Condominium Construction Issues in Florida: What Makes A Condominium Different Than Any Other Project

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July 19, 2018


A. Legislation

Condominium and the forms of ownership interests therein are strictly creatures of Statute in the State of Florida. In 1963, the Florida Legislature passed the Condominium Act, Florida Statute § 718, in order to give statutory recognition to the condominium form of ownership of real property and to establish procedures for the creation, sales, and operation of condominiums. Thus, every condominium created and existing in Florida is subject to the provisions of the Statute. It permits a system of ownership of horizontally stacked or divided spaces essentially under one roof. What distinguishes condominiums from other forms of property ownership is that the unit owner also owns an undivided interest in the “common elements” with other unit owners. This interest in common elements cannot be separated from the unit itself. The rights and obligations regarding management, maintenance, costs, regulation of human behavior, and property use, are just some of the many issues that are regulated in this form of ownership.

Once the American Dream was based on each family owning their own single-family detached residence on their own piece of land. However, primarily because of economic factors, this dream or concept has changed to a great extent. There is an ever-decreasing amount of land available for development in close proximity to urban centers and transportation services and an ever-increasing demand for housing in close proximity to urban centers and transportation services. One solution to the problem has been the development of condominiums.

The term condominium generally connotes a system of separate ownership of individual units in multiple-unit buildings. But the term is also used to refer to either the building or to the individual units themselves. It is a form of real property ownership in which individual units may be owned by one or more persons and, appurtenant to each unit, there is an undivided share in the form of common property usually referred to as common elements. These are the portions of the condominium property not included in the units. Condominium associations may also own property, distinctive from the common elements, which are referred to as “Association Property.” This is property, both real and personal, which is owned or leased by, or is dedicated to, the association for the use and benefit of its members. This includes such things as cabanas, golf courses, restaurants, and the like.

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The condominium concept in the Western Hemisphere was first legislated by Puerto Rico in the Puerto Rican Horizontal Property Act based on the Cuban law of 1951. The Federal Housing Administration (“FHA”) encouraged the condominium concept in 1960 when it agreed to insure mortgages secured by condominium units. It issued an FHA model statute for the creation of an apartment ownership that closely resembled the Puerto Rican Act. This created the first generation of condominium acts that were eventually passed by all 50 States by 1970.

There are currently more than one million condominium units in the State of Florida. The Florida Legislature saw this coming when it enacted the Condominium Act in 1963 under Florida Statute § 718 which is commonly referred to as the Condominium Act. Chapter 718 addresses such matters as warranties, litigation, enabling provisions for the creation of the condominium, what may or may not be put into the condominium form of ownership, the condominium association, its creation, control, duties and powers and the relationship of the developer and of the unit owners to the association, and the requirements for and the manner of offering and selling condominiums in the market place.

Florida Statute § 718 is divided in to six (6) parts including General Provisions, Rights and Obligations of Developers, Rights and Obligations of Associations, Special Types of Condominiums, Regulation and Disclosure Prior to Sale of Residential Condominiums, and

Conversions to Condominium.

Condominiums are regulated much differently than other forms of property ownership. The Condominium Act addresses the development, sale, ownership and operation of residential condominium units. A condominium differs from a cooperative. An owner of a condominium holds title to his or her particular unit and a portion of the common elements, whereas in a cooperative, a corporation holds title to the building and an owner owns shares in the corporation and simply leases his or her particular unit from the corporation.1 Cooperatives are regulated by the Cooperative Act.2 Another distinct form of ownership is the horizontal subdivision, which is governed by the Homeowners’ Associations Act, Chapter 720 of the Florida Statutes.3 A “horizontal subdivision” refers to the traditional, suburban housing form where an owner typically owns a piece of land and the home built upon the land and shares ownership and liability for the common areas.

B. History

In 1963, the Florida Legislature passed the Condominium Act, establishing the condominium form of ownership, thus allowing for development of condominiums throughout the state. The state subsequently experienced a rapid growth in development, and over the next ten years, condominiums became very popular.4 By the 1970s, the public voiced complaints over this form of ownership, the most serious of which pertained to the complexity of documentation.5 The complaints were also lodged at developers, with claims that some developers made changes to the quality, nature, and extent of construction and amenities during the course of development, which resulted in the buyers receiving much less than they were promised. Other complaints focused on sweetheart deals where some developers reserved rights of management, control, operation, and use of the condominium for themselves, family, or friends at the expense of other unit owners. Quality of construction and sweetheart deals made up most of the early litigation.

