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The Differences Between Homeowners Association and Condominium Association Law in Florida – Part III:  Construction Defects, Statute of Limitations and Liens
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The Differences Between Homeowners Association and Condominium Association Law in Florida – Part III: Construction Defects, Statute of Limitations and Liens

September 8, 2014 Community Association Industry Legal Blog

Reading Time: 13 minutes


Our first post, the first of a three part series, discussed the differences between homeowners association and condominium association law in Florida pertaining to basic board operations. The second post discussed the differences between homeowners association and condominium association law in Florida pertaining to records inspections and alterations to property. This third, and final, post discusses certain differences between homeowners association and condominium association law in Florida pertaining to construction defect litigation and other issues regarding litigation.

Defect Presuit Requirements

Condominium living is a way of life in Florida and condominium associations are creatures of the Florida Statutes.  “The peculiar features of condominium development, ownership, and operation require the providing of procedural vehicles for handling disputes affecting condominium unit owners concerning matters of common interest”.  Avila South Condo. Ass’n, v. Kappa Corp., 347 So.2d 599 (Fla. 1977).  Such vehicles are provided in the statutes and rules of procedure, but one curious statutory provision requires the association to examine and certify the construction defect via licensed engineer and/or contractor.

Specifically, Section 718.301(7), Florida Statutes states:

In any claim against a developer by an association alleging a defect in design, structural elements, construction, or any mechanical, electrical, fire protection, plumbing, or other element that requires a licensed professional for design or installation under chapter 455, chapter 471, chapter 481, chapter 489, or chapter 633, such defect must be examined and certified by an appropriately licensed Florida engineer, design professional, contractor, or otherwise licensed Florida individual or entity. (emphasis added)

First, this statutory provision seems to only apply to an action against the developer.  Therefore, this construction defect examination and certification does not apply to claims for negligence or violation of the building code against the contractor or subcontractors (assuming no common identity exists with the developer and contractor).  In its class action complaint for the construction defects, the condominium association would generally plead compliance with all conditions precedent to satisfy this requirement.  If plead in the construction defect complaint, the association should make sure the statutory examination and certification has actually occurred. The burden would then shift to the developer to deny with specificity and particularity any conditions precedent that have not been fulfilled by the condominium association.

Unfortunately there is zero guidance in the statute on how this condominium construction defect examination and certification works. The statute does not say that the report must be obtained prior to filing the condominium construction defect action, nor does it create a condition precedent to filing the lawsuit.  There is no guidance in Section 718.301(7), Florida Statutes, as to any penalty for initiating the condominium construction defect action without obtaining the examination and certification.  Additionally, there is no private right, cause of action or defense which are expressly created with this statutory provision.

Section 718.301(7), Florida Statutes, may be a statutory provision where legislative revisions could provide some direction, but the lack of Florida case law interpreting this provision may suggest that it is rarely an issue for the parties in condominium construction defect actions.  This is likely because when the condominium association serves its Chapter 558, Florida Statutes, Notice of Construction Defects, the condominium association will have already had the examination and certification performed to identify with reasonable certainty the exact nature of the construction defects.  If the condominium association has not performed such examination and certification, could it then use the report of the developer when it conducts its inspection during the Chapter 558 inspection period?  Hopefully the condominium association is not relying on the developer to certify his own construction defects, but the complete lack of procedure and silence in the statute leaves this open to interpretation.  Nevertheless, the condominium association considering pursuing class action construction defect litigation should have its examination and certification of the construction defects well in advance of initiating the construction defect lawsuit.

Likewise, an HOA may find that it has claims against its developer for construction defects to common areas such as clubhouses and pools; disputes over whether certain property was intended to be included as common areas; financial irregularities by the developer during developer control of the association’s board of directors; disputes over easements and use rights; and failure of the developer to pay appropriate assessments on developer-owned lots.

Both the Florida Rules of Civil Procedure and Florida Statute 720 authorize an HOA to bring claims on behalf of its members with regard to matters of common interest to the members.  Section 720.303(1), Florida Statues, also provides that before an HOA can begin litigation against any party in the association’s name, where the amount in controversy exceeds $100,000.00, the HOA much obtain the approval of a majority of the voting interests at a members meeting at which a quorum is present.  This subsection does not limit any statutory or common-law right of any individual member or class of members to bring any action without participation by the association. For Associations acting on behalf of the community, this is a legitimate procedural requirement which an HOA must successfully address.

