Case Law Update

Posted 3/25/09

Condominium Association Represents Unit Owners.

Trintec Construction, Inc v. Countryside Village Condominium Association, Inc.

Countryside contracted with Trintec to complete $1.3m in roof repairs to 13 buildings in the association. After completion, and with the association failing to pay, Trintec placed a mechanic’s lien on not only the association, but each individual unit, and filed for foreclosure. The association argued that each unit owner should have been joined as a defendant, and convinced the Circuit Court to dismiss the mechanic’s lien. On appeal, the 3^rd District Court of Appeal ruled the association contracted for the roof repairs on behalf of each and every unit owner, Trintec was allowed to proceed against the association alone, and the lien was reinstated. An important case for every member of an association to remember regarding who it is that has the power to bind them, the association and its Board of Directors.

Homestead Exemption for Lessees?

Higgs v. Warrick

In what can only be described as one of the strangest cases I’ve reviewed, a homeowner transferred his residence to a trust and applied for a homestead exemption, which was granted. Now, here is where it gets a bit strange. Shortly thereafter, the owner transferred the trust to his heirs in exchange for a 99-year lease on the property, and the county then denied his homestead exemption. After losing at both the value adjustment board and the circuit court levels, the county appealed and was shot down for the third and final time by the 3^rd District Court of Appeal. The homeowner was granted the homestead exemption because of a law in Florida that states a 98-year-plus lessee of a residential parcel permanently occupied as a residence qualifies for a homestead tax exemption. My only question is how long does this guy think he’s going to live?!

Liability for Homeowner’s Assessments

LR5A-JV, LP v. Little House, LLC

A helpful case, if for no other reason than it is a recent reaffirmation of what we already know. In July, 2005, Lender recorded its mortgage, on April, 2006, HOA filed its lien for unpaid assessments, and on May, 2007, Lender initiates a foreclosure action. The HOA asserted its lien was superior to that of the Lender. At trial, and on appeal, the Lender was found to have a superior lien because according to the relevant statute (§720.3085), only owners are held liable for unpaid assessments, not creditors, and the foreclosure action was not a proper venue for the HOA to seek relief from the debtor.

Required Approval for Sale Did Not Apply to Gift

Webster v. Ocean Reef Community Association, Inc.

This case provides legal authority as to how a gift transaction is to be handled by an association. Here, the owner gifted her home to her son outright. The association refused to approve the son, and sought to invoke it first right of refusal. The association’s documents clearly stated the association had the right to approve each lot purchaser, but the 3^rd District Court of Appeal held that a gift transfer did not constitute either a “sale” or “purchase,” and therefore, the governing documents clearly did not impose any restrictions on the gift of her lot.

Sale/Leaseback or Disguised Loan?

Bernstein v. New Beginnings Trustee, LLC

This case is of interest because it is the first of its kind to take on the “home saver” companies that are acting in a less than ethical manner. To avoid a foreclosure, homeowners “sold” their property to New Beginnings and “leased the property back for 12 months.” When they failed to pay “rent,” New Beginnings sued for eviction. The trial court ruled for New Beginnings, but the 4^th District Court of Appeal reversed and directed the circuit court to consider the totality of the transaction as a mortgage rather than a lease. Florida courts have always been loathe to reward form over substance, and this case continues to illustrate that heritage.

Posted 8/28/08

Foreclosure Deal Too Good To Be True

Long Beach Mortgage Corp. v. Bebble

Long Beach Mortgage sued for foreclosure and scheduled the sale. The only problem here, they didn’t show up to bid at the sale. The foreclosed property was appraised at $500,000. One lone bidder bid $1,000 and won the auction. The lender sued to have the foreclosure sale overturned, and on appeal the Court held the de minimis amount bid was “unconscionably inadequate” and the lender was an innocent victim of its attorneys’ failure to attend the sale. It is interesting to note, the lender lost at the trial court level!

Change In Condominium Rescission Rights

D & T Properties, Inc. v. Marina Grande Associates, Ltd.