The Florida Legislature responded to the varying complaints by writing significant consumer reforms into the Condominium Act.6 The Condominium Act was amended in the 1970s and it included a comprehensive regulatory framework for disclosures, including  requirements for a rescission period, statutory warranties of fitness and merchantability, substantial purchaser deposit escrow requirements, and restrictions on the use of such funds. In 1979, the Legislature amended the Statute in order to provide Florida’s Department of Land Sales, Condominiums, and Mobile Homes with the authority to levy civil penalties in order for it to enforce and ensure compliance with the provisions of the Condominium Act and related administrative rules without the necessity of court action.

In the late 1970s, developers began converting rental housing into condominiums. In

1980, the Legislature passed the Roth Act, § 718.604 through § 718.622 of the Florida Statutes, to address the provisions and requirements applicable to residential condominium conversions. Some requirements include special reserve accounts, warranties, or surety bonds,7 special rights in favor of tenants of existing structures being converted,8 significant additional disclosures of the condition of the buildings and estimated replacement costs,9 and the prohibition of discriminatory application of zoning laws.10 Developers considering a condominium conversion must also consider issues relating to existing tenants, including notice and disclosures, tenants’ rights to extend their lease terms, tenant relocation provisions, and tenant rights of first refusal. In 1986 and 1990, substantial amendments were made to the Condominium Act in an attempt to improve the ability of boards of directors to operate condominium associations.

Amendments to the Statute became commonplace in the 1990s, with yearly amendments to codify the rules of the Division of Florida Land Sales, Condominiums, and Mobile Homes (“Division”) and touching on such areas as phase development, the ability to void contracts for purchase of a unit from a developer, notification to the Division of the termination or merger of condominiums and the dissolution or merger of condominium associations, penalties for violation of the Division’s rules and guidelines, operational issues affecting association boards, consolidation of financial operations of phase condominiums, duties of association and developer in obtaining and maintaining insurance and insurance coverage, commingling of operating and reserve funds, and election of condominium directors.

In 2003, Florida enacted a construction defect statute to address actions by homeowners and their associations against developers and contractors. This statute applies to damage claims arising from defects associated with residential construction, including condominium construction, and excludes claims for personal injury and specific performance. The statute was enacted to provide an alternative method to resolve these disputes in order to reduce litigation and protect the rights of the condominium owners. The statute requires homeowners to provide developers, contractors, and other allegedly responsible parties with written notice and an opportunity to cure the alleged defect prior to filing a lawsuit.

The Condominium Act continues to evolve as the condominium form of ownership grows in popularity. During periods of low interest rates and increased urban development, the condominium is one of the preferred types of development and form of home ownership in Florida. Complaints and problems continue to arise, and thus the Legislature continues its reactive approach by amending the Act yearly.

C. Litigation

With single-family residences, offices, apartment buildings, schools, etc., there is one single identifiable owner. If the contractor can satisfy the single owner (in the case of a married couple two owners) his job is done. With a condominium, the developer and contractor are dealing with, at times, hundreds of individual homeowners who have different tastes and personalities. This increases the likelihood of litigation significantly.

Litigation is very expensive. The cost of litigation is frequently a factor in whether and to what extent the process moves forward. If you are dealing with a single owner, either an individual or company has to pay all of the legal and consulting expenses going forward. With condominiums, however, the cost is shared among several hundred unit owners, thus making litigation more affordable.

In addition, condominiums, unlike other forms of ownership, are given certain statutory warranties by developers, contractors, and even some subcontractors, directly in favor of the condominium association. Therefore, you have a potential litigator who is well funded and who has special statutory warranties that give him the ability to file claims against multiple parties at multiple levels in the construction food chain.

How did this all begin? It began, primarily, because of shoddy construction. Some of the condominium buildings in the 1960s were designed and constructed without quality control. This resulted in buildings with serious construction deficiencies. Condominium associations responded by hiring consultants to investigate the deficiencies and attorneys to prosecute their claims. This spun off cottage industries with construction consultants and attorneys who specialize in this area of the law and who actively and aggressively market their services to condominium associations. Now, most condominium associations hire consulting engineers and law firms.

II. DEVELOPER

A. Single-Purpose Entity

In Florida, developers frequently form single-purpose entities for each new condominium project in an attempt to shield themselves personally, and their parent or subsidiary companies, from liability arising out of each new project. When the developer has completed a project or a phase of a project and is ready to move on to the next project or phase, the developer opens a new company. Developers open and close these entities regularly, only inserting the minimal amount of cash and other assets necessary to operate the corporate entity and fund the development. It is sometimes the case that, if a condominium association seeks to file a lawsuit against the developer of its particular condominium once construction is completed and defects or other problems have been discovered, the developer’s single-purpose entity for the project may have either dissolved or have no assets with which to pay a judgment if the association eventually prevails in the lawsuit.

