Category Archives: Real Estate Blog

Leasing Restrictions on Condominiums

I bought this condo to lease however, the Association said I could not lease it.  Is that legal?

Funny you should ask.  In the past month, I have had occasion to review two separate legal issues on this very subject.  In the first instance, person owns a condo that is underwater.  The person decided to rent out the unit.  The Declaration of Condominium prohibited leasing unless the HOA approved the unit owner for a leasing permit.  A leasing permit was only allowed for 25% of the total number of units.  What does that mean? Once 25% of the units are rented out, you are placed on a waitlist until a leasing permit becomes available, if at all.

Another person came to me because the HOA recently amended their Declaration to include a 20% cap on leasing.  The Declaration at the time of purchase contained no previous leasing restrictions.

Are leasing restrictions on condominiums valid? The Florida Supreme Court addressed this issue in a case we will call Woodside. Woodside Vill. Condo. Ass’n, Inc. v. Jahren, 806 So. 2d 452, 456 (Fla. 2002).  In Woodside, the Court explained that Florida law   “expressly recognizes that a declaration of condominium may contain restrictions concerning the use, occupancy, and transfer of units.” In Woodside, the Declaration was amended to include leasing restrictions after two owners purchased their units.  The Declaration at the time of purchase contained a leasing provision that permitted an owner to lease their unit without prior HOA approval for a period of one year or less.  The amended leasing provision required all leases, subleases and assignments of leases to be approved in advance by the HOA, and restricted the lease term to a total of nine (9) months in any twelve (12) month period. The Court explained that since Florida law and the Declarations provided broad legal authority to amend the declarations, “courts have recognized the authority of condominium unit owners to amend the declaration on a wide variety of issues, including restrictions on leasing.”  For those reasons, the Court found that “the lease restriction amendment was properly enacted under the amendment provisions of the Declaration, and that the respondents took title to their units subject to the amendment provision set out in the Declaration and authorized by statute.”

Properly adopted leasing restrictions will be presumed valid unless the restriction is arbitrary, against public policy, or in violation of some fundamental constitutional right. The Court in Woodside recognized the concerns leasing restrictions impose on purchasers of condominiums for investment purposes, but explained that the Court is constrained to the view that this issue is better addressed by the Legislature.

In sum, Florida law permits leasing restrictions.  Declarations that previously contained no leasing restrictions at the time of purchase which are subsequently duly adopted to impose leasing restrictions, will subject both current and new owners to those restrictions.

written by Beejal P. Thakore, attorney at Davis Basta Law Firm, P.A.

Spousal Joinder on Sales Contracts for Homestead Property

Florida’s homestead law is one of the most generous in the United States.  Florida’s Constitution provides that homestead is (1) exemptfrom forced sale; (2) devise and alienation is restricted; and (3) homestead affords tax exemptions.  Of primary importance to real estate agents are the restrictions on alienation of homestead property.

Article X, section 4(c) of the Florida Constitution is clear that both spouses must join in a transfer of homestead property.  However, when real estate is owned by only one spouse, and homestead status is not obvious, the requirement that both spouses sign a sales contract may be overlooked.  This situation arose in Florida and was the subject of an appellate decision known as Taylor v. Maness, 941 So. 2d 559 (Fla. 3d DCA 2006).

In the case, a husband (Mr. Maness) entered into a contract to sell a home that he was living in by himself (while his wife temporarily resided elsewhere); title to the home was vested solely in the husband’s name.  The contract was not signed by the wife, and she refused to sign the deed at closing.  The buyers (Mr. and Mrs. Taylor) sued for specific performance on the contract, fraud in the inducement, and negligent misrepresentation.  In considering whether the wife could be forced to specifically perform the contract, the court said that the contract could not be enforced by specific performance because of the constitutional homestead exemption from forced sale.  The court determined that the property was homestead property as the permanent residence of the husband and wife; and the wife had a marital homestead interest in the property that protected the property from sale without her consent.

The buyers argued that the failure to file a homestead tax exemption on the property was an indication that the home was not the couple’s homestead.  However, the court stated: “failure to claim the homestead tax exemption is not evidence that the property is not in fact homestead.”

