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New Decision: Alterations (Bailey v. Shelborne Ocean Beach Hotel Cd’m.)

Michael Gelfand 7/21/2020

Wednesday, the Third District Court of Appeal addressed whether the Condominium Act requires approval of repairs that are also alterations, and whether approval must occur before the work, in Bailey v. Shelborne Ocean Beach Hotel Cd’m. Ass’n., Inc. Case Nos.: 3D17-0559 and 3D17-0767 (Fla 3d DCA July 15, 2020). Not to start with a spoiler, but for those that believe that the Tiffany Plaza line of decisions addressed this issue, those decisions did not.

BACKGROUND

The Condominium Association financed two major construction projects over a four-year period with seven special assessments totaling over $30 million, initially approved by the Association’s board of directors, not the members. Only after the work was completed did seventy-five percent of the unit owners vote to approve.

TRIAL COURT

The Appellants, Condominium unit owners sued the Association and the individual directors alleging violations of the approval requirements for “material alterations or substantial additions to common elements….” contained in § 718.113(2)(a) Fla. Stat. (2017), and against the directors alleging breach of fiduciary duty claim for violating the Condominium Act. At the summary judgment hearing the trial court reviewed multiple binders of the construction details. The Association conceded that two items, pool paver repairs and reinforcement under townhomes, were not necessary repairs. The trial court granted summary judgment that all work except for the pool pavers and reinforcements, were necessary repairs and maintenance, and that the owners approved or ratified the work thereafter.

APPELLATE COURT ANALYSIS

Two separate issues were presented. First, whether the Condominium Act in Section 718.113(2)(a) Fla. Stat. (2017) requires unit owner approval for a material alteration or substantial addition that is a necessary repair? Second, Whether the unit owner approval for a material alteration or a substantial addition required by Condominium Act Section 718.113(2)(a) Fla. Stat. (2017) must occur before the alteration or addition. As to what is a substantial change or material addition, it was noted that reliance was placed upon the classic “palpably or perceptibly vary or change the form, shape, elements or specifications” threshold of Sterling Village Condo, Inc. v. Breitenbach, 2511 So. 2d 685, 687 (Fla 4 DCA 1971).

Whether Approval is Required.

The court began with an analysis of Section 718.113(2)(a) which was “clear” as it prohibited material alterations or substantial additions to condominium common elements with three exceptions:

(1) “[e]xcept as otherwise provided in this section [718.113]”;

(2) “except in a manner provided in the declaration as originally recorded or as amended under the procedures provided therein”; or

(3) “[i]f the declaration . . . 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 sub-section begins:

““except as otherwise provided in this Section,” there shall be no material alterations or substantial additions to the common elements….”

(Emphasis added by court). Thus, as invited by the first line of sub-section (2)(a), there is an express exception to the prohibition of material alterations and substantial additions without owner approval. The first subsection of the statute beings “maintenance of the common elements is the responsibility of the association.” Section 718.113(1) Fla. Stat. (2017). Thus, because another sub-section requires the Association to be responsible for maintenance of the common elements, that sub-section creates an exception to the requirements in Section 718.113(2)(a).

Timing.

As to when a material alteration or substantial addition must be approved, the court again found that the statute is “clear.” “It would lead to an absurd result and defeat the statute’s general prohibition of material alterations or substantial additions” to allow post work approval or ratification. If approval was not required before the work, there would never be a violation of the statue “because approval could always be pending.”

Fiduciary Duty.

Because almost all of the repairs were necessary, the Association had authority for those, and there was no breach of a fiduciary duty. Concerning the two items that were not necessarily repairs or maintenance, the owners failed to provide any evidence that the items were either “unnecessary or unreasonable.”

KIBITZING.

Was not the repair v. approval dispute resolved in the 1980’s? Before jumping to an answer, take another look at the trifecta of decisions. Ralph v. Envoy Point Condo. Ass’n, Inc., 455 So. 2d 454, 455 (Fla. 2d DCA 1984); Cottrell v. Thornton, 449 So. 2d 1291 (Fla. 2d DCA 1984); Tiffany Plaza Condo. Ass’n, Inc. v. Spencer, 416 So. 2d 823 (Fla. 2d DCA 1982); and, George v. Beach Club Villas Condominium Association, 833 So. 2d 816 (Fla. 3d DCA 2002). Each of these three decisions was founded upon the particular declarations’ text, not the Condominium Act. Tiffany Plaza did quote the Condominium Act; however, the decision did not rely upon the Condominium Act’s text. Beach Club did quote the Act; however, the holding that replacing wooden roof mansards with terracotta shingles was a material alteration was a factual determination.

The decision reinforces the rule of statutory interpretation that when considering a statutory provision, even when seemingly clear, the entire statute must be considered, as well as the chapter the statute is located.

The court leaves associations in a quandary. What to do when the work is done, contractors must be paid, and an owner correctly challenges the work as a material alteration or substantial change occuring without an advance owner vote? While an association is no not able to approve after the fact, how are the contractors paid? The Florida Supreme Court has provided a proverbial “safety valve,” allowing a special assessment to pay for a judgment whose execution endangered association assets, even though the ultimate expense was ultra vires. Ocean Trail Unit Owners Ass’n., Inc. v. Mead, 650 So. 2d 4 (Fla 1994). Nevertheless, it appears wasteful to require a condominium association to be sued and subject to execution before a special assessment for work would be valid.

Michael J. Gelfand

Past Chair

Real Property, Probate and Trust Law Section

of The Florida Bar


The Real Property Probate and Trust Law Section of The Florida Bar
651 East Jefferson Street, Tallahassee, FL 32399-2300