Under certain circumstances, an association may find relief from a “judgment proof” developer. For example, the court may find a successor or pre-existing entity liable for a judgment against the developer’s single-purpose corporation. However, courts are unwilling to pierce the corporate veil, that is, to allow proceedings to be brought against the developer’s officers and directors individually, unless there is a showing of improper conduct. The attempt to collect on a judgment against a developer may require initiation of supplementary proceedings, which is a second suit to recover damages awarded by the first suit, which is costly and not typically successful. Timing is critical. The more time that passes, the more likely you are to end up with a single-purpose entity that is assetless.

Where does this leave the contractor and subcontractor? Under § 718.203 of the Florida Statutes, developers are deemed to have granted to the purchaser of each condominium unit an implied warranty of fitness and merchantability for the purposes or uses as set forth in the Statute. Contractors, subcontractors, and suppliers grant to the developer and the condominium unit owners implied warranties of fitness as to the work performed or the materials supplied by them. The warranties generally run for three years from the date of completion of construction of the building. Warranty issues are covered later in this seminar in significantly greater details.

It is being raised at this juncture to point out how unique the condominium law is with respect to these types of claims. In the scenario just described, if the developer is no longer in business and is assetless, it does not prevent the association from filing direct claims against the contractor, subcontractors, or suppliers. This is significantly different from construction litigation involving other types of projects, where the developer, contractor, subcontractors, and suppliers are not deemed to provide statutory warranties. Generally, contractors cannot get away with forming single-purpose entities. Developers will not contract with them, and even if they will, the contractors generally are required to furnish bonds which could result in personal liability to principals of the company under their indemnification agreement with their bonding company.

B. The Developer is Key to Customer Satisfaction and Avoidance of Litigation

As evidenced throughout the history of condominium development in Florida, consumers are more than willing to bring suits against developers for a range of problems, the most common one pertaining to construction defects or quality of construction. A common complaint in these suits is that developers do not deliver as promised. In the development and construction of new condominiums, developers market and sell the condominium units directly to the public.

The marketing often involves expensive, glitzy campaigns during which the building’s amenities and other features are communicated through various promotional efforts, including print, radio, and television advertising, brochures, and informational websites. Thus, when a developer does not deliver as promised by making changes to the quality, nature, and extent of construction and amenities, buyers often take legal action, individually or through their associations. Courts strictly construe the Condominium Act and condominium documents to assure customers that the buyer gets what he sees.11 Therefore, in order to avoid litigation, developers must focus on customer satisfaction, ensuring that there is adequate and proactive communication with prospective unit owners throughout the development process.

A proactive developer, with the cooperation of the contractor and subcontractors, can avoid or limit litigation of construction defect claims. Keys to this process are for the developer, contractor, and subcontractor to be proactive, to maintain open lines of communication between and among them, and to promptly investigate and attempt to resolve complaints by the association. The problems are not going to go away. It is much easier and less expensive to investigate claims and attempt to resolve them when the individuals working for the parties are still around, the records can be easily located, and more resources are available. Many developers, contractors, and subcontractors establish budgets to prepare for these types of claims by the associations.

C. Track Record and Reputation

Condominium developers are ultimately condominium salespersons, looking to sell units directly to the public. Prospective condominium buyers are enticed by elaborate marketing campaigns but many look past the promotions and do their own research. The buyers learn from friends, family, and even the media about possible pitfalls and helpful advice. The main advice for buying preconstruction units directly from the developer is to check the developer’s history, his track record, and reputation, according to the notion that history is the best predictor.

One of the ways that a developer maintains its reputation is through avoiding litigation. Often, developers are faced with a decision of whether to indulge in an exhaustive legal battle or settle claims. A developer may prevail in a legal battle brought by an association, but at the same time the developer may lose the public relations battle. While not having to pay damages to the association, the developer may pay much more throughout and after the litigation to convince the public that it produces only quality condominiums.

Settlements are often a better solution for developers because they often terminate the litigation before the general public learns of the construction problems. For developers, confidentiality agreements in settlements of construction defect claims are crucial. These agreements seek to ensure that the developer’s reputation and track record will not be marred, although it is inevitable for construction professionals and others to learn of some of the defects.

However, the developer’s exposure is greatly reduced, as opposed to the possible exposure generated by a lengthy and costly litigation battle.

Contractors and subcontractors should also take into consideration the track record and reputation of the condominium developers. As indicated above, there is a substantial likelihood that the condominium association will make claims for defective construction. The developer’s track record in dealing with the associations should be an important business consideration for the contractor and subcontractors before deciding whether to take on the project. A proactive developer that is interested in working to resolve claims is more desirable than one that uses litigation as a means of temporarily delaying or avoiding claims.

