TO REJECT OR NOT TO REJECT: THAT IS THE QUESTION

Last week’s column about what sort of relationships may constitute a family, sure drew the ire of some of our readers.  People were outraged that their association was able to determine who can and who cannot live in or occupy a home that they own.  Some of you thought that just because you move into a community association doesn’t mean you checked your property rights at the entrance to the community.  Well…to some extent you’re wrong.  Here is what the 4th District Court of Appeal said in 1975 in a case called Hidden Harbour Estates, Inc. v. Norman 309 So.2d 180 (Fla 4th DCA, 1975):

Inherent in the condominium concept is the principle that to promote health, happiness, and peace of mind of a majority of unit owners, since they are living in such close proximity and using facilities in common, each unit owner must give up a certain degree of freedom of choice which he might otherwise enjoy in separate, privately owned property.

So…yes you do check some of your rights at the entrance to the community.  The trade off though is health, happiness and peace of mind in your condo.  (Stop laughing)

Specifically, in terms of whether or not your association can decide who gets to live in your condominium here is what The Florida Supreme Court said in White Egret Condominium, Inc. v. Franklin, 379 So.2d 346 (Fla.1979),

we recognized that “[r]easonable restrictions concerning use, occupancy and transfer of condominium units are necessary for the operation and protection of the owners in the condominium concept.”

The power to screen and reject though is not absolute.  While it is apparent that the association can make reasonable regulations regarding the sale and transfer of units, in Aquairian Foundation, Inc. v. Sholom House  448 So.2d 1166 (3rd DCA, 1984) the court held:

The declaration of condominium in the present case permits the association to reject perpetually any unit owner’s prospective purchaser for any or no reason. Such a provision, so obviously an absolute restraint on alienation, can be saved from invalidity only if the association has a corresponding obligation to purchase or procure a purchaser for the property from the unit owner at its fair market value. Otherwise stated, if, as here, the association is empowered to act arbitrarily, capriciously, and unreasonably in rejecting a unit owner’s prospective purchaser, it must in turn be accountable to the unit owner by offering payment or a substitute market for the property. When this accountability exists, even an absolute and perpetual restraint on the unit owner’s ability to select a purchaser is lawful.

 

 

Associations should first check whether they even have the ability in their declaration to screen and reject leases, transfers or sales in the first place.  Many associations think they have that right but confuse same with their “right of first refusal” which basically only gives the association the right to purchase or lease the unit on the same terms being offered by the owner to the potential new buyer or renter.

 

Assuming that the documents allow the association to screen and reject, you may all be surprised to learn that there is little to no case law or statutory guidance as to what criteria a board must use in determining whether or not to reject an applicant.  Most attorneys agree however that allowable factors include poor credit history, prior history of foreclosure or evictions, criminal record and the immediate inability to comply with the existing documents.  (For example, documents say “no pets” and the prospective owner wants to move in with a dog)

 

Associations that have the authority to screen and reject would be wise to create a uniform set of guidelines that apply even handedly to all potential purchasers, transferees or tenants.  This could potentially protect the association against claims based upon discrimination or claims by the unit owner for breach of fiduciary duty, breach of contract and/or claims for tortuous interference with contract.

 

Last week we heard from lots of Floridians who thought that associations may have too much power in deciding who can and who can’t live in their units.  I’m guessing that there are lots of other Floridians who are glad that the association may have the right to reject felons, people with terrible credit and people who seek to immediately breach the association’s governing documents and I would certainly like to hear from them too.

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