The most important aspect of this case for real estate agents is that it emphasizes the importance of ascertaining whether property is a homestead at the outset.  A real estate agent (based on the outcome of the case) should never rely on the fact that no homestead tax exemption is filed when determining whether a property may be subject to homestead protections.  Because Florida’s homestead law is liberally construed in favor of protecting a family’s home, a thorough inquiry must be made into homestead status any time one spouse attempts to convey real estate without the other spouse’s signature on the sales contract.

I heard that I may have lost coverage under my owner’s title insurance policy when I transferred my property to an LLC. Is this true?

Yes, it can be true. Sometimes it is difficult to get a loan in a Trust or in a limited liability company (LLC). Often, investment buyers are advised to purchase the property individually and then transfer the property to an LLC by using a quit claim deed. There are several reasons why this may not be a good idea, including the fact that you may lose your title insurance coverage.

This can cause significant problems for individuals who transfer their ownership interest into a trust or business entity, even when they do it simply for estate planning purposes. Oftentimes, the owner of the property is not actually selling or transferring the property to a different person, but rather to an entity that is controlled by them.

Under the 1992 ALTA Owner’s Policy, an insurer will likely deny coverage for a claim made after a voluntary conveyance via a quitclaim deed by the insured to an LLC or Trust. The rationale behind this is the insured did not retain an interest in the property. To address this problem, the 2006 ALTA Owner’s Policy expanded the definition of an “Insured” to provide coverage under the Policy to an insured that transfers title in the following instances: (1) to a trust in which the owner is a trustee; (2) to a LLC where the grantee is the sole member of the LLC; or (3) or to a Partnership, where the insured is a partner. This language provides superior coverage over the 1992 ALTA Owner’s Policy; however there are still common transfers that will be denied coverage.

Before transferring your property, for any reason, consult a real estate attorney. In this situation, a real estate attorney may recommend obtaining an “additional insured endorsement” prior to a transfer to avoid losing coverage. Only a real estate attorney can properly advise you on any pitfalls that may arise by virtue of a transfer of your real property.

Obtaining Title to An Abandoned Mobile Home

1. Show proof of rental agreement, time elapsed during abandonment and any correspondence from the original owner of the mobile home to your local Florida clerk of court. File a lien with the clerk of court based on your documentation. You may be required to file a “Declaration of Abandonment” with the courts as well.

2. Pay off any liens the original owner may have had against the mobile home. This will ensure that the title is free and clear from repossession once you take legal control.  Lien information is available to the courts and Florida DMV through a state database.

3. Contact your local Florida DMV to file for a lost title. The DMV takes care of all vehicles and vessels that can be transported on Florida roads. Provide court papers showing you hold a legal lien and your rental agreement.

4. Submit a HSMV 82040, Application for Certificate of Title form to the DMV. You will be charged a small fee for filing and titling. Include an affidavit of lost or stolen title. You may fill out forms 82040 or 8204 instead of an affidavit.

5. Wait for the new title to arrive in the mail. This normally takes four to six weeks. You will be given a copy of the mobile home registration once you apply for the title. Place the registration and title in a safe location for future reference.

New Laws for Homeowners’ Associations – 2013 Legislative Session

The Florida Legislature has recently enacted laws imposing new procedures that homeowners’ associations must comply with.  While it would be impossible to summarize all the new laws and statutory changes in this short article, a synopsis of some of the laws is provided.  For a detailed description of all the new changes, you should visit the Division of Florida Condominiums, Timeshares, and Mobile Homes Website at <http://www.myfloridalicense.com/dbpr/lsc>.

Some of the most notable changes are found in Chapters 2013-188 and 2013-218, Laws of Florida (2013).  These laws impose various reporting requirements, and provide changes regarding the provision of official records to HOA members.  The changes took effect on July 1, 2013.  The following is a synopsis of the statutory changes/additions, and a partial summary of sections 720.303 and 718.111, Florida Statutes (2013):

  • Chapter 2013-188 amended or created the following Florida Statutes: 399.02; 718.111; 718.112; 718.113; 718.115; 718.303; 718.403; 718.406; 718.5011; 719.104; 719.1055; 719.106; 719.303; 719.501; 720.303; 720.305; and 720.306.  See the following website to read all statutory changes in their entirety: <http://www.myfloridalicense.com/dbpr/lsc/documents/Ch_2013_188.pdf>

 

  • Chapter 2013-218 amended or created the following Florida Statutes: 486.436; 720.303; 720.3033; 720.306; 720.307; 720.3075; and 720.3085.  See the following website to read all statutory changes in their entirety: <http://www.myfloridalicense.com/dbpr/lsc/documents/Ch_2013_218.pdf>