III. UNIT OWNERS AND ASSOCIATIONS

A. Ownership Structure

Condominiums are a form of real property that is exclusively a creature of statute.12 A “residential condominium” is a condominium consisting of two or more units, of which the occupants’ intended use is for private, temporary or permanent residence.13 The individual condominium unit or parcel is essentially a cube of space enclosed by the walls, floors, and ceiling of the dwelling unit. The building itself,14 underlying land, outside air space, parking lots, and recreational facilities are all usually considered part of the common area. The condominium plan allows an individual unit in a multifamily dwelling to be separately mortgaged, conveyed, leased, and taxed just as any other individual piece of land.

Condominiums can be created on land that is owned or held under a lease,15 provided that the lease is for an unexpired term of at least 50 years.16 A condominium is formed by recording a declaration in the public records of the county where the land is located.17 A “declaration” or “declaration of condominium” is the instrument by which a condominium is formed,18 laying out the definitions of the condominium, an identification of each unit by letter, name, number, or a combination thereof, a survey of the land, responsibilities and powers of the condominium association, processes for maintenance, alterations, and improvements, expenses and assessments, obligations of the unit owners, insurance, other rules and regulations, and the methods to make amendments to the declaration. The declaration of condominium must contain a land survey that meets the minimum technical standards of the Board of Professional Surveyors and Mappers, which is part of the State of Florida’s Department of Business and Professional Regulations (DBPR).19 This survey must contain a graphic description of the units and a plot plan in sufficient detail to identify the common elements, each unit, and their relative locations and approximate dimensions.20

If, at the time the condominium declaration is filed, the construction of the condominium is not substantially completed, the condominium declaration must include a statement to that effect.21 Upon substantial completion of the construction, the developer or the condominium  association must amend the declaration to include a surveyor’s certificate.22

Generally, if the declaration of condominium does not provide a method of amendment, the declaration may be amended, so long as the owners of at least two-thirds of the units approve the amendment.23 Unless the declaration, as originally recorded, provides otherwise, no amendment may change the configuration or size of any unit in any material fashion or change the proportion by which a unit owner shares the common expenses of the condominium unless the record owner of the unit affected approves and unless all record owners of all other units approve the amendment.24

Except in the case of termination because of economic waste or impossibility,25 or unless the declaration of condominium provides otherwise,26 the condominium form of ownership of property may be terminated pursuant to a plan of termination approved by at least 80 percent of the total voting interests of the condominium if not more than 10 percent of the total voting interests of the condominium have rejected the plan of termination by negative vote or written objection.27 Nevertheless, an association that has been terminated remains in existence for the purpose of closing its affairs, prosecuting and defending actions by or against it, and enabling it to collect and discharge obligations, to dispose of and convey its property, and to collect and divide its assets.28

Since each condominium unit is its own parcel, ad valorem taxes, benefit taxes, and special assessments by taxing authorities must be assessed against the condominium parcels and not upon the condominium property as a whole.29 Unlike a cooperative, where taxes are charged to the entire property and apportioned among the cooperative units according to the shares of ownership, condominium owners are individually responsible for payment of taxes. Similarly, after recording of the declaration, no liens of any nature are valid against the condominium property as a whole except with the unanimous consent of the unit owners and, as such, liens may arise or be created only against individual condominium parcels.30

Although units form their own individual parcels, the benefits of living in a condominium community are juxtaposed with the fact that each unit owner, their tenants, and guests are governed by, and must comply with, the Condominium Act, the declaration, the documents creating the association, and the association by-laws.31

B. Each Unit Is Individually Owned

In a condominium development, each owner (1) holds title to an individual unit (usually in a multistory building), and (2) also owns an undivided interest in the common area as a tenant in common with other owners.32 The developer is considered a unit owner of those units that remain unsold. Generally, a unit owner is entitled to the exclusive and private possession of his or her unit.33 Moreover, the unit owner’s enjoyment and use of his individual unit cannot be impaired or diminished without consent from the owner or an amendment to the condominium declaration.34 In fact, by statute, individual owners cannot be denied use of access to available cable television service.35 Although a unit owner is generally entitled to the exclusive possession of his or her unit, the association has the irrevocable right of access to each unit, when necessary, during reasonable hours, for the maintenance, repair, or replacement of any common elements or of any portion of any unit to be maintained by the association.36

Additionally, as mentioned, each unit owner owns a proportional share of the common elements with each of the other unit owners, which is inclusive of the “common surplus.” The “common surplus” is the amount of all receipts or revenues, including assessments, rents, or profits, collected by a condominium association that exceeds common expenses.37  When a condominium parcel is purchased, an undivided share in the common surplus passes to that particular parcel.38

