NEWS

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

Michael J. Gelfand 1/23/2018

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

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

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

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

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

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

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

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

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

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

Michael J. Gelfand

Past Chair

Real Property, Probate and Trust Law Section

of The Florida Bar

Click www.RPPTL.com for Breaking News

About Florida’s Largest Substantive Law Section!

______________________________________

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

© 2018 Michael J. Gelfand

Michael J. Gelfand

Florida Bar Board Certified Real Estate Attorney

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys


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

Michael J. Gelfand 1/23/2018

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

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

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

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

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

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

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

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

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

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

Happy drafting!

Michael J. Gelfand

Past Chair

Real Property, Probate and Trust Law Section

of The Florida Bar

Click www.RPPTL.com for Breaking News

About Florida’s Largest Substantive Law Section!

______________________________________

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

© 2018 Michael J. Gelfand

Michael J. Gelfand

Florida Bar Board Certified Real Estate Attorney

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys


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

Michael J. Gelfand 1/22/2018

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Michael J. Gelfand 12/15/2017

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

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

The court focused on the following Condominium Act language:

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

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

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

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

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

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

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

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

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

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

Michael J. Gelfand

Past Chair

Real Property, Probate and Trust Law Section

of The Florida Bar

Click www.RPPTL.com for Breaking News

About Florida’s Largest Substantive Law Section!

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

© 2017 Michael J. Gelfand

Michael J. Gelfand

Florida Bar Board Certified Real Estate Attorney

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys

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

Michael J. Gelfand 12/8/2017

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

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

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

In short background,

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Michael J. Gelfand

Past Chair

Real Property, Probate and Trust Law Section

of The Florida Bar

Click www.RPPTL.com for Breaking News

About Florida’s Largest Substantive Law Section!

______________________________________

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

© 2017 Michael J. Gelfand

Michael J. Gelfand

Florida Bar Board Certified Real Estate Attorney

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys


ALM Nominations deadline Dec 15, 217

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

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

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

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

Michael J. Gelfand 11/9/2017

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

So consider what is the purpose of the disclosure?

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

Have a great holiday weekend.

Michael J. Gelfand

Past Chair

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

Click www.RPPTL.com for Breaking News

About Florida’s Largest Substantive Law Section!

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

© 2017 Michael J. Gelfand

Michael J. Gelfand

Florida Bar Board Certified Real Estate Attorney

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys

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

Michael J. Gelfand 10/31/2017

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

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

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

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

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

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

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

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

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

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

There are many lessons from this decision:

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

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

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

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

Michael J. Gelfand

Past Chair

Real Property, Probate and Trust Law Section

of The Florida Bar

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About Florida’s Largest Substantive Law Section!

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

© 2017 Michael J. Gelfand

Michael J. Gelfand

Florida Bar Board Certified Real Estate Attorney

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys

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

Michael J. Gelfand 10/31/2017

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Michael J. Gelfand

Past Chair

Real Property, Probate and Trust Law Section

of The Florida Bar

Click www.RPPTL.com for Breaking News

About Florida’s Largest Substantive Law Section!

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

© 2017 Michael J. Gelfand

Michael J. Gelfand

Florida Bar Board Certified Real Estate Attorney

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys

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

Michael J. Gelfand 10/31/2017

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

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

A brief derogation of title is appropriate:

· Fanny Mae held a mortgage on the property.

· CitiMortgage became the holder of the first mortgage.

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

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

Thereafter CitiMortgage deeded the property to Fanny Mae.

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

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

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

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

(Emphasis in decision.)

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

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

Michael J. Gelfand

Past Chair

Real Property, Probate and Trust Law Section

of The Florida Bar

Click www.RPPTL.com for Breaking News

About Florida’s Largest Substantive Law Section!

______________________________________

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

© 2017 Michael J. Gelfand

Michael J. Gelfand

Florida Bar Board Certified Real Estate Attorney

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys

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

Michael J. Gelfand 10/16/2017

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

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

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

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

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

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

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

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

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

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

Michael J. Gelfand

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

P Please consider the environment before printing this e-mail

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

Michael Gelfand 10/9/2017

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Have a great week.

Michael J. Gelfand

Past Chair

Real Property, Probate and Trust Law Section

of The Florida Bar

Click www.RPPTL.com for Breaking News

About Florida’s Largest Substantive Law Section!

______________________________________

Michael J. Gelfand

Florida Bar Board Certified Real Estate Attorney

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys

Citizens Begins taking claims in Big Pine Key on Wednesday

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

New Decision: Derivative Action (Collado v. Baroukh)

Michael J. Gelfand 9/18/2017

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

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

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

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

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

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

Michael J. Gelfand

Past Chair

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

Click www.RPPTL.com for Breaking News

About Florida’s Largest Substantive Law Section!

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

© 2017 Michael J. Gelfand

Michael J. Gelfand

Florida Bar Board Certified Real Estate Attorney

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys

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

Michael Gelfand 9/18/2017

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

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

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

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

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

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

Online backup system; and,

Email logs.

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

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

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

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

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

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

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

Michael J. Gelfand

Past Chair

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

Click www.RPPTL.com for Breaking News

About Florida’s Largest Substantive Law Section!

