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Insider Real Estate and Community Association Law Update

August, 2019







APPELLATE COURT REJECTS CONDO BUY-OUT ATTEMPT 
All Seasons Condo. Ass’n v. Patrician Hotel, LLC, 44 Fla. L. Weekly D1036 (Fla. 3d DCA April 24, 2019)



After its board of directors unanimously voted to sell a beachfront condominium, the association entered into a purchase and sale agreement with a real estate investor.  The agreement required the association to use its best efforts to obtain consent from all 106 unit owners.  While the association was attempting to obtain the consents, the real estate investor flipped his rights to a second investor, for a $3 million profit.



The association was unable to obtain the required 100% unit owner consent within the specified time period and agreed to release the original investor’s deposit. Even though the association’s board could not obtain the required consent, the second investor filed a lawsuit for specific performance as well as a lis pendens. After a six day non-jury trial, the judge entered a final judgment for specific performance as well as damages in favor of the second investor and against the association.



The association appealed the final judgment to the Third District Court of Appeal which reversed the trial court finding that the condominium unit owners did not give authority to the board of directors and its president, through supplemental contracts, to take all action reasonably necessary to effectuate a closing under the original agreement and that the agreement automatically terminated when 100 percent of the unit owners did not consent to the sale.  The board attempted to use proxies to obtain the consent of the unit owners but the proxies were not valid under Florida Statute § 718.112 or Rule 61B-23.002 of the Florida Administrative Code.  The Court further ruled that the president and board did not have actual or apparent authority to modify the sale approval deadline and other essential terms of the supplemental contracts, as no unit owner signed or was made a party to the e-mail chain that allegedly extended the applicable deadlines.



The sale ordered by the trial court was cancelled accordingly.







UNIT OWNER’S DEFAMATION SUIT DISMISSED
Hoch v. Loren, 44 Fla. L. Weekly D1494 (Fla. 4th DCA June 12, 2019)



A condominium association’s attorneys sent a cease and desist letter to a unit owner and provided a copy of the letter to the condominium association client. The unit owner who was the target of the cease and desist letter then sued the association’s attorneys in state circuit court for defamation.  The court dismissed the defamation case for failure to state a cause of action because providing  a copy of the cease and desist letter to its client did not amount to the publication required under the law of defamation.
The court viewed the letter as a statement made by the attorneys to their client as part of the attorney-client relationship and analogous to the situations where there was no publication to a third party because the communication was tantamount to the principal talking to itself.



It is important that community association directors and managers keep in mind that their communications with association counsel are protected by the attorney-client privilege, are confidential, and should not be disclosed to third parties, including non-director unit owners.  Disclosing such privileged communications to third parties may result in the waiver of the privilege.  In addition, it is also important to take precautions to avoid potential defamation suits whenever possible as these are one of the most filed actions in the community association setting.







NEGLIGENCE CLAIM AGAINST HOME INSPECTOR ALLOWED TO PROCEED DESPITE STATUTE OF REPOSE 
Manney v. MBV Eng’g, Inc., 44 Fla. L. Weekly D1253 (Fla. 5th DCA May 10, 2019)



After reviewing construction drawings and inspecting a newly constructed house, the inspector advised the home buyer, prior to the purchase, that the structural integrity was excellent and there were no signs of structural distress. Thirteen years after the purchase, a structural engineer performed another review and determined that the house had significant latent structural defects, including a foundation design defect.



The homeowner sued the original inspector for negligence for failing to notify her of the structural defects.  The trial court applied the ten-year statute of repose found in Florida Statute § 95.11(3)(c) and dismissed the homeowner’s claim. The Fifth District Court of Appeal reversed finding that the ten-year statute did not apply since the homeowner’s claim against the inspector was not “founded on” the design, planning, or construction of real property. Rather, the allegations were that the inspector negligently performed an inspection of a completed structure that happened to be newly constructed.  Accordingly, the homeowner is being allowed to pursue her claim against the inspector.



The statutes of limitation and repose can prevent an injured party from recovering if it waits too long to institute legal proceedings. It is therefore critical that someone faced with possible construction defects or related negligence consult with experienced counsel as soon as the defects manifest themselves.