C. The Common Elements Are Collectively Owned By the Unit Owners

The common elements are those parts of the condominium property which are not included inside the units,39 and, as previously discussed, the common elements are those parts not subject to exclusive ownership, but instead are collectively owned by the unit owners. Each unit possesses an undivided share of the common elements.40 Common elements also include: easements through units for conduits, ducts, plumbing, wiring, and other facilities for the furnishing of utility services to units and the common elements, an easement of support in every portion of a unit that contributes to the support of a building, and the property and installations required for the furnishing of utilities and other services to more than one unit or to the common elements.41 Nonetheless, the declaration of condominium may also allocate other parts of the condominium property as part of the common elements.42

In addition, a “limited common element” is a part of the common elements, but it is reserved for exclusive use by owners of an individual condominium unit.43 The association provides maintenance for limited common elements as a common maintenance charge,44 to all unit owners irrespective of their limited use.45 Parking spaces and balconies are often classified as limited common elements because the individual unit owner possesses the exclusive use of these elements, but they remain commonly owned.

Common expenses pay for the upkeep and use of the common elements. Common expenses include the expenses of the operation, maintenance, repair, replacement, or protection of the common elements and association property, costs of carrying out the powers and duties of the association, and any other expense.46 Common expenses also include reasonable transportation services, insurance for directors and officers, road maintenance and operation expenses, in-house communications, and security services that are reasonably related to the general benefit of the unit owners.47 Moreover, the share in the common elements to a unit cannot be transferred or encumbered other than with the unit itself.48 Accordingly, there is a specific prohibition of transferring the common elements, including limited common elements, unless such an interest passes along with the title to the living unit.49

Under the condominium declaration and the condominium by-laws, there may be means of adopting and amending the rules that administer the procedures and use of the common elements. As such, a condominium association may adopt reasonable rules regarding allowable uses of the common elements, as well as rules that govern personal rights while using the common elements. However, a condominium association cannot adopt rules that are arbitrary or capricious or those that bear no relationship to the health, happiness, and enjoyment of life of the various unit owners.50 In Hidden Harbor Estates v. Norman, when the condominium association instituted and enforced a new rule prohibiting owners from consuming alcohol in the club house and other common areas, one unit owner brought suit seeking a permanent injunction against the rule.51 The court upheld the rule, asserting the following:

[I]nherent in the condominium concept is the principle that to promote the health, happiness, and peace of mind of the majority of the 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.52

While the court held that the condominium association cannot adopt rules that are arbitrary or capricious, a condominium association can adopt rules that are reasonable.53

D. The Association is a Nonprofit Corporation that Represents the Interests of the Unit Owners and has Responsibility for the Common Elements

There are approximately 323,600 association communities, encompassing 25.9 million units, and occupied by approximately 63.4 million residents in the United States alone.54 Condominiums account for approximately 45-48% of these numbers.55 A condominium association governs every condominium. As authorized by the condominium declaration, the typical association: (1) maintains and repairs the common area; (2) hires and supervises staff; (3) enforces the covenants, conditions, and restrictions of the declaration; (4) adopts new rules or by-laws that bind all owners; (5) collects assessments and monthly maintenance fees from the 20 owners; (6) represents the condominium in outside issues; and (7) takes other actions necessary to successfully operate the condominium.

Courts have experienced difficulties in determining the appropriate standards by which to judge condominium association decisions. This stems from the peculiar nature of a condominium association, which is a private organization that performs quasi-legislative, quasiexecutive, and quasi-judicial functions. As discussed above, Florida courts have reviewed association decisions under a reasonableness standard and, in effect, an association is held to the standard of a reasonably prudent person under the same or similar circumstances.

For instance, in Winston Towers 200 Ass’n, Inc. v. Saverio,56 defendant purchased a condominium unit where plaintiff condominium association had by-laws permitting ownership of a pet.57 Defendant properly registered his female dog.58 The association amended its by-laws to disallow pets acquired after the date of the amendments.59 Two years after the amendments, defendant’s dog had puppies, and he decided to keep one.60 Plaintiff association sought to enjoin defendant from keeping the pup.61 The court held that the subject amendment to the by-laws was unenforceable and an unreasonable attempt to enforce a retroactive regulation.62 On another note, after unit owners obtain control of a condominium association, 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.63 Furthermore, though the right to bring an action for a breach of implied warranty of fitness in condominium construction belongs to the unit owners, they may exercise the right cumulatively through their condominium association in matters of shared interest.64

