Condominium and Homeowners’ Association Acts do not Always Trump a Community Association’s Governing Documents

January 6th, 2017

Posted in Business & Corporate Law,Real Estate Law

A common question we receive from community association board members and managers is whether pertinent provisions of the governing documents or Florida Statutes control when a conflict exists between them.  Understandably, a layperson’s initial reaction might be, “the law is the law, so it obviously trumps any contrary provisions in the governing documents, right?”  The short answer is “no” because Article I, Section 10 of the United States and Florida Constitutions generally prohibit States from passing laws that impair contracts.  A recent case illustrates the importance of understanding that the Florida Statutes will not necessarily control over conflicting provisions of a community association’s governing documents.

Tropicana Condo. Ass’n, Inc. v. Tropical Condo., LLC is a case followed closely by many community association lawyers because the court chose to address what many have previously wondered: How is a condominium optionally terminated when the termination provisions of the declaration of condominium conflict with Section 718.117 of the Florida Statutes.  Although not set forth in detail in this article, the facts of Tropicana are interesting because contrary to many termination scenarios where a developer desires to terminate the condominium to create rental apartments or otherwise, in this case the Association’s members wanted to terminate the condominium and the original developer opposed it.

The condominium declaration was recorded in 1983 and contained a provision which required unanimous membership and “Institutional Mortgagee” approval to terminate the condominium. The declaration also required the same approval to amend the provisions of the declaration concerning termination.  In 2007, the Florida Legislature passed an amendment to Section 718.117 of the Condominium Act to provide that a condominium may be optionally terminated upon the approval of 80% of the unit owners so long as 10% do not oppose the termination.  In apparent recognition of the fact that the developer (who still owned five units in the forty-eight unit condominium) would not approve the termination, the Association attempted to amend the declaration to reduce the approval requirement to terminate the condominium below the 80% statutory threshold.  In response, the developer filed a lawsuit challenging the amendment.

Although it appears the appellate court may have been able to decide the case without reaching the issue of retroactive contract impairment, the primary focus of its opinion concerned whether Section 718.117 of the Florida Statutes could be applied retroactively to the declaration of condominium to effectively reduce the approval requirement for termination.  In affirming the trial court’s decision in favor the developer, the appellate court stated if the 2007 amendment were retroactively applied it would “eviscerate” the developer’s “contractually bestowed veto rights.”  Stated differently, the appellate court believed the declaration of condominium created vested rights in favor of the unit owners (including the developer) which could not be subsequently impaired by the Florida Legislature according to the Florida Constitution.

Although many reading this will never deal with a condominium termination, the moral of the story is that amendments to the Condominium Act, Homeowners’ Association Act, or other law enacted after the recording of a declaration of condominium or declaration of covenants and restrictions will not necessarily “trump” the provisions of the declaration and other governing documents.  Accordingly, if your community association is confronted with a conflict between its governing documents and law, it should strongly consider contacting a qualified Florida community association law attorney for guidance; it will likely be less expensive than litigation.

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