisdiction pursuant to §702.06, Fla. Stat. (2014).

The issue framed by the Supreme Court was:

… Whether a complainant may pursue a separate action at law to recover a deficiency judgment when the foreclosure court reserved jurisdiction in its final judgment to adjudicate the deficiency claim.

The Court began its analysis with a review of the statute:

In all suits for the foreclosure of mortgages heretofore or hereafter executed the entry of a deficiency decree for any portion of a deficiency, should one exist, shall be within the sound discretion of the court . . . . The complainant shall also have the right to sue at common law to recover such deficiency, unless the court in the foreclosure action has granted or denied a claim for a deficiency judgment.

§702.06, Fla. Stat. (2014) (Emphasis added by Court).

The Supreme Court held that the language “plainly allows,” indicating that the language was clear and unambiguous, that:

the right to sue at common law to recover such deficiency, unless the court in the foreclosure action has granted or denied a claim for a deficiency judgment.

A separate action is prohibited only when the court handling the foreclosure action has actually granted or denied a deficiency claim.

In quashing the First District’s decision, the Court agreed with decisions from the other four districts:

Garcia v. Dyck-O’Neal, Inc., 178 So. 3d 433 (Fla. 3d DCA 2015);

Dyck-O’Neal, Inc. v. Hendrick, 200 So. 3d 181 (Fla. 5th DCA 2016);

Gdovin v. Dyck-O’Neal, Inc., 198 So. 3d 986 (Fla. 2d DCA 2016); and,

Dyck-O’Neal, Inc. v. McKenna, 198 So. 3d 1038 (Fla. 4th DCA 2016).

The decision provides a number of important lessons for practitioners. First, the Court remarked on the First District Court of Appeal’s reliance on an earlier decision which in turn relied on an earlier version of the statute. The 2013 amendments to the statute included the italicized language quoted above. Thus, relying on a prior court decision for statutory interpretation may require determining whether and how the statute has changed over time.

Strategically, the legislative change allows, if not begs for, forum shopping. After all, why would a deficiency claimant go through the exercise of drafting a new complaint, incurring filing fees and service fees, starting from scratch, as opposed to merely proceeding with a deficiency. The proofs would be similar. One exception, of course, would be if the foreclosure action was a purely in rem proceeding without obtaining personal jurisdiction over the borrowers; however, in that instance a foreclosure judgment would presumably not reserve jurisdiction for a deficiency.

In the condominium context it is noted that for quite some time the courts recognized that the Condominium Act provided a separate independent basis for a money damage claim. Maya Marca Cd’m Apts., Inc. v. O’Rourke, 669 So.2d 1089 (Fla. 4th DCA 1996).

Last week the First District Court of Appeal acknowledged the Lanham reversal in apparently similar case, Dyck-O’Neal, Inc. v. Stermilli, Case No. 1D17-3396 (Fla. 1st DCA, August 3, 2018).

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

Condominium & Planned Development Law

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys

The only thing necessary for the triumph of evil is for good men to do nothing.

- Edmund Burke


New Decision: Derivative Claims (Iezzi Family v. Edgewater Beach)

Michael J. Gelfand 8/6/2018

A unit owner’s claim for damages suffered by a condominium association must comply with the derivative action procedure in the Florida Not for Profit Corporation Act, §617.07401, Fla. Stat., however, in seeking to reinforce a bright line test, the First District Court of Appeal may have blurred that line in the context of equitable actions in Iezzi Family LP v. Edgewater Beach Owners Ass’n., Inc., Case No. 1D16-5878 (Fla. 1st DCA August 1, 2018). Compliance with derivative action notice, independent investigation and court fact finding requirements can add substantial complexity, time, and expense to what an owner may consider is a routine straight forward claim.

The decision did not identify the underlying facts or even the claims in the owner’s 27 count complaint seeking legal and equitable relief against the Condominium Association and seven current or former officers and directors, perhaps because of the unit owner’s critical “acknowledgment” that his 27-count complaint fit within the description of a derivative action!

The court emphasized that the description of a derivative claim encompasses claims “existing in the corporation, the injury sustained … is basically the same as the injury sustained by others…” citing Leppert v. Lakebreeze HOA Inc., 500 So.2d 252 (Fla. 1st DCA 1986) (emphasis in original).

