Florida Law: Common Areas

DO THEY OR DO THEY NOT BELONG TO THE ASSOCIATION

by Michael Gelfand, ESQ./ Published March 2015

What happens when a developer fails to convey the common areas to an association? Or more importantly, what happens if a developer conveys the common areas to someone other than the association? It may depend on the specific language in the association’s declaration of covenants.

Interpreting a community’s declaration of covenants in the context of the entire document and not in isolation of surrounding words and sentences was emphasized in a recent Florida appellate court decision. In Bethany Trace Owners’ Associa-tion, Inc. v. Whispering Lakes 1, LLC, 39 Fla. L. Weekly D 2517 (Fla. 2nd DCA, December 3, 2014), the association’s declaration of covenants defined “Common Areas” as “those tracts, easements, or areas of land shown on any recorded subdivision plat of the Prop-erty … including, without limitation, Bethany Lake, the Lake Maintenance Area, the Park Areas, and the Conservation Area and Conservation Buffer Area.”

The interpretation was important because who owned the common areas was at issue. Although the Declaration’s exhibits included separate descriptions for Bethany Lake, a lake maintenance area, park areas, conservation area, and conservation buffer area, no plat of the Bethany Trace subdivision was ever recorded as provided in the definition. The developer assigned its rights and obligations to Waterman. The assignment provided that Waterman agreed to “convey to the Association, for no further consideration and free and clear of any liens or encumbrances, those Common Areas referred to [as] ‘Bethany Lake’, the ‘Lake Maintenance Areas’, the ‘Park Area’, and the ‘Conservation Area and Conservation Buffer Area’, as those areas are described in the Declaration.”

The situation became interesting, meaning a lawsuit was filed, when instead of conveying the lands to the association, Waterman sold the lands to Whispering Lakes, which appeared to be preparing the land for building homes. The association sued Waterman and Whispering Lakes for claims including breach of contract, breach of covenant, and trespass. The trial court granted summary judgment in favor of Waterman and Whispering Lakes, finding that the association had no ownership interest in the lands based on the original definition because the plat was never recorded.

The Florida appellate court disagreed and reversed the trial court’s decision. The court recounted that the Declaration’s “Land Plan” referred to in another provision, which referenced the park areas, conservation and buffer areas, and lake maintenance area as being owned by the association and maintained by the association. The court, noting that the interpretation adopted by the trial court rendered provisions of the declaration meaningless, stated, “courts must strive to interpret a contract in such a way as to give meaning to all provisions while doing violence to none.”

The moral to the story is that there is great danger just picking and choosing phrases from a document. Communities need to consider the entire content of a document, especially if an interpretation may cloud title.

MORTGAGE FORECLOSURE: DELAY BARS LENDER’S SECOND COMPLAINT

Finally, an appellate court decision benefits associations! Defendant borrowers and associations may now have a greater chance at dismissing a second, refiled mortgage foreclosure action when the original action was dismissed without prejudice, and obtaining some value from the unit or parcel that was being foreclosed.

A Florida appellate court recently ruled that the involuntary dismissal without prejudice of a mortgage foreclosure action did not by itself negate, invalidate, or otherwise decelerate the lender’s acceleration of the payments where a lender files a foreclosure action upon a borrower’s default and expressly exercises its contractual right to accelerate all payments. In Deutsche Bank Trust Company Americas v. Beauvais, No. 3D14-575 (Fla. 3rd DCA, December 17, 2014), the court held that the individual installments, which were accelerated as provided by the note were not reinstated or de-accelerated; thus, there were no “new” payments due after acceleration and dismissal of the first foreclosure action. 

The facts in this case indicate that the lender filed the initial foreclosure action in January 2007, accelerating payment of the remaining balance of $1,439,926.80. In December 2010, the court dismissed the action without prejudice. In 2011, the association obtained title pursuant to its own lien foreclosure action. On December 18, 2012, the lender filed its second foreclosure action, seeking the exact same principal amount.

The trial court granted the association’s motion for summary judgment on the basis that the statute of limitations barred the second claim filed more than five years after the initial action was filed. The trial court went on to render the mortgage null and void and quieted title to the property in favor of the association.

The Florida appellate court affirmed the part of the judgment determining that the action was barred by the statute of limitations. However, the court reversed that portion of the order, which cancelled the mortgage. 

The appellate court explained that once the bank accelerated the debt, and in the absence of contractual reinstatement, modification by the parties, or an adjudication on the merits, the accelerated debt was not “decelerated” by the involuntary dismissal. The statute of limitations continued to run from the initial acceleration date, January 23, 2007. Because there was no de-acceleration, the bank could not sue on any new default without first de-accelerating and reinstating the original installment terms. Simply put, because of acceleration, there was no new payment due, which in turn means there could not be a new default. Therefore, there could not be a new cause of action. 

With this holding, it appears that there is jurisdiction for review by the Supreme Court of Florida. In the interim, this decision appears to provide a basis to challenge those mortgages with accelerated in-stallments in which the dismissal of an initial foreclosure was without prejudice and the current, second, action was filed five years or more after the acceleration. If you have any questions regarding specific mortgage foreclosures, contact your association’s attorney.