• Wednesday, December 7, 2022

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New Decision: Covenants Running with the Land, Deeds and Arbitration (Hayslip v. U.S. Home Corp)
January 27, 2022

This morning the Florida Supreme Court issued its opinion in Hayslip v. U.S. Home Corp., Case No. SC19-1371 (Fla., January 27, 2022). The appeal followed certification of a case of great public importance, Hayslip v. U.S. Home Corp., 276 So. 3d 109 (Fla. 2d DCA 2019). Commentary on the lower, District Court’s, decision is found at the 7/16/2019 posting at http://www.rpptl.org/DrawNews.aspx?Action=NewDecisions&PageID=13

The Court revised the certified question to read:

DOES A DEED COVENANT REQUIRING THE ARBITRATION OF ANY DISPUTE ARISING FROM A CONSTRUCTION DEFECT RUN WITH THE LAND, SUCH THAT IT IS BINDING UPON A SUBSEQUENT PURCHASER OF THE REAL ESTATE WHO WAS NOT A PARTY TO THE DEED?

A unanimous Court answered “YES,” affirming the District Court of Appeal’s decision.

Recognizing that covenants are either real, running with the land, or personal, not running with the land, the Court relied on the parties agreement as to the three part test for determining a real property covenant found in Winn-Dixie Stores, Inc. v. Dolgencorp, Inc., 964 So. 2d 261, 265 (Fla. 4th DCA 2007).

(1) the existence of a covenant that touches and involves the land;

(2) an intention that the covenant run with the land; and

(3) notice of the restriction on the part of the party against whom enforcement is sought.

In a short decision, the opinion determined that:

The performance of the covenant in the present case affects the occupation and enjoyment of the home, as it dictates the means by which the Hayslips must seek to rectify building defects related to the home.

The impact on the home occurs when the defect is “realized” and “recourse” is sought, as well as when an arbitration decision is issued.

As to the whether there was an agreement to arbitrate, the intent to be bound was shown in the developer’s deed to first purchaser. The Hayslips, though remote grantees, were bound by notice provided by recording the deed.

Moving forward! The Court was not inclined to re-examine what constitutes a covenant running with the land. It remains somewhat broad.

As for the future, particularly the binding impact on remote grantees may encourage a proliferation of restrictions of all types, in instruments of all flavors. We will undoubtedly see these similar covenants, if not more restrictive, in developer deeds. See, for example, the recent decision in Lennar Homes, LLC, v. Martinique at the Oasis Neighborhood Association, Inc., Case No. 3D20-1732. (Fla. 3rd DCA, December 27, 2021). This writer has not commented in this column on the Martinique decision, but please read the decision as it may be interpreted as gutting in large part the purpose behind the public policy against homeowners’ associations filing suit against developers See §720.3075(1)(b), Fla. Stat.

Do not bet on the Legislature amending the Homeowners’ Association Act to address in the same manner as the Condominium Act’s anti-waiver provisions in §718.303(2) Fla. Stat.

In the interim, title searches likely will be more complex, and in thirty years, there may be a deluge of MRTA evaluations, unless this decision compels a revision of §712.01(6), Fla. Stat. to provide a root of title earlier than 30 years! Do not bet on that one either. In any event, a slightly shorter period would likely not assist in most defect claims because of statutes of limitation and repose.

Michael J. Gelfand

Past Chair

Real Property, Probate and Trust Law Section

of The Florida Bar

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

© 2022 Michael J. Gelfand