It is also not uncommon for an HOA’s governing documents to contain procedural impediments or even prohibitions against an HOA bringing a claim against a developer.  Examples include provisions stating that no claim can be brought against the developer unless the developer approves in writing; a requirement that a practically impossible member vote be obtained, such as 90% of all members; and even outright bans on HOA claims against the developer.

Such hurdles have been addressed in section 720.3075, Florida Statutes, which provides that the public policy of Florida prohibits both the inclusion of or enforcement of certain types of clauses in HOA governing documents.  Among the clauses forbidden to be enforced are those which provide, or have the effect of: prohibiting or restricting an HOA from filing a lawsuit against the developer, or otherwise effectively prohibiting or restricting the HOA from bringing such a lawsuit.

Developer Liability

There is some difference in developer liability in the COA/HOA laws of Florida. If, during the period prior to the time that the developer relinquishes control of the condominium association any provision of the Condominium Act or any rule promulgated thereunder is violated by the association, the developer is responsible for such violation and is subject to the administrative action provided in the Florida Condominium Act for such violation or violations and is liable for such violation or violations to third parties. Fla. Stat. § 718.301(5). Thus, the action or inaction by the developer or the developer-controlled board of administration cannot be used against the association in an attempt to establish selective or arbitrary conduct by the owner-controlled board of the association.

Though there are certain limitations on developer actions and indemnification responsibilities owed by the developer under section 720.303, Florida Statutes, no limitation similar to that referenced above is enumerated within Chapter 720 of the Florida Statutes.

Tolling of Statute of Limitations

The statute of limitations for any actions in law or equity which a condominium association or a cooperative association may have shall not begin to run until the unit owners have elected a majority of the members of the board of administration. Fla. Stat. § 718.124. Florida HOA law under Chapter 720 has no such shield. Thus, for all community association boards, as early as possible after turnover, the board should attempt to identify potential legal causes of action which the association may have against other parties.

The Right to Sue

After control of a condominium association is obtained by unit owners other than the developer, the association may institute, maintain, settle, or appeal actions or hearings in its name on behalf of all unit owners concerning matters of common interest to most or all unit owners, including, but not limited to, the common elements; the roof and structural components of a building or other improvements; mechanical, electrical, and plumbing elements serving an improvement or a building; representations of the developer pertaining to any existing or proposed commonly used facilities; and protesting ad valorem taxes on commonly used facilities and on units; and may defend actions in eminent domain or bring inverse condemnation actions. Fla. Stat. § 718.111(3). If the association has the authority to maintain a class action, the association may be joined in an action as representative of that class with reference to litigation and disputes involving the matters for which the association could bring a class action. Id.

Comparing that provision to the Florida HOA law, after control of the association is obtained by members other than the developer, the association may institute, maintain, settle, or appeal actions or hearings in its name on behalf of all members concerning matters of common interest to the members, including, but not limited to: the common areas; roof or structural components of a building, or other improvements for which the association is responsible; mechanical, electrical, or plumbing elements serving an improvement or building for which the association is responsible; representations of the developer pertaining to any existing or proposed commonly used facility; and protesting ad valorem taxes on commonly used facilities. Fla. Stat. §720.303 (1). The association may defend actions in eminent domain or bring inverse condemnation actions. Id.

When dealing with either a condominium association or homeowner’s association the attorney is usually retained and directed by the association’s board of directors. Occasionally, the board of directors will empower an officer to direct the litigation proceedings or establish a litigation subcommittee for such purpose. Unique to Chapter 720 homeowner association claims is the requirement for a vote by the members as a condition to commencing certain litigation. Id.  In particular, section 720.303(1), Florida Statutes, provides:

Before commencing litigation against any party in the name of the association involving amounts in controversy in excess of $ 100,000, the association must obtain the affirmative approval of a majority of the voting interests at a meeting of the membership at which a quorum has been attained.

In fulfilling this obligation, make sure that quorum is met- often a tall task if the bylaws are followed. The quorum burden is somewhat eased by section 720.306, Florida Statutes, which reduces the percentage of voting interests required to constitute a quorum at a meeting of the members to thirty percent of the total voting interests if the governing documents are more restrictive. Decisions that require a vote of the members must be made by the concurrence of at least a majority of the voting interests present, in person or by proxy, at a meeting at which a quorum has been attained. Id.

Lawsuits are often inadvertently begun in violation of these statutory requirements. Failure to obtain the requisite vote invites a motion to dismiss the action by a defendant or perhaps a member of the association who opposes the institution of litigation.

