The Florida Bar RPPTL Section

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

4/26/2019

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

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

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

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

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

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

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

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

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

1) the plaintiff is clearly entitled to it,

2) there is no adequate remedy at law, and

3) the judge believes that justice requires it.

Clear entitlement in a specific performance context requires that:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Michael J. Gelfand

Past Chair

Real Property, Probate and Trust Law Section

of The Florida Bar

Click www.RPPTL.com for Breaking News

About Florida’s Largest Substantive Law Section!

______________________________________

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

Michael J. Gelfand

Florida Bar Board Certified:

Real Estate Attorney