Proceeding with the owner’s concession acknowledgement, the appellate court addressed whether the Condominium Act’s private cause of action in §718.303(1), Fla. Stat. conflicts with the Not for Profit Corporate Act’s derivative action procedures. The court noted that neither statute has been substantially amended since 1976 which explains why the decision does not identify a particular year for the statutes cited.

The court began its analysis reminding that statutory interpretation begins with reading “related statutory provisions in harmony with one another….” Thus, the court held that the two statutes do not conflict.

The threshold for which statute applies turns upon the basis of the claim. If the one owner plaintiff’s claim is “… not distinct from any other unit owner, and seeks legal damages for its exclusive benefit…” then that claim would be a derivative action. The court appeared to distinguish a derivative action seek damages for a loss suffered by all owners from a claim based on a loss suffered just by an individual owner.

The courts approach to legal claims for damages may be well understood. After all, it would not seem “right” for one owner to sue for damages that were incurred, or damages that are the right of, all owners while the suing owner kept all the funds.

The court’s discussion strove to differentiate a claim for equitable relief as opposed to a claim for legal money damages. This is an important distinction because equity has traditionally allowed injunctive relief to address common element issues. For example, consider a claim for injunctive relief to repair a roof or wall, or to address an improper alteration.

The court cited three decisions from other District Courts of Appeal allowing the owner of one unit to seek equitable relief concerning common elements. Unfortunately, these favorable citations, though including parenthetical notes, did not explain why one unit owner would have a claim for equitable relief regarding common elements that all owners own, as differentiated from an owner’s claim for legal damages from a claim seeking equitable relief.

By contrasting the legal and equitable actions, it appears that the court was concerned with an individual unit owner seeking money for legal damages suffered by all owners, but still desired to allow one owner to seek equitable relief against an association for failing to comply with common element maintenance duties. In the later equitable claim, repairs to the roof or wall would not inure to the single claimant, but would benefit all owners indivisibly. Further that claims would not bar another owner from seeking relief.

Unfortunately, the decision may have created more issues by its focus on “legal” verses “equitable” claims, especially in the context of a breach of fiduciary duty claim for damages. While a claim for damages may be assumed by many to be a legal claim, a fiduciary duty claim has been seen as different. It is an “ambiguous expression”, and “…whether the action will lie at law, in equity, or both depends on the nature of the breach and the remedy sought.” King Mountain Cd’m. Ass’n., Inc. v. Gundlach, 425 So. 2d 569, 571 (Fla. 4th DCA 1982).

The court sought to differentiate a more traditional carveout for a unit owner seeking legal damages in Rogers & Fords Const. Corp. v. Carlandia Corp., 626 So.2d 1350, 1354 (Fla. 1993). In Carlandia one unit owner was able to claim damages for construction defects to common elements; however, other unit owners’ rights must be protected. The Iezzy court appears to conclude that the 2009 enactment of the Not for Profit Corp. Act Derivative Action statue “resolves the representation issues discussed in Rogers.” It is suggested that the court’s write off of Rogers may be too quick, at least to the extent that a unit owner seeks damages only that the unit owner incurred; thought it is recognized that usually all unit owners would be an indispensable party.

Touching on representative claims, the court largely sidesteps a closely related concept, the community association as class action representative provisions of Fla.R.Civ.P Rule 1.221. While the Rule is procedural, a question may be asked: does standing mandate compliance with the statutory derivative action substantive requirements in the class action context for a unit owner bringing a claim held by all owners? Perhaps because the claims were not brought as a derivative action, the court believed it did not have to reach the issue.

In conclusion, legal claims for money damages not differentiated from the same claim held by all unit owners requires a derivative action. An equitable claim seeking injunctive relief that does not award one unit owner relief to the exclusion of other owners may be able to be filed. The distinction is between claims benefiting just the plaintiff owner and claims that would ostensibly benefit the association and all owners

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

Condominium & Planned Development Law

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys

The only thing necessary for the triumph of evil is for good men to do nothing.

- Edmund Burke


New Decision: Interest (Sterling Villages of PB Lakes v. Lacroze)

Michael J. Gelfand 7/11/2018

Time is money. Thus, recent seemingly conflicting appellate court decisions as to when interest starts to accrue may impact counsel’s approach.