ASSOCIATION DROPPED FROM LAWSUIT, NOT RESPONSIBLE FOR DAMAGES
Lincoln Mews Condo. Ass’n v. Harris, 44 Fla. L. Weekly D 1151, (Fla. 3d DCA May 1, 2019)



After a $500,000 default final judgment was entered in favor of a unit owner and against the Lincoln Mews Condominium Association, the Association moved to vacate the judgment because while it had originally been named in the suit, it was thereafter dropped as a defendant.  The judge denied the motion.
On appeal, the appellate court concluded that the final judgment entered against the Association was void in its entirety, as to both liability and damages, because the unit owner dropped the Association as a party to the case and never re-served the Association with original process.  In addition, the judgment was void as to the $500,000 damages awarded as it had no discernible basis in the operative complaint or any other part of the circuit court record.



Once the plaintiff dropped the Association from the case, it was required to re-serve it in order to obtain relief against it.







TENANT SUES FOR UNSAFE SIDEWALK AT CONDOMINIUM
Leon v. Pena, 44 Fla. L Weeky D 1492 (Fla. 4th DCA June 12, 2019)



For almost ten years, a tenant in a condominium complex walked across an area with a broken sidewalk without incident, aware of the damage to the pathway.  She did not take care to avoid the damaged area.  When she lost her footing on the broken sidewalk and was injured in a fall, she sued her landlord for failing to maintain and failing to warn her about the broken sidewalk.  The landlord moved for summary judgment which was granted by the trial judge.



The tenant appealed the judgment against her and argued that there remained genuine issues of material fact regarding the obviousness of the dangerous condition that caused her injuries, and that the landlord breached its duty to maintain the premises because it knew about the sidewalk’s condition but failed to undertake any repairs.  The appellate court found that the trial judge properly entered summary judgment in favor of the landlord on the duty to warn claim but erred with regard to the failure to maintain claim because the judge concluded that the tenant assumed the risk by walking on the broken sidewalk.  The tenant’s knowledge of the broken sidewalk, the appellate court determined, merely raised an issue of fact as to her own comparative negligence, an issue that needed to be decided by the trier-of-fact at a trial.



This case illustrates the multiple duties that landowners – including community associations – owe to tenants, invitees, and even, in some instances, trespassers.  It is important to keep the premises in proper repair and warn of known dangers.







PROPERTY BUYER SUCCESSFULLY DEFENDS FORECLOSURE
Green Emerald Homes, LLC v. 21st Mortg. Corp., 44 Fla. L. Weekly D1449 (Fla. 2d DCA June 7, 2019)



Green Emerald purchased real property that was subject to a mortgage.  Whet the mortgage went into default the holder of the mortgage brought suit and named Green Emerald as a defendant.  It also filed a lis pendens against the property.



After a non-jury trial at which Green Emerald attended, Green Emerald moved to dismiss the foreclosure complaint because the mortgage holder failed to establish legally sufficient proof of the amount due under the underlying note and mortgage. The judge denied the motion – because Green Emerald was not a party to the note and mortgage – and entered a final judgment of foreclosure and directed the property be old at a public sale.



Green Emerald appealed to Florida’s Second District Court of Appeal.  The Second District reversed the final judgment in favor of the mortgage holder.  It ruled that as Green Emerald took title to the mortgaged property before the filing of the lis pendens, it had a due process right to defend the suit in the same way any other named party to civil litigation had right to defend entitling it to insist that the mortgage company present competent substantial evidence of the amount due under the note.  Because the mortgage holder had not presented such competent substantial evidence, the trial court was ordered to enter an involuntary dismissal in favor of Green Emerald.



Like Green Emerald, community associations are named defendants in first mortgage foreclosure actions.  In appropriate cases it may make sense to actively defend and even oppose judgment sought by the mortgagee.  Associations should consult with counsel to determine the appropriate course of action.







Jed Frankel is a shareholder with Eisinger Law. He is a Florida Certified Circuit Mediator and is Board Certified in Condominium and Planned Development Law, as well as Civil Trial Law, by The Florida Bar. He focuses his practice on community association law, litigation and dispute resolution. He can be reached at jfrankel@eisingerlaw.com or 954-894-8000 x 301.