WAS ALL OF THIS FOR NOTHING?

            If there ever was a column that I hated to write, this is it!  Last week I spoke about a case I argued before The Florida Supreme Court in 2011 called Cohn v. The Grand Condominium.  In that case, the minority commercial unit owners at The Grand Condominium challenged a new Florida statute that took away their rights under the bylaws and declaration to elect a majority of the Board of Directors.  On appeal, The Florida Supreme Court said that since this new law impaired the contractual voting rights of the commercial unit owners, it could only apply at The Grand if the declaration contained Kaufman  language or language which put the parties on notice that future changes to Florida Statute 718 (The Florida Condominium Act) would automatically apply at The Grand.  Unfortunately for the residential unit owners, the declaration for The Grand Condominium only adopted The Florida Condominium Act when the Declaration of Condominium was filed in 1986.  There was no “and as amended from time to time” language.  Therefore, the court held that as applied to The Grand Condominium, this statute would be unconstitutional and could not be applied there.

            So now we come to all the new condominium and homeowner association laws that The Florida Legislature put so much time and effort into over the last two years.  Do any of them also impair contractual rights of the owners or the association?  Well, if so, they won’t apply in that condominium or HOA if that condominium or HOA does not have as amended from time to time language in their declaration.  Let’s review a few:

  1. Mandatory Reserves for condominiums 3 stories or higher: Here we have a statute that The Florida Legislature did for the good of the health, welfare and safety of residents in a condominium, especially after the absolute tragedy at The Champlain Towers in Surfside where 98 innocent men, women and children died.  The only question The Florida Supreme Court cares about however is whether this new statutory requirement impairs contractual rights?  Of course it does.   Many declarations of condominium specifically grant unit owners the right to waive the funding of a reserve account.  Under this new law, reserves cannot be waived.  Clearly, we have an impairment of contractual rights under this new statute. Therefore, it can certainly be argued that this new statute will not be allowed in any condominium where the docs allow the owners the right to waive reserves and there is not as amended from time to time language.  The new safety inspection laws would still apply however as that law forces the government to do inspections, it does change the relationship of the parties to the declaration or bylaws.
  2. Mandatory Education for Board Members: There is not a single declaration or set of bylaws in Florida that require members of a Board of Directors for either a condominium or HOA to take valuable hours out of their personal lives and attend school in order to be able to serve on their condominium or HOA board. This statute impairs the owners’ contractual rights to serve on their board by adding additional educational requirements that are not contained in the governing documents. Therefore, it can certainly be argued that this new statute will not be allowed in any condominium or HOA if  there is not as amended from time to time language in the governing documents.
  3. Mandatory Websites: There is probably a handful of declarations or bylaws in Florida that require a Board of Directors for either a condominium or HOA to post the records on a website.  The declaration or bylaws normally state that the records must simply be made available to the owner after a written request is made.  This new statute impairs the association’s contractual rights by requiring the association to spend money to open up a website.  It forces additional requirement on the association that the governing documents do not require.  Therefore, it can certainly be argued that this new statute will not be allowed in any condominium or HOA if  there is not as amended from time to time language in the governing documents.
  4. Mandatory Meetings at Least Once a Quarter. You would be pressed to find a single declaration or set of bylaws in Florida that requires a Board of Directors for a condominium to have quarterly meetings.  This new statute impairs the association’s contractual rights by requiring the association to have more meetings than its own documents require.  Therefore, it can certainly be argued that this new statute will not be allowed in any condominium if there is not as amended from time to time language in the governing documents.

 

You get the point.

When I argued the Cohn v. The Grand Condominium case before The Florida Supreme Court, I argued that The Florida Legislature clearly has the right to make laws that it deems to be in the best interest of condominium associations under the state’s police powers, meaning The Florida Legislature’s right to regulate behavior and enforce order for the betterment of the health, safety, morals, and general welfare of Florida’s inhabitants.

Here was the law I cited to: The “police power” is exercise of sovereign right of state to enact laws for protection of lives, health, morals, comfort and general welfare.  A state’s economic interests may justify exercise of police power for promotion of general welfare, notwithstanding interference with lawful callings or even contracts.  State ex rel.  Municipal Bond and Investment Co., Inc. v. Knott 114 Fla. 120 (Fla. 1934).  Legislative exercise of police power cannot constitute impairment of contract.  Springer v. Colburn 162 So.2d 513 (Fla. 1964)  Constitutional inhibition of state legislative impairment of obligations of contract does not extend to legislation that is proper exercise of police powers.  Holladay v. City of Coral Gables 382 So.2d 92 (Fla. 1980)  All contract and property rights are subject to fair exercise of power inherent in state to promote general welfare of the people through regulations reasonably necessary to secure health, safety, good order and general welfare.  Constitutional right of every person to pursue a business, occupation, or profession is subject to paramount right of government, through police power, to impose reasonable restrictions as may be required for protection of the public.  Golden v. McCarty 337 So.2d 388 (Fla. 1976)  Merely because legislation places some restriction on right to freely contract will not invalidate legislation if restriction was intended to protect public’s health, safety or welfare.  Khoury v. Carvel Homes South  403 So.2d 1043 (1st DCA, 1981)  All of this precedent was ignored.

It was also easy to see that if The Florida Supreme Court ruled against Cohn, the court would set up a bizarre system where new laws would apply in some condominiums and not others and it would depend upon which condominiums have “as amended from time to time” language and which do not.  There could be 10 condominiums all on the same block and each one could be governed by a different set of laws, depending upon when the condominium was built and which ones do and do not have as amended from time to time language in their governing documents.

Well, that’s the system The Florida Supreme Court put in place.  That’s what we have today.  Ask a Florida legislator if this is what they thought or knew when they passed these new laws that they believed would protect the lives of Florida citizens after The Champlain Towers.  Do you think they thought it may only apply to few, if any, Floridians? Tragic.

My partner Richard Sachs may have a good idea to resolve this Kaufman Language confusion, at least for condominiums, co-ops and HOAs built since 1991. All of these communities incorporated under Florida Statute 607 or 617 when they came into existence.

Florida Statute   617.0102 and 607.0102 stated at that time and states to this very day:

Reservation of power to amend or repeal.The Legislature has the power to amend or repeal all or part of this act at any time, and all domestic and foreign corporations subject to this act shall be governed by the amendment or repeal.

Therefore, if a simple amendment was made to the above statute(s) to say:

all associations governed under Florida Statutes 718, 719 and 720 are bound to said statutes as they may exist from time to time. 

every association would obviously be bound to the current statutes and all amendments to those statutes regardless of whether or not they have “as amended from time to time” language in their governing documents.

This is a great idea that The Florida Legislature must consider during the next legislative session if they want all condominiums,  HOAs and co-ops to be forced to follow the new laws that they pass and are so vital for the health, welfare and safety of all of our residents.

Of course, even that could be challenged, but in light of the provisions above it’s this attorney’s opinion that it would be a difficult road to hoe.

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