Thursday the Fourth District Court of Appeal addressed whether a trial court has discretion to award pre-judgment interest in Sterling Village of Palm Beach Lakes Cd’m. Ass’n., Inc. v. Lacroze, Case No.: 4D-17-1385 (Fla. 4th DCA, July 5, 2018).

Astute followers will recall that just weeks ago the Third District Court of Appeal addressed a similar issue in First Equitable Realty III Ltd. V. The Grandview Palace Cd’m. Ass’n., Inc. Case No.: 3D-17-669 (Fla. 3d DCA, April 11, 2018), rehearing denied June 25, 2018.

Analysis of the two decisions indicates a conflict among the Districts.

In Sterling Village, Lacroze, successfully bid for a Sterling Village Condominium unit at a foreclosure sale and obtained title to that unit. A dispute over the Association’s demand for assessments resulted in Lacroze filing an action for an accounting, injunctive relief and damages. The Association counter-claimed seeking damages for unpaid assessments, later adding a count to foreclose a claim of lien.

Following a non-jury trial, the trial court held that owner Lacroze “shall take nothing from the action.” The trial court found owner Lacroze owed the Association money damages, plus pre-judgment interest from the date of the claim of lien’s recording, not from the date money was delinquent and due. While the opinion mentions that jurisdiction was reserved for the injunction claim, the opinion is silent as to the disposition of the foreclosure claim.

Affirming that interest did not have to be awarded from the date of the delinquency, the appellate court held that the trial court in this case had discretion to find that pre-judgment interest should commence from the date the owner received the Association’s default notice. Reciting that interest is to make a claimant whole, and the “general rule that prejudgment interest should run from the date of the loss…”, the appellate court cited to Broward County v. Finlayson, 555 So. 2d 1211 (Fla. 1990), for the proposition that interest could be withheld based on considerations of “fairness.”

When a trial court determines it would be inequitable under the circumstances to award prejudgment interest prior to a party’s notice of the default, the trial court has the discretion to find that prejudgment interest should run from the date the party received notice of the default and not the date of the default. Cuillo v. McCoy, 810 So. 2d 1061, 1064-65 (Fla. 4th DCA 2002).

Thus, “equity” may be perceived to be a basis for shortening the time from which interest accrues.

Interestingly, the decision does not cite to a specific date for when interest accrues, and its holding seems to refer to two different dates. The court’s analysis refers to the date that a notice of default is provided. That date is normally different from the date of recording of the claim of lien which is the date from which interest was allowed to accrue. The factual deference to the trial court may be explained by the lack of a record on appeal; but, is nevertheless not explained.

Especially as the Sterling Village decision appears to contradict the Third District’s First Equity decision, it may be helpful to understand the precedent upon with the appellate court relied. Both decisions appear to provide narrow distinguishing facts that would not appear to invite broad extension. The Broward County limitation on interest was predicated on the parties first negotiating in good faith on a distinct issue, workweek pay, and apparently only after extensive negotiations was a separate overtime claim raised; the Supreme Court invoked the fairness analysis for interest on the not negotiated overtime claim. In Cuillo, the claim was against an indemnitor which had no notice of the primary debtor’s underlying default. Thus, the two citations’ situations would have appeared to have been clearly distinguishable from the Sterling Village situation.

For practitioners this decision may raise uncertainties. Initially, what is the test for limiting interest, particularly what factors or threshold trigger the equitable or fairness withholding of interest? Then, if interest is to be partially withheld, then what date should interest begin to accrue, recognizing that there is usually a difference between the date of default notice and the date of recording a claim of lien.

Concerning the first, threshold issue, whether equity may reduce or bar interest, there is the recent holding by the Third District Court of Appeal in First Equitable Realty that a trial court did not have discretion to reduce interest recoverable pursuant to statute. While First Equitable could be stated to be distinguishable because it addressed the rate of interest, not when it accrues, that appears to be a distinction without a purpose.

In fairness to the Sterling Village court, the First Equitable conflict may not have been raised by the parties. In Sterling Village the Fourth District affirmed over the Association’s objection, most of the trial court’s holdings because a transcript was not provided! Further, it appears from the appellate court’s docket that briefing was completed only two days before the First Equitable decision was published which normally would have been too short of time for even counsel to have been appraised of First Equitable, and there was no notice of supplemental authority to bring the First Equitable decision to the appellate court’s attention.

