Quarterly Newsletter – Winter 2013

Pillars of Justice - Ruggieri Law Firm

First of all, Happy New Year! My best wishes on a prosperous 2014. I took the opportunity to put together this “Year In Review” which provides a summary of significant appellate decisions issued in the State of Florida in 2014 directly impacting Community Associations in Florida. What follows is not an exhaustive list of every appellate decision issued which affects Community Associations but, only those which I felt will have a significant impact on Community Associations in Florida. Feel free to call or e-mail should you have questions regarding a particular appellate decision or issue. Best wishes in 2014!

Year In Review

Maronda Homes, Inc. of Florida v. Lakeview Reserve Homeowners Association, Inc.

Unlike condominiums, homeowners associations do not have statutory implied warranties against construction defects in the common areas. Implied warranties provide a significant benefit to condominiums as there is no burden to prove fault or knowledge of the defect on the part of the developer. Rather, the condominium association need only prove the defect itself. Implied warranties are a “strict liability” cause of action. In Mironda Homes, the Association filed suit against the developer for construction defects in the common areas, and included a claim for breach of implied warranty. The trial court entered summary judgment in favor of the developer and the builder, and the association appealed to the Fifth District Court of Appeals who ultimately ruled that implied warranties do extend to common areas which provide significant support to the homes such as roadways.

That decision was appealed to the Florida Supreme Court. While on appeal, our legislature modified Florida Statute §553.835, Florida Statutes to limit implied warranty claims in favor of homeowners association improvements on the lot which immediately supports the home. The Florida Supreme Court ultimately decided that this legislative change could not be applied retroactively to defeat Lakeview Reserve’s implied warranty claim. In so holding, the Florida Supreme Court stated that a cause of action on the part of a homeowners association for implied warranties as they pertain to common areas which accrued prior to the effective date of the act cannot be defeated by this legislative change.

This is significant as the Court stated, “a cause of action, in short, occurs when the complaining party sustains damage and the last act necessary to establish liability occurs.” Consequently, you should consult your community association counsel to determine if a potential claim for construction defect which you have in your community occurred prior to the effective date of the statute which would allow the association to pursue a claim for breach of implied warranties.

Rosenberg v. Metrowest Master Association, Inc.

Rosenberg filed suit against the master association alleging violations of the transition provisions of Chapter 720. The master association prevailed on summary judgment and the trial court awarded the master association its attorney’s fees and costs. Rosenberg appealed the final judgment to the Fifth District Court of Appeals arguing that the trial court improperly awarded the master association’s attorney’s fees as the definition of member in the master declaration did not include individual homeowners and it was therefore improper to award the master association its attorney’s fees and costs because he was not a “member”. The Fifth District Court of Appeals held that the statutory definition of member controlled because Rosenberg was obligated to pay assessments to the master association, and he was a member of the master association pursuant to F.S. §720.301 (10) which defines member as any parcel owner who is obligated by the governing documents to pay an assessment or amenity fee. The Court held that the fact that the master assessments were paid to the sub-association where Rosenberg resided did not alter the fact that he was obligated to pay assessments to the master association. The Fifth District Court of Appeals held that the statutory definition controlled over the definition in the master declaration.

Yang v. Sebastian Lakes Condominium Association, Inc.

In this case, the condominium association filed lien foreclosure actions against two (2) owners of a unit. At the hearing on the association’s motion for summary judgment, the association presented the testimony of its then community association manager regarding the ledgers to admit them into evidence under the “business records exception” to the hearsay rule. The association had transitioned management companies prior to the time that the lien foreclosures were initiated. The current management company did not have ledgers dating back to a zero balance. Pursuant to the business records exception to the hearsay rule, the proponent of a record must show: (1) The record was made at or near the time of the event; (2) Was made by or from information transmitted by a person with knowledge; (3) Was kept in the ordinary course of a regularly conducted business activity; and (4) That it was a regular practice of that business to make such a record. The unit owners claimed to have made a partial payment which was not reflected on the association’s ledgers. During the community association manager’s testimony, on cross-examination, she testified that the records prior to the 2008 takeover were maintained by the prior accountant, that she started with an account balance from outside records, that she did not know the prior accountant’s practice and procedure, and that she never worked for that accountant. She was unable to testify as to the accuracy of the starting balance. The Fourth District Court of Appeals reversed the lower court’s ruling in favor of the association and remanded the case to the trial court for entry of a directed verdict in favor of the condominium unit owners. This case demonstrated the importance of obtaining ledgers that date back to a zero balance when taking over a community from another management company. The association must either have ledgers that date back to a zero balance or be prepared to obtain testimony from the prior management company regarding their records.

Boyle v. Hernando Beach South Property Owners Association, Inc.

The association filed suit against the homeowner alleging he was in violation of the declaration by failing to keep his lot in a neat, clean and orderly condition by failing to properly maintain and trim the landscaping and trees. In support of its motion for summary judgment, the association filed affidavits from the board members with no photographic evidence alleging generally that the homeowner had failed to keep his lot in a neat, clean and orderly condition by failing to properly maintain and trim the landscaping and trees (there was also an allegation regarding mold on the house which is not relevant to the discussion). The trial court granted summary judgment in favor of the association and entered the mandatory injunction ordering the homeowner to “properly maintain and trim the landscaping and trees…”. It also allowed the association to enter onto the lot if the homeowner failed to do so, perform the maintenance, and lien the lot if necessary to secure its costs. The homeowner appealed arguing that the summary judgment evidence in the record did not indicate how he was in violation of the declaration. The Fifth District Court of Appeals ruled that there was no evidence to show how the landscaping and trees had not been properly maintained and trimmed, and the summary judgment in favor of the association was reversed.