 

  • § 720.303(13), Fla. Stat. (2013) – Reporting Requirements
    • Homeowners’ associations must register with the Division of Florida Condominiums, Timeshares, and Mobile Homes by November 22, 2013.
      • The Division is currently developing a web portal which will allow associations to register online.  The web portal is to be developed by October 1, 2013.
      • Every homeowner’s association shall report the following information to the division:
        • the association’s legal name;
        • the association’s federal employer identification number;
        • the association’s mailing and physical addresses;
        • the association’s total number of parcels; and
        • the association’s total amount of revenues and expenses from the association’s annual budget.

 

  • § 718.111(12), Fla. Stat. (2013) – Official Records
    • Must be maintained for 7 years and made available for photocopying within 45 miles of the community or within the county in which the association is located.
    • Owners may be charged no more than 25 cents per page (down from 50 cents per page) for copies.
    • The association’s right to pass on personnel costs has been restricted.  The association may not prohibit unit owners from using portable devices (such as smart phones, tablets, or portable scanners) to copy documents, and the association may not charge a fee for use of such a portable device.

 

  • § 718.111(13), Fla. Stat. (2013) – Year-End Financial Reporting Requirements
    • Associations with total annual revenues of less than $150,000 (previously $100,000) must prepare a report of cash receipts and expenditures.
    • Compiled financial statements are required for associations with annual revenues between $150,000 and $300,000 (previously $100,000 to $200,000).
    • Reviewed financial statements are required for associations with annual revenues of $300,000 to $500,000 (previously $200,000 to $400,000).
    • Audited financial statements are required for associations with annual revenues of $500,000 or more (previously $400,000+).

So, what will be the impact of these new laws on homeowners’ associations?  In addition to providing some much-needed structure, the laws will make regulation easier, and also cut down on arbitrary and capricious practices that afflict some homeowners’ associations.  Board members may think twice before taking actions that are not well-founded when they realize the members now have a physical office with the Department of Business and Professional Regulation where they may express their concerns.  While I am not typically a proponent of increased government regulation in any sector, I welcome these new laws, and expect to see a reduced number of conflicts between associations and their members in the future.

Liability of Condominium Associations & Association Directors

The premise concerning the issues of liability of directors and officers is that directors and officers of a condominium association cannot be held liable for corporate acts simply by reason of their official relationship to the association.  Taylor v. Wellington Station Condominium Ass’n, Inc., 633 So. 2d 43 (Fla. 5th DCA 1994); Munder v. Circle One Condominium, Inc., 596 So. 2d 144 (Fla. 4th DCA 1992); B & J Holding Corp. v. Weiss, 353 So. 2d 141 (Fla. 3d DCA 1977).

The case of Perlow v. Goldberg sets forth the several laws which must be alleged to have been violated in order to find liability on the part of a director.  700 So. 2d 148 (Fla. 3rd DCA 1997).  In Goldberg, condominium owners brought suit against association directors for breach of fiduciary duty in administering insurance proceeds; the court found that the case was properly dismissed because the owners failed to allege fraud, criminal activity, or self-dealing and unjust enrichment as required by: the Condominium Act, specifically Fla. Stat. § 718.111(2) and Fla. Stat. § 718.303(1)(d); the Florida Business Corporation Act, specifically Fla. Stat. § 607.0831(1); and the Florida Not For Profit Corporation Act, specifically Fla. Stat. § 617.0834(1).  Id.

As a general proposition, a condominium association will be immune from liability under the business judgment rule when its board of directors acts in a reasonable manner.  See Garcia v. Crescent Plaza Condominium Ass’n, Inc., 813 So. 2d 975 (Fla. 2d DCA 2002) (case remanded to determine whether board acted reasonably in leasing common element parking spaces to owner).  However, an association may be held liable for an officer or director’s negligent act or breach of fiduciary duty under the condominium declaration or the Condominium Act (Chapter 718, Fla. Stat.), even if the individual officer or director is not found to be individually liable.  See e.g., Munder v. Circle One Condominium, Inc., 596 So. 2d 144 (Fla. 4th DCA 1992) (Although the association director was not held liable for failing to maintain insurance as required by the condominium documents and Condominium Act, the condominium association was still found liable).