Interestingly, First Equitable relies upon a Fourth District decision holding that the trial court lacked discretion to reduce an interest award based upon equitable considerations because equity cannot override a statutory mandate for an interest award. Oreal v. Steven Kwartin, P.A., 189 So. 3d 964, 966-67, (Fla. 4th DCA 2016).

Concerning the second issue, the date from which interest was allowed to accrue, there might be confusion. The court’s use of the date of recording of the lien does not normally relate to the date of a default notice, and the decision does not explain the differentiation. As the claimant was a condominium association normally the association would have provided a statutory notice of intent to lien which in turn would have been at least forty-five days before the recording of the lien. Again, this issue may be a mystery because there was not trial transcript as part of the record on appeal.

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 Attorney:

Real Estate Law

Condominium & Planned Development Law

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys

The only thing necessary for the triumph of evil is for good men to do nothing.

- Edmund Burke


Attending your first RPPTL Meeting?

7/6/2018
Everything you need to know to easily navigate your first RPPTL meeting . Download the tip sheet. 

New Decision: Sequestering Rents (Green Emerald Homes v. Residential Credit Opportunities Trust)

Michael J. Gelfand 7/1/2018

What is good for the goose is good for the gander. Turnabout is fair play?

Wednesday’s decision by the Florida’s Second District Court of Appeal seems, at least to those who compare appellate decisions, to allow aphorisms to run wild.

Green Emerald Homes, LLC v. Residential Credit Opportunities Trust, Case No. 2D17-4410 (Fla. 2nd DCA June 27, 2018), may be known not only for its substantive holding that the lender could not enforce a mortgage’s sequestration and assignment of rents against a third-party acquirer of title subject to the mortgage, but also the logic leading to the holding, that plain statutory and contract language must be followed, and not subjected an interpretation analysis.

The facts are straightforward.

· 2008: Borrowers execute a promissory note and mortgage to CTX Mortgage which contained an assignment of rents. The Mortgage was recorded.

· June 2014: Junior lien holder Homeowners’ Association forecloses, resulting in a Clerk’s sale and Green Emerald Homes obtaining a Certificate of Title.

· September 2014: Residential Credit was assigned the Note and Mortgage.

· October 2014: Residential Credit files a foreclosure action, including Green Emerald Homes as a defendant.

· April 2017: Residential Credit moves to sequester earnings, revenues, rents, issues, profits and incomes based upon §697.07 Fla. Stat. (2017), and the Mortgage’s sequestration terms.

The trial court’s order on appeal granting the motion to sequester, required Green Emerald to file a copy of rental agreements to which it was a party for the year 2017, and to deposit in Residential Credit attorney’s trust account rents collected from March 2017 forward. Renters were required to pay into the trust account rents not previously paid.

The Appellate Court quoted §697.07 in large part, including the provisions stating the statute is binding upon the “mortgagor.”

The appellate court began its analysis with a foundation premise, that the purchaser of real property at a junior lien holder’s foreclosure sale did not become the mortgagor or borrower. Instead, the third-party purchaser becomes the “owner of the property subject to the superior interest and lien and posed by the recorded mortgage.” (Citations omitted). Thus, Green Emerald, not a party to the mortgage and note, was not obligated to perform pursuant to those documents. Further, otherwise Green Emerald was not an assignee.

Analyzing the duty created by the statute, the statute’s language does not bind third party owners. The statute places an obligation upon a “mortgagor.” Similarly, the Mortgage’s sequestration provisions bind the “borrower.” Green Emerald did not become the “mortgagor” or “borrower” by virtue of purchasing at the foreclosure sale, it was neither a “mortgagor” or “borrower”.

The Appellate Court does not interpret the mortgage or the statute’s text because courts do not have authority to vary the “plainly written” language of the mortgage and statute. Thus, applying the seemingly tried and true rules of judicial interpretation, at the first stop, if a statute or document is not ambiguous, there is no ambiguity to interpret! Applying the mortgage binding the “borrower” and in the statute binding the “mortgagor,” neither the Mortgage or the statute limits the third-party purchaser subject to the Mortgage.

The Court notes that the decision does not address whether the assignment of rents provision would apply to leases executed by the mortgagor/borrowers which may have been assumed by Green Emerald Homes. That issue of assumption of leases apparently was not raised in the the motion.