E. The Association is run by an Elected Board of Directors and Officers

The powers and duties of the condominium association are usually controlled by a board of directors. In a new condominium project, the developer will typically select the initial members of the board. However, once the project has sold out, the owners typically conduct an election to vote for board members. At the time that the unit owners, other than the developer, elect a majority of the members of the board of administration of a condominium association, the developer must give up control of the association, and the unit owners must accept control.65 The officers and directors of the association have a fiduciary relationship to the unit owners.66 All funds collected by an association must be maintained separately in the association’s name.67 A condominium association may have a cause of action against its officers or board of directors individually for self-dealing or a breach of fiduciary duty by the officers or board of directors.68 Subject to the law relating to the transfer of the control of the association, any member of the board of administration may be removed from office with or without cause by the vote or agreement in writing by a majority of all the voting interests.69

By-laws of the association govern the operation of the association. Under the by-laws, there may be methods of adopting and amending the rules and regulations that govern the operation and use of the common elements, as well as restrictions and requirements regarding the use of the individual units and the common elements.70

The by-laws must also provide for the title of the officers and board of administration, as well as the powers, duties, manner of selection and removal, and any compensation of officers and boards.71 The board can delegate some of its duties to committees. A committee is a group of board members and/or unit owners, appointed by the board to make recommendations regarding the proposed annual budget or to take action on behalf of the board.72

Included in the by-laws are some of the express duties of the condominium association, including maintenance and repairs. If work is required to be made to the common elements, the board of directors has the authority to make its own repairs.73 However, if the work qualifies as a material alteration or a substantial addition, the board needs approval from the association members.74 Every board must adopt hurricane shutter specifications for each condominium building.75 All specifications adopted by the board must comply with the applicable building code.76 The board may operate appropriately installed shutters without the permission of the unit owners only if such operation is necessary to preserve and protect the condominium and association property.77 The installation, replacement, operation, repair, and maintenance of such shutters does not qualify as a material alteration of the common elements or associationproperty.78

F. The Association Generally Hires a Professional Property Manager for Day-To- Day Operations

A condominium association has the power to contract with respect to the exercise of its powers, including the maintenance, management, and operation of the condominium property. A written contract between a property management company and an association, which provides for operation, maintenance, or management of a condominium property serving the unit owners of a condominium, must contain specific criteria per the statute: (1) it must specify the services, obligations, and responsibilities that the management company will be providing to the unit owners;79 (2) it must specify the costs that will be incurred in the performance of the services, obligations, or responsibilities to be reimbursed by the association;80 (3) it must indicate how often the maintenance or management services will be performed, broken down by each service or separated into categories;81 (4) it must specify the minimum number of personnel that will be employed in providing maintenance or management services to the association;82 (5) it must disclose any financial or ownership interest held by the developer in the management company, if the developer still controls the association;83(6) it must disclose any financial or ownership interest a board member or any part providing maintenance or management services to the association holds with the contracting party.84

If the party contracting to provide management services fails to provide them as required by the contract, the association may procure the services from some other party.85 In the event the property manager fails to perform and the association seeks another party to complete the services, the association is also entitled to collect any fees or charges paid for services performed by the other party from the original manager contracted to provide those services.86

G. The Association Assesses the Unit Owners for the Funds Necessary to Operate the Property

An assessment, which is the share of the funds required for the payment of common expenses, will be levied against condominium unit owners from time to time, dependent upon the language in the declaration or the by-laws.87 Funds for the payment of common expenses of a condominium must be collected by assessments against unit owners in the proportions or percentages provided in that condominium’s declaration.88 The condominium association has the power to make and collect assessments and to lease, maintain, repair, and replace the common elements or association property.89 However, the association may not charge a use fee against a unit owner for the use of common elements or association property unless otherwise provided for in the declaration of condominium or by a majority vote of the association or unless the charges relate to expenses incurred by an owner having exclusive use of the common elements or association property.90

A unit owner’s duty to pay assessments is conditioned solely on whether the unit owner holds title to a condominium unit and whether the assessment conforms to the declaration of condominium and by-laws of the association.91 A unit owner, regardless of how his or her title has been acquired, including by purchase at a foreclosure sale, is liable for all the assessments that come due while he or she is the unit owner.92 Unpaid assessments and installments on common elements and units bear interest at the rate provided in the condominium declaration from the due date until paid.93 This rate may not exceed the rate allowed by law and, if no rate is provided in the declaration, interest will accrue at the rate of 18% per year.94

The proposed annual budget of common expenses must be detailed and must show the amounts budgeted by accounts and expense classifications, including any expenses relating to the estimated operating budget of the condominium and the association.95 The budget must include reserve accounts for capital expenditures and deferred maintenance.96 Generally, the association may adjust replacement reserve assessments annually to take into account any changes in estimates of the useful life of a reserve item.97

If a board adopts in any fiscal year an annual budget that requires assessments against unit owners that exceed 115% of assessments for the preceding fiscal year, the board must conduct a special meeting of the unit owners to consider a substitute budget.98