In Lake Forest Master Cmty. Ass’n v. Orlando Lake Forest Joint Venture, an association brought a lawsuit against the developer of its subdivision, based on alleged construction defects in improvements located in association’s common areas. Lake Forest Master Cmty. Ass’n v. Orlando Lake Forest Joint Venture, 10 So. 3d 1187 (Fla. 5th DCA 2009). The developer being sued moved to dismiss the lawsuit claiming that the statutorily required presuit membership approval was not properly obtained. Id. It was undisputed that the membership approved the filing of the lawsuit at a meeting where a quorum was obtained, but the developer alleged that the notice of the meeting was improper and thus the vote approving the filing of the lawsuit was invalid. Id.  The trial court granted summary judgment in favor of the developer on this basis. Id.

Although the focus of the case was on the technical requirements of giving notice of a reconvened meeting, the appellate court took the opportunity to opine more broadly of the purpose of the statute. The pertinent section of the opinion states:

Developer claims that section 720.303(1), Florida Statutes, by requiring an association to obtain the affirmative approval of membership before commencing litigation in excess of $100,000, constitutes a statutory condition precedent to bringing suit. This is a statutory limitation on the authority of the Homeowners’ Association to commit the resources of the Association to litigation, designed for the protection of its members, which, if violated, the members may or may not elect to enforce. It is not a condition precedent running in favor of a defendant to the right of an association to file suit to recover damages on behalf of the Association.

Id.

The court also considered whether the defendant developer even had standing to raise the issue. Id. The court ruled that because the developer still owned lots in the subdivision and was thus a member it could raise the issue; however, the court also noted that if the developer were not still a member such claims could not even be raised. Id. In conclusion the court interpreted the statute as permitting a member to sue the association to enjoin prosecution of a lawsuit not properly approved by the membership, but that violation of the statute could not serve as an affirmative defense to the claims asserted by the association. Id.

Liens

If common condominium facilities for an area are jointly owned by the individual members of the association, or if there is a recorded declaration submitting the property to condominium ownership, the Condominium Act, Chapter 718, Florida Statutes applies. The Condominium Act provides a statutory framework for creating and enforcing condominium association assessment liens. A recorded declaration of condominium encumbers a member’s unit and imposes rights and obligations of ownership, including mandatory membership in the condominium association. A declaration’s provisions are supplemented by the association’s articles of incorporation and bylaws, recorded as exhibits to the declaration. See Fla. Stat. § 718.104. An owner/ member’s obligation to the association and the association members — that is, the other owners of units in the condominium — includes the duty to timely pay assessments for maintenance, repair, and replacement of the common elements, among other things. There is a corresponding right of the association to file and enforce a claim of lien against a member’s unit if a delinquency is not cured. Fla. Stat. § 718.111(4), 718.116(5).

Non-condominium communities, generally administered by a Homeowners’ association, are those in which streets, recreational facilities, and other elements are used in common by the property owners within the community. If membership is mandatory, the association is authorized to levy assessments that may be secured by a lien against the owner’s parcel. Whether labeled as property, property owners’, master, homeowners’, or owners’ associations, non-condominium, non-cooperative residential associations are governed by the Homeowners’ Association Act, Chapter 720, Florida Statutes. For residential homeowners’ associations created on or after October 1, 1995, section 720.308 and section 720.3085, Florida Statutes, regulate homeowners’ association assessments. The legislature significantly expanded the scope of homeowners’ association assessment tools when creating the latter statute. Ch. 2007-183, Laws of Fla. For homeowners’ associations that were created previously, former sections 617.301-617.312, Florida Statutes, (renumbered as F.S. 720.301-720.312) of the Florida Not For Profit Corporation Act applied. In a homeowners’ association, a declaration of covenants, conditions, and restrictions generally encumbers both the individual residences and the common property. Such a declaration generally provides for:

    • the rights and obligations of membership in the homeowners’ association, as supplemented by the association’s articles of incorporation and bylaws, which are recorded with the declaration;
    • the requirement that assessments be paid for common expenses;
    • the association’s right to file and enforce a claim of lien if assessments are not timely paid; and
    • restrictions on the use of the common properties, frequently including architectural controls. Fla. Stat. § 720.308.

In sum, there are substantial differences between Chapter 718 and Chapter 720 regarding construction defect presuit notices, developer liability, tolling of the statute of limitations, the right to sue and liens. Please consult our previous posts as linked above for other nuances in the law governing Florida community associations.

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