Moving forward, this decision will find a warm welcome from most third-party purchasers at foreclosure sales, and those purchasing property without assuming an otherwise binding mortgage. This would include Florida community associations that take title and rent property until the seemingly unending foreclosure action is completed. The decision readily acknowledges that the holding may result in longer foreclosure processes, implying that third party purchasers have a financial incentive to avoid a swift determination, but the court is bound by words as “plainly written.”

Of course, an observer may conclude that if lenders were interested in swift resolutions, then sequestration is near the end of the list of processes anticipated to speed litigation. Interestingly, the decision does not state the date of the alleged mortgage default, but the timeline reflects nearly three years passing from the filing of the foreclosure action before the sequestration of rents was sought. One would anticipate that in three years a summary judgement could be heard, if the lender had its proverbial “ducks lined up.”

One may also anticipate that lenders will seek to change the law and similarly amend mortgage documents; however, these changes would likely not impact existing mortgages.

As for the introduction’s reference to aphorisms, readers may recall the holdings that when a borrow prevails in a foreclosure because the lender cannot prove up the note, then the borrower cannot obtain prevailing party attorney’s fees because if there is no note, then there is no agreement providing for fee. The courts have strictly construed who is the “borrower” or the “mortgagor” and though the lender lost the case, the lender did not pay the borrower’s fees. See e.g. Sabido v. The Bank of New York Mellon, _____ So. 3d _____, 43 Fla. L. Weekly D 296 (Fla. 4th DCA, February 7, 2018); Nationstar Mortgage LLC v. Glass, _____ So. 3d _____, 42 Fla. L. Weekly D 815 (Fla. 4th DCA, April 12, 2017).

This decision similarly applies the plain text as to who is the “borrower” or “lender” but the result denies the lender relief. Thus, pick your aphorism: “What is good for the goose is good for the gander” or “Turnabout is fair play?” Or come up with your own.

As we head into the Independence Day holiday, please take a moment during celebrations to remind family and friends of the freedoms fought for on many types of battlegrounds over the past two and a half centuries. Relate how lawyers crafted the Declaration of Independence, and the Federal Constitution. Communicate that it is the duty of each citizen to educate themselves as to the issues of the day, to challenge what is false, what is not right, and to vote.

Do not just talk about our freedoms, but help all to be able to exercise these freedoms.

Have a great holiday. Turn off the \phone. Get some rest.

Many thanks to appellant’s counsel Brennan Grogan, and to Doug Christy, each for swiftly providing the decision.

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

Condominium & Planned Development Law

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys

The only thing necessary for the triumph of evil is for good men to do nothing.

- Edmund Burke



New Decision: Alterations (Lenzi v. The Regency Tower)

Michael J. Gelfand 6/26/2018

At first glance, Wednesday’s decision by the Fourth District Court of Appeals was a seemingly pedestrian alteration dispute over the authority of a condominium association’s board of directors to alter the condominium’s common elements; however, a further reading reveals an interesting, if not concerning, commentary on how to interpret terms in a declaration of condominium which should relegate a substantial portion of the decision to being considered dicta.

Further, the decision includes helpful guidance as to interpretation, generally, and specifically, the term “general-terms cannon.”

Posture.

In Lenzi v. The Regency Tower Ass’n, Inc., Case No. 4D17-2507 (Fla. 4th DCA June 20, 2018), Regency Tower Condominium unit owner Lenzi objected to the authorization by the Condominium Association’s board of directors of a lobby renovation swapping Carrara marble for ceramic tile without an owner vote. Apparently, the attributes of marble must have been paramount because Lenzi pursued his dispute. An adverse condominium mandatory pre-suit arbitration decision led to the trial court, and then to the District Court of Appeal.

Background.

The dispute hinged on whether the Regency Tower’s Declaration of Condominium’s use of the word “alterations” includes alterations encompassed within the Condominium Act’s use of the term “material alterations” in §718.113(2)(a) Fla. Stat. (2015). This provision stated in pertinent part:

If the declaration as originally recorded or as amended under the procedures provided therein does not specify the procedure for approval of material alterations or substantial additions, 75 percent of the total voting interests of the association must approve the alterations or additions.