A “special” assessment is any assessment levied against unit owners other than the assessment required by a budget adopted annually.99 Special assessments are typically charged to unit owners for repairs, renovations, or alterations beyond the usual maintenance of the building. Usually, these special assessments are not forecasted and not planned within the annual budget. The specific purposes of any special assessment must be delineated in a written notice delivered to each unit owner. The funds collected from a special assessment must be used only for the specific purposes described in the notice.100 If any excess funds remain after completion of the purposes described in the special assessment notice, these excess funds are considered common surplus and, at the board of directors’ discretion, can be either returned to the unit owners or held towards future assessments.101

H. The Association Has the Ability to Collect Funds to Underwrite Engineers for Inspections and Lawyers for Litigation

A condominium association should hire an attorney to represent its interests. In representing the condominium association in an action brought by the unit owners against the association, an attorney represents the corporate entity and not the individual unit owners.102 When a condominium association is formed, the association’s attorney should recommend that a professional engineer be retained to perform a complete inspection of the building and to report all defective conditions.103 In conducting this inspection, the engineer should rely on the relevant portions of the building code from the date the building permit was issued by the building department. This is important because building codes are modified and updated and an applicable provision might only come into effect after the building permit was issued.104

1 10 Fla. Jur.2d Condominiums, Etc. § 10 (2013).

2 Cooperative Act, Fla. Stat. §§ 719.101 – 719.1255 (2013).

3 Homeowner’s Association Act, Fla. Stat. §§ 720.301 - 720.407 (2013).

4 Joseph E. Adams, Community Associations: 1998 Survey of Florida Law, 23 Nova L. Rev. 65, 66 (1998).

5 William P. Sklar, Florida Condominium and Community Association Law § 1.3 (The Florida Bar 2007).

6 Joseph E. Adams, Community Associations: 1998 Survey of Florida Law, 23 Nova L. Rev. 65, 66 (1998).

7 Fla. Stat. § 718.618 (2013).

8 See Fla. Stat. § 718.606 (2013); see also Fla. Stat. § 718.612 (2013).

9 Fla. Stat. § 718.616 (2013).

10 Fla. Stat. § 718.507 (2013).

11 See Woodside Village Condominium Ass’n, Inc. v. Jahren, 806 So. 2d 452 (Fla. 2002); see also Sterling Village

Condominium, Inc. v. Breitenbach, 251 So. 2d 685 (Fla. 4th DCA 1971).

 

12 Woodside Village Condominium Ass’n, lnc. v. Jahren, 806 So. 2d 452, 455 (Fla. 2002).

13 Fla. Stat. § 718.103(23) (2013); Condominiums are also created for various non-residential purposes including offices,

retail stores, parking lots, and hotels.

14 The building is typically composed of the roof, exterior walls, floors, hallways, stairways, elevators, lobby, ceilings, and

electrical, mechanical, and heating systems.

15 Fla. Stat. § 718.104(1) (2013).

16 Fla. Stat. § 718.401(1) (2013).

17 Fla. Stat. § 718.104(2) (2013).

18 Fla. Stat. § 718.103(15) (2013).

19 Fla. Stat. § 718.104(4)(e) (2013).

20 Id.

21 Id.

22 Id.

23 Fla. Stat. § 718.110(1)(a) (2013).

24 Fla. Stat. § 718.110(4) (2013).

25 Fla. Stat. § 718.117(2) (2013).

26 Fla. Stat. § 718.117(3) (2013).

27 Id. This subsection does not apply to condominiums in which 75 percent or more of the units are timeshare units. Id.

28 Fla. Stat. § 718.1l7(6) (2013).

29 Fla. Stat. § 718.120(1) (2013).

30 Fla. Stat. § 718.121(1) (2013).

31 Fla. Stat. § 718.303(1) (2013).

32 Fla. Stat. § 718.103(11) (2013).

33 Fla. Stat. § 718.106(3) (2013).

34 Pepe v. Whispering Sands Condominium Ass’n, Inc., 351 So. 2d 755, 757-58 (Fla. 2d DCA 1977).

35 Fla. Stat. § 718.1232 (2013).

36 Fla. Stat. § 718.111(5) (2013).

37 Fla. Stat. § 718.103(10) (2013).

38 Fla. Stat. § 718.103(12) (2013).

39 Fla. Stat. § 718.103(8) (2013); Fla. Stat. § 718.108(1)(a) (2013).

40 Rogers & Ford Const. Corp. v. Carlandia Corp., 626 So. 2d 1350, 1352 (Fla. 1993).

41 Fla. Stat. § 718.108(1) (b) through (d) (2013).

42 Fla. Stat. § 718.108(2) (2013).

43 Fla. Stat. § 718.103(19) (2013).

44 Fla. Stat. § 718.113(1) (2013).

45 See Cedar Cove Efficiency Condo. Ass’n v. Cedar Cove Props., Inc., 558 So. 2d 475 (Fla. 1st DCA 1990) (where

alteration or improvement is necessary or beneficial in the maintenance, repair, or replacement of the common elements,

all unit owners should equally bear the cost as provided in the declaration, by-laws and statutes).