Purchaser contracted with developer for a new condominium and made a $99,000 escrow deposit. Thirteen months later the developer changed the budget, increasing assessments by 36% to reflect higher property taxes, utilities and installing a state-of the-art multimedia system to service the units. In response, the purchaser sought to rescind the contract. The Court denied the rescission based on a recent change to Florida Statutes, §718.504(21)(e), which states that increases in assessments beyond the developer’s control no longer give rise to a right for rescission as an “adverse amendment.” The Court further ruled that and the multimedia system would do nothing but increase the value of the unit and was therefore not adverse

Posted 8/12/08

No Meeting of the Minds, No Contract

Duck Dog, L. C. v. Brownstar Properties, LLC

In this case Buyer and Seller contracted for a $6.325 million parcel of land. The land was subject to a $1.9 million Community Development District (CDD) assessment. Prior to closing, Buyer demanded Seller pay the assessment, and of course, Seller demanded Buyer pay it. The Court found that on such a material matter to the contract there had been “no meeting of the minds” and therefore, there was no enforceable contract.

“Intentional” Breach of Contract

Murciano v. Garcia

Buyer and Seller enter into a contract and just prior to closing Buyer declares the Seller in default due to incurable zoning and/or building code violations. Seller discovers that Buyer has gone to the city and made the allegations that led to citations for “interior construction, alterations and repairs without approval and permits,” and “areas below flood grade built out without approval and permits.” Almost sounds like a case straight out of Siesta Key. The Buyer based his case on the “fact” the violations could not be cured, and the Court found that until the Seller has the opportunity to cure and remove the violations, they were not “incurable.” File this one under “exceptionally unique Buyer’s remorse.”

Condominium A/C System Covered by Implied Warranties.

Turnberry Court Corp. v. Bellini

Buyer purchased a luxury penthouse from Developer. Shortly after closing, Buyer discovers over $30,000 must be spent to remedy deficiencies in the central A/C system. Developer refuses to pay for the repairs and Buyer sues. Developer alleges the unit’s A/C system is exempt from the statutory implied warranties because the equipment served only Buyer’s unit. The Court found for the Buyer, stating that a central A/C system is exactly what the statutory warranties were created to cover.

Deed With One Witness and a Notary Is Void.

McKoy v. DeSilvio

This case truly highlights the importance of proper execution of a Deed. A Deed was signed by only one witness and notarized. Many people have the incorrect impression that when the notary signs and seals the Deed, they are acting as the required “second witness”. As the Court found, that is not the case unless the notary also signs in the witness space on the Deed. Therefore, the Deed was ruled to be void by the Court.

“Consideration” in a Lease/Option.

LaRoche v. Nehama

The parties entered into a lease with an option purchase. The only “consideration” for the option were the payments due under the lease. The parties later amended the lease to state that the lease was terminated, but not expressly terminating the option. The Court ruled that once the lease was terminated, any consideration for the option was terminated as well, and therefore, no option existed. This case illustrates why a proper option agreement always has a separate sum as consideration.

Rights of “Backup” Contract Buyer.

Goldsmith v. Brockhouse

Seller enters into a contract, and then enters into a “backup” contract with a separate Buyer, contingent on the termination of the first contract. The first contract was extended and modified several times and eventually closed. The second Buyer sued for specific performance under the theory that the first contract should not have been modified and extended. The Court ruled that the “backup” contract Buyer did not have any beneficial right in the first contract, and therefore could not sue for specific performance without a specific provision in the backup contract barring the modification and/or extension of the first contract.

Rescission of a Condominium Purchase and Sale Contract.

McGuinness v. Prospect Aragon, LLC

Buyer entered into a Purchase and Sale Contract for several new condominium units on February 7^th, was provided all of the required condominium documents on February 9^th, and the developer signed the contract on February 15^th. On March 1^st, Buyer attempted to terminate the contract and avoid paying a $1,000,000 deposit. The Court ruled that the 15-day statutory rescission period began at the later of when the Buyer signed the contract, or the Buyer received the required condominium documents, not when the developer signed the contract. Therefore, the Buyer was late in terminating the contract and owed the developer the $1,000,000 deposit.