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

© 2017 Michael J. Gelfand

Michael J. Gelfand

Florida Bar Board Certified Real Estate Attorney

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys

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

Michael Gelfand 9/18/2017

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

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

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

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

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

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

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

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

Michael J. Gelfand

Past Chair

Real Property, Probate and Trust Law Section

of The Florida Bar

Click www.RPPTL.com for Breaking News

About Florida’s Largest Substantive Law Section!

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

© 2017 Michael J. Gelfand

Michael J. Gelfand

Florida Bar Board Certified Real Estate Attorney

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County Court

Fellow, American College of Real Estate Attorneys

Court Closure State Wide Friday, and time extensions to Monday

Michael J. Gelfand 9/6/2017

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

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

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

 

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

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

Michael J. Gelfand 8/24/2017

Fore!

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

THE ISSUE & POSTURE.

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

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

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

THE FACTS.

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

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

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

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

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

COURT’S ANALYSIS.

Cancellation.

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

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

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

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

Restraint on Alienation.

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

Limitations.

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

CONCLUSION.

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

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

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

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

Remember all eagles, no bogeys.

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

Michael Gelfand 7/26/2017

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

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

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

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

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

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

The trial court’s expansive order required Fox to:

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

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

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

Fox appealed.

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

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

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

Citations omitted.

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

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

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

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

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

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

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

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

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

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

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

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

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

Michael J. Gelfand

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

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

Michael J. Gelfand 4/30/2017

Dear Colleagues

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

Michael J. Gelfand

Florida Bar Board Certified Real Estate Attorney

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County CourtMichael J. Gelfand

Immediate Past Chair

Real Property, Probate and Trust Law Section

of The Florida Bar

image002.png@01D01152.BB680010" >

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About Florida’s Largest Substantive Law Section!

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

© 2017 Michael J. Gelfand

RPPTL Sponsors Minority Mentoring Picnic

Jesse Friedman 2/13/2017

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

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

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

Michael Gelfand 2/1/2017

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Michael J. Gelfand

Florida Bar Board Certified Real Estate Attorney

Florida Supreme Court Certified Mediator:

Civil Circuit Court & Civil County CourtMichael J. Gelfand

Immediate Past Chair

Real Property, Probate and Trust Law Section

of The Florida Bar

image002.png@01D01152.BB680010" >

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About Florida’s Largest Substantive Law Section!

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

© 2017 Michael J. Gelfand

RPPTL SECTION STARTS BICYCLE CLUB

Robert Swaine 1/30/2017

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

Are you a cyclist? Wanna try?

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

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

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

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

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

Michael Gelfand 1/27/2017

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

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

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

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

The unit’s street address was stated.

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

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

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

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

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

Michael J. Gelfand

Florida Bar Board Certified Real Estate Attorney

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

Michael J. Gelfand

Immediate Past Chair

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

Click www.RPPTL.com for Breaking News

About Florida’s Largest Substantive Law Section!

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

© 2017 Michael J. Gelfand

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

Michael Gelfand 1/27/2017

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

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

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

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

The unit’s street address was stated.

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

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

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

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

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

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

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

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

Michael Gelfand 1/25/2017

It Lives! What? The lis pendens statute!

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

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

The Facts.

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

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

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

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

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

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

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

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

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

The court reflects on how we arrived at this point.

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

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

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

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

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

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

Michael J. Gelfand

Immediate Past Chair

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

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© 2017 Michael J. Gelfand

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

Michael Gelfand 1/12/2017

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

THE FACTS.

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

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

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

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

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

DIGRESSION: QUATOMAIN.

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

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

* * *

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

(Citations omitted.)

THIS APPEAL.

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

JUNE REHEARING.

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

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

(Emphasis in original.)

THIS, JANUARY 2017, DECISION.

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

ERRATA.

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

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

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

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

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

Michael J. Gelfand

Florida Bar Board Certified Real Estate Attorney

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

Immediate Past Chair

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

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© 2017 Michael J. Gelfand

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

Michael Gelfand 1/12/2017

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

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

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

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

Michael J. Gelfand

Florida Bar Board Certified Real Estate Attorney

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

Immediate Past Chair

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

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About Florida’s Largest Substantive Law Section!

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

© 2017 Michael J. Gelfand

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

Michael Gelfand 1/12/2017

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

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

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

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

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

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

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

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

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

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

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

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

Michael J. Gelfand

Florida Bar Board Certified Real Estate Attorney

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

Immediate Past Chair

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

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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

Save Calusa Trust v. St. Andrews Holdings, Ltd

Manuel Farach 1/9/2017

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

I. Facts

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

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

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

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

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

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

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

II. Case

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

III. Analysis

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

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

Id. at 915.

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

IV. Conclusion

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

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

Michael Gelfand 1/6/2017

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

The background facts reach back literally half a century:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Best wishes for a new year.

Michael J. Gelfand

Florida Bar Board Certified Real Estate Attorney

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

Michael J. Gelfand

Immediate Past Chair

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

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

Michael Gelfand 1/6/2017

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

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

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

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

The unit’s street address was stated.

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

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

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

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

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

Michael J. Gelfand

Florida Bar Board Certified Real Estate Attorney

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

Michael J. Gelfand

Immediate Past Chair

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

Click www.RPPTL.com for Breaking News

About Florida’s Largest Substantive Law Section!

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

© 2017 Michael J. Gelfand

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