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New Decision: Novation/Attorney’s Fees (C.V.P. Community Center v. McCormick 105)

Michael Gelfand 8/6/2020

The gauntlet has been thrown down! Is Jacobi dead? Has the wrong gauntlet been thrown? Should the concept of “consent” and novation apply to recorded covenants running with the land?

Whether acquiring title to a condominium unit constitutes a novation which in turn allows the Section 57.105(7) prevailing party attorney’s fees provision to be incorporated in a pre-1988 recreation area lease, and the continued viability of Jakobi v. Kings Creek was addressed yesterday by the Fourth District Court of Appeal in C.V.P. Community Center, Inc. v. McCormick 105, LLC, Case No. 4D19-1515 (Fla. 4th DCA August 5, 2020).

Background.

Century Village of Pembroke Pines Condominium was developed in 1984. McCormick 105, LLC is an institutional mortgagee and the purchaser of a unit at the Condominium. McCormick obtained title to a unit in the Condominium as a result of a foreclosure. C.V.P., the holder of a long term Lease on the Condominium’s recreational facilities, demanded that McCormick pay Lease rental amounts due befor the unit was transferred to McCormick.

Trial Court.

McCormick sued for declaratory relief, breach of contract, and rent abatement. The trial court held that the C.V.P.’s demand as landlord for rents was contrary to the Lease. Both parties sought attorney’s fees. C.V.P.’s motion for fees based on the Lease’s one-sided fee provision in favor of the landlord was denied. McCormick sought prevailing party attorney’s fees, costs and expert fees pursuant to the Lease, asserting that Section 57.105(7) modified the Lease’s one sided attorney’s fee provision in favor of the landlord into a prevailing party fee provision. The trial court awared McCormick $141,475.15.

The Opinion.

The Appellate Court first focused on the statute’s express limitation “this subsection applies to any contract entered into on or after October 1, 1988.” This limitation prohibits the statute’s application to the 1984 Lease.

To avoid the statute’s limitation, McCormick asserted that its acquisition of the certificate of title after the foreclosure created new obligations and thus a novation of the Lease, citing Jakobi v. Kings Creek Village Townhouse Association, Inc., 665 So. 2d 325 (Fla. 3d DCA 1995).

The Appellate Court rejected reliance on Jakobi, initially distinguishing, and then disagreeing with Jakobi. In Jakobi the unit owner prevailed in a dispute over a screen enclosure and sought to apply Section 57.105(7) to the Association By-Laws’s one-sided attorney’s fee provision I favor of the Association. The Jacobi Court held that the owner taking title with record notice of the declaration’s duty to pay assessments assumed that duty which fulfilled the consent element for a novation, citing to Sans Souci v. Division of Florida Land Sales & Condominium, 448 So. 2d 1116, 1121 (Fla. 1st DCA 1984).

The appellate court implied that Jakobi misinterpreted Sans Souci and proceeded to “disagree with the reasoning with Jakobi.” In Sans Souci novation required consent to substitute a new agreement for the old agreement, and that consent was not shown in Sans Souci. “In our view, there is no mutual ascent to a new contract; instead, the owner agreed to be bound by the terms of the old contract.” Thus, McCormick’s acceptance of title did not assume a new owner’s obligation to pay rent that became due before the certificate of title was issues. In fact, the Lease provided otherwise concerning those earlier rents,

In concluding the opinion reinforced that a trial court’s post-judgment order denying a motion for attorney’s fees is a final appealable order. As a result, C.V.P.’s appeal, apparently filed more than thirty days after the order of denial, was untimely; thus, C.V.P.’s appeal of the order denying attorney’s fees was dismissed.

Kibitzing.

Where do we go from here in terms of consent and recorded covenants. This issue impacts far beyond condominium associations and the obligation to pay rent and assessments.

Disagreement with Jakobi has been brewing for a long time, being treated by many as a seeming outlier. Nevertheless, the Fifth District Court of Appeal in a little cited decision aligned with Jakobi in Holiday Square Owners Ass’n. Inc. v. Tsetsenis v. 820 So. 2d 450 (Fla. 5th DCA 2002). Note that Holiday Square did not undertake the next level of analysis of Judge Warner in this case, C.V.P., examining Jakobi’s underlying support.

Has Jakobi distracted the courts from the true nature of recorded covenants. As the other District Courts of Appeal have not undertaken the same analysis as Judge Warner, her opinion may be helpful for those seeking to challenge Jakobi while sticking with the concept of consent and novation. Still, this opinion in C.V.P., while recognizing that the Lease, looking backward, did not provide for payment of the former owner’s rents and thus McCormick did not agree to pay those rents, did not address looking forward at rents due in the future and the acceptance of the obligation to pay those rents. That perhaps implied consent to pay future rents, similar to Jakobi’s duty to pay future assessments, hangs up the analysis.

Query: Is the effort to shoehorn the concept of “consent” an academic effort akin to shoving a size 12 foot in a size 5 shoe, or the proverbial round peg in a square hole. In the context of covenants running with the land that are recorded is the contract concept of novation actually applicable?

In our “real world” of real estate the acquirer of title does not “consent” to be bound by the covenants. The purpose of the recording laws is to do away with consent to the recorded covenant. Further, an acquirer does not need to have actual knowledge of a recorded covenant to be bound. The acquirer’s duties and obligations are set by the recorded covenants, regardless of whether the acquirer agrees or not, has knowledge or not. See Section 695.01(1) Fla. Stat. (2019). Superimposing consent to enforce a covenant running with the land that is recorded adds a burden of proof that is not only unnecessary, but undermines the entire concept of record notice.

Beyond commentary, consider the practical implications of Jacobi. Should each parcel in a community be governed by a different set of restrictions for each parcel, dependent only on the date title was acquired. While we have certain amendments, condominium leasing restrictions and HOA restrictions, dependent on whether an owner obtained title or expressly consented, those thresholds were legislative mandated in Sections 718.110 and 720.306, and notably for a novation analysis the legislature allowed and exception, that consent is a factor.

The opinion did not address the constitutional retroactive impairment of contract analysis. It would appear that the constitutional issue would not have reached because the statute expressly rejects retroactive application; thus, no legislative impairment. Consider also if a novation is required to apply new statutory changes, that would shift the traditional analysis to whether the new statutory provisions are procedural or providing a remedy then there is no impairment, as opposed to impacting the substantive rights.

So, are we left with a split among the Districts. By providing an alternative basis for the holding, the appellate court may have sought to avoid conflict certification to the Florida Supreme Court. Nevertheless, is there an issue of great public importance that would lead to the Florida Supreme Court? Is this the case to bring the issue to the Court, especially considering the Court’s recent rejection of stare decisis in State v. Poole?

See you at the upcoming committee meetings.

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Michael J. Gelfand

Past Chair

Real Property, Probate and Trust Law Section

of The Florida Bar

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

© 2020 Michael J. Gelfand



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