The Declaration of Condominium’s Article titled “Right of Association to Alter and Improve Property and Assessment Therefor,” stated that the board of directors had approval authority for “such alterations or improvements to the COMMON PROPERTY.” Mr. Lenzi asserted that the marble to tile swap was a material alteration for which the Condominium Act which required a 75% unit owner vote pursuant to §718.113(2)(a), because the Declaration did not contain the term "material alteration", instead granting the board the sole authority to approve "alterations", without further definition or qualifier.

Alteration.

It is recognized that an “alteration” has been defined very broadly, including “"To vary; change; or make different…” which lead over three decades ago to a sweeping definition of a “material alteration”:

We hold that as applied to buildings the term "material alteration or addition" means to palpably or perceptively vary or change the form, shape, elements or specifications of a building from its original design or plan, or existing condition, in such a manner as to appreciably affect or influence its function, use, or appearance.

Sterling Village v. Breitenbach, 251 So.2d 685, 687 (Fla. 4th DCA, 1971).

In light of Sterling Village and its progeny should an affirmance of the trial court’s hold in favor of the Association that a unit owner vote was not necessary have been a swift and foregone conclusion? Under the rules of interpretation that have guided the courts, in the absence of a finding of an ambiguity there is no need for a court to interpret the meaning of a disputed provision. The analysis normally stops with a court stating the plain meaning of the words.

In this matter, the Regency Tower Declaration utilizes the term “alterations.” The Condominium Act’s adding the adjective “material” does not change the target noun “alteration.” The adjective “material,” by definition a modifier, creates a subset of all “alterations.” Thus, a “material alteration” is still an “alteration.”

Thus, the Condominium Act’s use of “material alteration” in §718.1130(2)(a) does not create an ambiguity. The Act’s use of the term “material alteration” does not change the fact that a “material alteration” is still a type of “alteration.”

Dicta.

While the Court could have simply concluded its opinion with a finding that the term "alterations" contained in the Declaration is unambiguous, and therefore not subject to interpretation, the Court continued its analysis. Perhaps the Court desired to provide a fuller explanation so as to not just shut out the unit owner with a PCA. However, the extended explanation by the Court of its rationale seems to upset decades of decisions addressing judicial interpretation, including: thou shall not interpret if not ambiguous!

Nevertheless, continuing in what appears to be dicta the Court cites to two decisions interpreting contracts in the divorce arena for the proposition that a court is to seek “a reasonable interpretation of the text of the entire agreement to accomplish its stated meaning and purpose.” This broad swath of “reasonableness” creates two concerns. First, reading text in context is a standard touchstone of covenant analysis; however, a court still must return to settled precedent requiring no interpretation unless an ambiguity exists.

Second, there is the potential creation of confusion as to whether covenants are subject to a test of “reasonableness” or rather in application the test of “clear and unambiguous.” “Reasonableness” may be appear de rigor when construing contracts of money and services, or identifying procedures. On the other hand, substantive property restrictions in covenants have traditionally been subject to a stricter test of “clear and unambiguous” as a threshold to enforceability.

Thus, the Regency Tower’s Declaration provision in question, how to approve an alteration, addresses procedures, specifically the process to approve an alteration. This provision does not address restrictions on an owner’s use of real property; thus while the threshold for enforcement may be reasonableness, this memo proposes that reasonableness is not the threshold for enforcement of a covenant imposing a use restriction. Thus, when at issue was a narrow procedure, and at that a clear procedure. hopefully the decision’s broad statement regarding the interpretation of a declaration’s terms, will be recognized as dicta, not in itself create an ambiguity!

Additional Drafting Principles.

Finally, for trial courts and practitioners, the decision reinforces the value of a good dictionary and the presumption created by use of a general term. While quoting from Black’s Law Dictionary the decision continues:

terms should be given their plain and unambiguous meaning as to be understood by the “man-on-the-street”

* * *

words of common usage should be construed in their plain and ordinary sense.

Citations omitted.

The decision also explains the “general-terms cannon” as follows:

The “general-terms canon” posits that “[w]ithout some indication to the contrary, general words (like all words, general or not) are to be accorded their full and fair scope [and] are not to be arbitrarily limited.”

* * *

[T]he presumed point of using general words is to produce general coverage—not to leave room for courts to recognize ad hoc exceptions . . . in the end, general words are general words, and they must be given general effect.

Citations omitted.

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

Condominium & Planned Development Law

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys

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.

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