By Michael J. Gelfand / Published October 2020
What happens when an association makes a change, a change that is a material alteration or a substantial change, without owner approval? Does it matter whether the work was necessary repairs? Can the owners approve the work after it is completed? If there is not proper approval, can the directors be sued personally?
A Florida appellate court recently addressed whether the Condominium Act requires approval of repairs to a Florida condominium association that are also alterations and whether the approval must take place before the work begins. The facts in Bailey v. Shelborne Ocean Beach Hotel Condominium Association, Inc., 3D17-0559 and 3D17-0767 (Fla. 3rd DCA, July 15, 2020), focused on a Florida condominium comprised of residential and commercial units and developed as a rental property.
The condominium association financed two major construction projects over a four-year period with seven special assessments totaling more than $30 million! The projects were approved initially by the association’s board of directors but not the unit owners. After the work was completed, 75 percent of the unit owners voted to approve the completed construction.
Unit owners sued the association and individual directors alleging violations of the approval requirements for “material alterations or substantial additions to common elements” contained in the Condominium Act. The association conceded that two of the work items, pool paver repairs and reinforcement of the structure under certain townhomes, were not necessary repairs. The trial court granted summary judgment for the association, finding that all the construction work, except for the pool pavers and reinforcements, were necessary repairs and maintenance. As to the pool pavers and reinforcements, the trial court found that the repairs were approved and/or ratified by the members.
The Florida appellate court agreed with the trial court as to all repairs except for the pool pavers and reinforcements. The court began its analysis by examining the Condominium Act, determining that the Act, §718.113(2)(a) of the Florida Statutes, clearly prohibits material alterations or substantial additions to condominium common elements with three exceptions:
Taking its cue from the first (“1”) line, the appellate court looked back to the first paragraph of the statute which states broadly, “Maintenance of the common elements is the responsibility of the association.” §718.113(1) Fla. Stat.
Thus, the appellate court’s first major holding in this case was that because the statute requires the condominium association to maintain common elements and the statute does not contain a unit owner approval requirement, the statute does not require unit owner approval where maintenance also constitutes a material alteration or substantial addition. The court reinforced its decision with citations to a trio of decisions reaching to the early 1980s.
Timing is another matter and perhaps problematic. As to when a material alteration or substantial addition that is not maintenance must be approved by the members, the appellate court disagreed with the trial court‘s interpretation. Allowing ratification by the owners after the alteration or addition would, in the words of the appellate court “lead to an absurd result and defeat the statute’s general prohibition of material alterations or substantial additions.” Apparently, the condominium’s declaration did not provide a procedure for approval that was different from the statute.
Thus, the appellate court’s second major holding was that when work was not maintenance, then the statute required unit owner approval of the material alterations or changes to occur before beginning the work. After the fact approval would undermine the need for advance approval, noting that the law was amended to add the vote was to occur “before” commencement.
Third, and not least, the court held that the so-called “business judgment rule” protected the directors from the owners’ breach of fiduciary duty claims for damages. The director’s actions appeared reasonable. Further, though provided the opportunity, the owners did not provide any proof that the efforts were particularly unreasonable or not necessary.
Though in some regards this decision is welcomed by Florida associations, this decision leaves some unanswered and troubling questions. What does an association do when the work starts, and the association mistakenly failed to obtain owner approval? Contractors still must be paid, and if not, then likely will lien the property and may obtain a judgment to garnish bank accounts.
If an association cannot approve work after the fact, are the contractors unable to be paid? That is unlikely. If a contractor receives a judgment, will the courts allow the association’s assessment bank account to be garnished?
Does a Florida condominium association have the same duty to maintain an elevator as other elevator owners? What should the association president do when there are complaints, just rip off warning signs? Do these disputes only arise in Florida?
Recently, a Florida appellate court ruled that it was up to a jury, and not the judge, to decide whether a Florida condominium association’s response to an elevator’s on-again, off- again problems was reasonable and whether an injured visitor could seek monetary damages. In Vogel v. Cornerstone Doctors Condominium Association, Inc., 45 Fla. L. Weekly D 1630 (Fla. 2nd DCA, July 8, 2020), a patient of a doctor stepped into an elevator and fell, injuring his neck and back. The floor of the elevator was discovered to be 18 to 24 inches below the landing.
The injured patient sued the condominium association, which apparently administered the two-story building, for negligence and for violating Florida’s Elevator Safety Act. The president of the association testified that patients of another doctor had made repeated complaints about the elevator not working properly. The president would then go and ride the elevator. If the elevator was working properly, he would not report any problems to the company which provided monthly inspections, concluding that the other doctor’s patients simply did not know how to work the elevator. The trial court granted summary judgment for the association.
The Florida appellate court reversed the trial court’s decision. The appellate court noted that the association, as the property owner, had a duty to use reasonable care in maintaining the elevator in a reasonably safe condition. The court further stated that an owner who has not assigned its responsibility for an elevator by a lease is responsible for the elevator’s safe operation. “Period.” The court concluded that it was up to the jury to decide whether the association had used reasonable care to learn of the existence of a dangerous condition.
This decision harkens back to our earlier discussion of a Florida condominium association’s non-delegable duty to maintain common elements reported to you in our June 2020 FLCAJ article following the legislative update. This decision reinforces maintenance duties in general, and especially for elevators! At a minimum, elevators should have a maintenance contract. Take all complaints seriously and report them to your service provider.
Michael J. Gelfand, Esq.
Senior Partner, Gelfand & Arpe, P.A.
Michael J. Gelfand, Esq., the Senior Partner of Gelfand & Arpe, P.A., emphasizes a community association law practice, counseling associations and owners how to set legitimate goals and effectively achieve those goals. Gelfand is a dual Florida Bar Board Certified lawyer in Condominium and Planned Development Law and in Real Estate Law, Certified Circuit and County Civil Court Mediator, Homeowners Association Mediator, an Arbitrator, and Parliamentarian. He is a past Chair of the Real Property Division of the Florida Bar’s Real Property, Probate & Trust Law Section, and a Fellow of the American College of Real Estate Lawyers. Contact him at firstname.lastname@example.org or (561) 655-6224.