By Michael J. Gelfand, Esq. / Published October 2017
“Cooperation” usually is pleasant, but assisting a selling owner to kill a sale or lease contract may be risky for all involved. Many association-governed communities require association approval for the transfer of property, sales and leases especially, and normally the association will approve. Sometimes after accepting a price an owner experiences “seller’s remorse,” or second thoughts. If the association’s directors or management “cooperates” with the recalcitrant seller to kill the sale, is there liability?
Recently, a Florida appellate court addressed seller’s remorse involving a condominium unit in a decision that should also apply in the homeowners and cooperative contexts. The court held that a trial court mistakenly granted summary judgment for the seller of a condomin-ium unit who wanted to terminate his contract because the seller did not act in good faith when seeking the association’s approval for the sale of the property. As indic-ated by the facts of Head v. Sorensen, 42 Fla. L. Weekly D 1380 (Fla. 2nd DCA, June 16, 2017), after the death of her father, Sorensen, who lived in Idaho, found a real estate agent to quickly sell her father’s unit. Based on the realtor’s recommendation, the property was listed at $405,000.
The same day that Sorensen listed the unit for sale, Head offered to purchase the unit for the listing price. After Sorensen and Head signed a sales contract, Sorensen was contacted by a unit owner who told Sorensen that the price was too low. Then, Sorensen attempted to cancel the contract, but Head refused to sign the cancellation.
The sales contract was conditioned on the association’s approval, a condition most associations place on contracts, whether a condomin-ium or otherwise. Apparently to circumvent Head’s refusal to cancel the contract, Sorensen told the association that Sorensen did not want to go through with the sale, and Sorensen suggested that the association investigate Head’s ability to pay association assessments.
Perhaps not surprising in light of the negative information, the association indicated that it would not approve the contract because of the low sales price. Sorensen stated that she did not object to the association’s decision. The association rejected the contract on the basis of the low sales price.
Head sued Sorensen for breach of contract and specific performance of the contract and sued the association. The trial court granted summary judgment for Sorensen, finding that the contract had been terminated because the association did not approve the sale, which meant that a condition of the contract was not fulfilled.
The Florida appellate court reversed the decision of the trial court. The appellate court explained that the contract did not terminate automatically with the association’s rejection. Sorensen had a contractual duty to use “reasonable due diligence,” which required her to act in good faith to “sell the contract” to the association.
Instead of diligence, Sorensen actively assisted the association to reject the contract. Rejection for a low price was seemingly suspect because Sorensen did not show the directors the unit’s interior, and she did not admit to the association that she told the realtor that she wanted the unit sold quickly to pay off estate expenses. “At a minimum, these facts tend to show that Sorensen had information that she could have easily provided to justify the sales price if she had wanted to act in compliance with her duty of good faith.”
This decision showcases some of the problems that may arise if an owner engages its Florida association to invalidate a contract. If an association is to reject a sale or lease contract, it is important that rejection be for reasons allowed in the association’s documents and that sufficient facts justify the rejection. Just because a selling owner wants out of the contract to obtain more money may not be enough.
There are risks all around. In this instance, the association eventually settled the buyer’s claim. One can easily anticipate a situation where a director or management may go out of their way to assist an owner however in doing so wrongfully interferes with the contractual relationship. In the circumstances when a selling owner asks for assistance to kill the sale or lease, it is best to do the right thing, which may be to say, “No!”
Thirteen days or 14 days—is there really a difference? When it comes to imposing a fine lien, one day makes a whole world of difference!
In a recent Florida appellate court decision, an association seeking to foreclose a lien for a fine was required to strictly comply with the statutory 14-day notice of intent to fine requirement. In Dwork v. Executive Estates of Boynton Beach H.O.A., Inc., 42 Fla. L. Weekly D 1158 (Fla. 4th DCA, May 24, 2017), the association repeatedly sent letters to homeowner Dwork demanding that Dwork properly maintain his home, but Dwork ignored the demands. The association then sent Dwork notice that a fine committee hearing would take place 13 days later to consider imposing fines for his maintenance violations. The fine hearing notice was returned unclaimed.
Th fine committee voted to impose fines for three violations. The violations were never remedied; thus, the association placed a lien on Dwork’s property and then sued Dwork to foreclose the lien and to collect the amount of the fines. The trial court ruled that the association could not foreclose on the property because the association only provided the owner 13 days’ notice of the hearing instead of 14 days; nevertheless, the trial court entered a judgment for money in favor of the association because the “equities” were with the association.
The Florida appellate court reversed the money damages awarded for the unpaid fines. The Homeowners Association Act, Section 720.305(2)(b), Fla. Stat. (2013), provides that a “fine or suspension may not be imposed without at least 14 days’ notice to the person sought to be fined or suspended and an opportunity for a hearing before a committee.” The court explained that the statute was clear and unambiguous. Further, according to the statute’s purposes, the notice period was intended to protect a homeowner; thus, the holding that the association must strictly comply with the notice requirement and 13 days was not sufficient to satisfy the statute’s notice requirement.
The court’s decision illustrates two important concepts for Florida associations. First, when enforcing a statute, the plain meaning of the legislature’s text is the polestar. If the text is clear, there is no reason to interpret.
Second, if there is an ambiguity, or lack of clarity, the legislature’s purpose of protecting an owner may require an association to proverbially “dot the ‘I’s’ and cross the ‘T’s’,” especially if an owner refuses to respond or even pick up mail. As shown in this case, it is imperative that a Florida association strictly comply with notice requirements in order to impose a lien on an owner’s property. Substantial compliance, even falling short by just one day, is not good enough!
The Governor vetoed House Bill 653, which was a boon and a bane to Florida community associations. However, many items were also included in other bills that became law, most notably HB 1237 and 1520, such as criminal penalties for certain types of destruction of records, limitation on director and manager unit purchases, termination thresholds, website requirements, and debit card prohibitions.
Perhaps the topic of greatest interest that fell with the veto of HB 653 may no longer be of importance, at least to shorter condominiums. In light of the controversy created by a small number of published articles last year regarding fire sprinkler regulations, the Legislature stated that condominiums 75 feet or less in height do not need to undertake an opt-out vote to avoid fire sprinkler retrofitting. Of significance, the veto of the extension of time for higher condominiums to obtain a unit owner opt-out vote if the condominiums were built without sprinkler systems means that those condominiums higher than 75 feet still face the retrofit requirement if there was no vote.
Other topics that went by the wayside include extending developer bulk purchase rights, cooperative association bylaw requirements, simplification of homeowners association elections, and expressly extending the Condominium Act’s regulation of restrictive endorsements on assessment payment checks. Confer with your association counsel to determine what laws impact your specific community.
Michael J. Gelfand, Esq.
Senior Partner of Gelfand & Arpe, P.A.