In connection with maintenance violations, or any violation for that matter, it has always been my practice to submit photographic evidence to the court attached to the community association manager’s affidavit depicting specifically how the property is not in compliance. The failure to do so in this instance was fatal to the association’s action.

Flescher v. Oak Run Associates Limited

This opinion of the Fifth District Court of Appeals involves amendments by a developer to the declaration pursuant to the amendment provision in the declaration which reserved the unilateral power of the developer to amend the declaration while in control. The opinion also addresses the retroactive application of Florida Statute §720.3086 regarding the developer’s obligation to disclose financial information (the declaration was recorded prior to the effective date of this legislation).

The original covenant for maintenance assessments provided that the assessments were, in part, to be used for maintaining the lawn and landscape areas, common areas and recreational areas, for all utility costs, including electricity, water, gas, and telephone service in connection with the foregoing, garbage and trash collection, 24 hour security service, cable television reception service, and an exclusive closed circuit Oak Run television channel, for road and drainage facilities, repair and maintenance. It further stated that the assessments may also provide reasonable reserves for deferred maintenance and replacement, for construction of common areas, recreational areas, and was to also be used as a means of enforcing compliance with the deed restrictions.

As amended, the new provisions limited the use of assessments to the common areas and recreational areas, and allowed the developer to retain any unused assessments, effectively preventing the creation of any reserves. The lower court ruled in favor of the developer and the homeowner appealed.

The Fifth District Court of Appeal referenced prior case law which provides that a developer’s right to unilaterally amend the declaration is subject to a reasonableness standard and the developer may not materially change the burden to the community members unless the amendment provision specifically reserves the right to do so. The Fifth District Court of Appeals ruled that the amendment violated this standard as it impermissibly changed the burden between the parties. It effectively operated to relieve the developer of his express burden to use the funds collected for maintaining the lawns and landscaped areas, utilities, etc.

With respect to the financial disclosure requirements of F.S. §720.3086, the Fifth District Court of Appeals overruled the trial court’s ruling, ruling that it was not impermissible to retroactively apply the statute as the developer had no “vested right” to the confidentiality of its financial records.

South Fields of Palm Beach Polo and Country Club Homeowners Association, Inc. v. McCullough

A homeowner in the community filed suit seeking both an injunction and mandamus relief compelling the association to file a marketable record title act notice to preserve the covenants. The lower court granted the injunction and mandamus relief ordering the association to file the marketable record title act notice, and the association appealed. The Fourth District Court of Appeals affirmed the lower court’s ruling and specifically referred to provisions of the declaration that the board had a duty to protect the covenants. This appellate opinion makes it clear that boards should file its marketable record title act notices in a timely fashion, and homeowners do have the right to compel that action should the board indicate that they are not willing to do so.

Estoril, Inc. v. Mayfield Condominium Association, Inc.

The appellant, Estoril, Inc., was the developer of a multiuse building which included a residential condominium, and numerous shared facilities. The shared facilities included a parking garage which the developer owned. The declaration specifically stated that the developer was entitled to establish fees for use of the shared facilities and, prior to turnover, the developer had for several years charged the condominium association use fees for use of its parking garage. The association paid them for several years. However, after turnover, the association refused to pay them stating that no specific rule had been adopted regarding the use fees and the developer filed suit to recover the unpaid parking garage charges. The trial court entered judgment in favor of the association based upon the lack of a formally adopted written rule regarding the use fees for the parking garage, and the developer appealed.
The Third District Court of Appeals reversed indicating that there were material issues of fact regarding whether the developer’s course of conduct of having charged the use fees and having included it in the association’s budget prior to turnover, was sufficient course of conduct to establish a rule or regulation. The Third District Court of Appeals noted that the governing documents did not specify that a rule or regulation had to be in writing. It should be noted that the Third District Court of Appeals did not address whether it felt the course of conduct was sufficient. It merely held that there was a material issue of fact that precluded summary judgment and remanded the case back to the trial court for further proceedings consistent with its opinion.

It is unclear whether the Third District Court of Appeals felt that the developer’s actions were indeed sufficient to establish a rule or regulation by course of conduct. This opinion appears to stand for the proposition that a rule or regulation can be adopted by course of conduct if there are sufficient actions to establish the rule in question. I would certainly recommend that all rules and regulations be formally adopted by the board with a formal board resolution and proper notice of the meeting at which the rules will be adopted.

Aventura Management, LLC v. Spiaggia Ocean Condominium Association, Inc.

The association initiated a lien foreclosure action against a unit and ultimately obtained title at the foreclosure sale. The first mortgage holder initiated its mortgage foreclosure while the lien foreclosure action was pending, and Aventura Management, LLC was the successful bidder at the first mortgage holder’s foreclosure sale and took title to the unit shortly after the condominium association took title in their own lien foreclosure. The Association fought to collect all delinquent amounts which had accrued prior to the time that it took title. The trial court ruled in favor of the Association and Aventura Management appealed. On appeal, the Third District Court of Appeals reversed the ruling that the association was the “prior owner” for purposes of F.S. §718.116 (1) (a) which provides that a unit owner is jointly and severally liable with the previous owner for all unpaid assessments that came due up to the time of transfer of title. The Third District Court of Appeals reversed the ruling that the association was the “prior owner” for purposes of the statute and, therefore, could not demand the amounts that had accrued in unpaid assessments prior to the time that the association took title.

Interestingly, this issue was specifically addressed by the legislature in July of 2013 in the legislative changes to Chapter 720. However, the same change was not made to Chapter 718. This may simply be a legislative oversight that will be corrected in the next legislative session.