46 Fla. Stat. § 718.115(a) (2013).

47 Id.

48 Fla. Stat. § 718.107(2) (2013).

49 Brown v. Rice, 716 So. 2d 807, 809 (Fla. 5th DCA 1998). Here, the court held that, unlike an easement, the grant of a

license does not convey any interest in the land, and, therefore, it generally may not be assigned or conveyed. Id.

Instead, a license is a personal privilege and is automatically extinguished upon the sale or conveyance of the servient

property. Id. In this case, although appellant condominium owner was given use privileges of the garage by another

owner, upon transfer of that unit, appellant condominium owner’s license was extinguished.

56 Winston Towers 200 Ass’n, Inc. v. Saverio, 360 So. 2d 470 (Fla. 3d DCA 1978).

57 Id. ).

58 Id.

59 Id.

60 Id.

61 Id.

62 Id. at 470-71.

63 Fla.R.Civ.P. Rule 1.221.

64 Charley Toppino & Sons, Inc. v. Seawatch at Marathon Condominium Ass’n, Inc., 658 So. 2d 922, 924 (Fla. 1994).

65 Fla. Stat. § 718.301(4) (2013).

66 Fla. Stat. § 718.111(1)(a) (2013).

67 Fla. Stat. § 718.111(14) (2013).

68 See Fairways Royale Ass’n, Inc. v. Hasam Realty Corp., 419 So. 2d 667 (Fla. 4th DCA 1982).

69 Fla. Stat. § 718.112(2)(j) (2013).

70 Fla. Stat. § 718.112(3) (2013).

71 Fla. Stat. § 718.112(2)(a)l (2013).

72 Fla. Stat. § 718.103(7) (2013).

73 See George v. Beach Club Villas Condominium Assoc., 833 So. 2d 816 (Fla. 3d DCA 2002).

74 See id.

75 Fla. Stat. § 718.113(5) (2013).

76 Id.

77 Fla. Stat. § 718.113(5)(c)(2013).

78 Id.; See also Schmeck v. Sea Oats Condominium Ass’n, Inc., 441 So. 2d 1092 (Fla. Dist. Ct. App. 5th Dist. 1983).

79 Fla. Stat. § 718.3025(1)(a) (2013).

 

80 Fla. Stat. § 718.3025(1)(b) (2013).

81 Fla. Stat. § 718.3025(1)(c) (2013).

82 Fla. Stat. § 718.3025(1)(d) (2013).

83 Fla. Stat. § 718.3025(1)(e) (2013).

84 Fla. Stat. § 718.3025(1)(f) (2013).

85 Fla. Stat. § 718.3025(2) (2013).

86 Id.

87 Fla. Stat. § 718.103(1)(2013)

88 Fla. Stat. § 718.115(2) (2007).

89 Fla. Stat. § 718.111(4) (2013).

90 Id.

91 See Ocean Trail Unit Owners Ass’n, Inc. v. Mead, 650 So. 2d 4 (Fla. 1994).

92 Fla. Stat. § 718.116(1)(a) (2013).

93 Fla. Stat. § 718.116(3)(2013).

94 Id.

95 Fla. Stat. § 718.112(2)(f)1 (2013).

96 Id.

97 Fla. Stat. § 718.112(2)(f)2 (2013).

98 Fla. Stat. § 718.112(2)(e)2 (2013).

99 Fla. Stat. § 718.103(24) (2013).

100 Fla. Stat. § 718.116(10)(2013).

101 Id.

102 Ocean Club of Palm Beach Shores Condominium Ass’n, Inc. v. Estate of Daly By and Through Daly, 504 So. 2d 1377,

1379 (Fla. 4th DCA 1987).

103 See Conquistador Condominium VIII Ass’n, Inc. v. Conquistador Corp., 500 So.2d 346 (Fla. 4th DCA 1987) declined

to extend by 789 So. 2d 392.

104 See Biscayne Cove Condominium Ass’n, Inc. v. Biscayne Cove Southeastern, Inc., 582 So.2d 806 (Fla. 3d DCA 1991)

(where condominium association claim against developer for noncompliance with building code provisions requiring

installation of life-safety equipment was precluded because specific building code provisions did not become operative

until after building permit was issued).


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