Important considerations for unit owners who wish to transfer their units to a corporate entity for estate, liability, or tax planning purposes
Is a unit owner who transfers title from an individual capacity to a corporate entity or LLC required to obtain Association approval? The answer is often not simple as the transfer of title does not necessarily result from a sale. There are many different types of title transfers including gifts, devices, transfers between related entities for less than fair market value, transfer to trusts, foreclosures, and others. The devil is always in the details, and it is critical that owners review the specific provisions governing sales, transfers and conveyances of units found in their Association’s governing documents.
Recently, in Cool Spaze, LLC v. Boca View Condominium Association, Inc., the Fourth District Court of Appeal distinguished between leases, subleases or other occupation of a unit and unit transfers, title transfers or sales. In Cool Spaze, an individual unit owner purchased a unit at a condominium in Boca Raton, Florida, and then transferred title to the unit to Cool Spaze, LLC, a limited liability company, in order to be able to lease the unit. When the LLC later submitted two lease applications for the Association’s approval, the Association denied the lease applications, indicating that it would not approve the lease applications until the unit’s title was transferred back to the owner in his individual capacity. The Association took the position that the transfer of title of the unit to the LLC required the Association’s approval.
The unit owner filed suit seeking injunctive relief concerning the Association’s regulation of sales and transfers of title and declaratory relief concerning whether the Association could require approval of a sale or transfer of title. Additionally, the owner sought damages for slander of title because the Association’s property manager allegedly told a Realtor that the application could not be processed because there was a “problem with title to the unit.”
The trial court initially found in favor of the Association, finding that the unit owner was required to comply with the Association’s reasonable requests and obtain approval prior to transferring title to the LLC. However, the Fourth District Court of Appeals reversed, strictly construing the Declaration, and finding that the Declaration did not specifically require that transfers of title be approved, holding that the Declaration “does not use the term unit transfer, title transfer, or sale.” The court differentiated different types of transfers citing to Webster v. Ocean Reef Cmty. Ass’n, 994 So. 2d 367, 370 (Fla. 3d DCA 2008), in which a gift transfer was differentiated from a sale, purchase or lease.
The owner in this case transferred his unit to an LLC and the Association took the position that the owner needed to obtain approval of the transfer to the LLC because the Declaration authorized the Association’s approval of “all leases, subleases, or other occupation of a Unit before lease, sublease or occupation.” However, the provision in the Declaration did not use the term “unit transfer, title transfer or sale.” As such, the court determined that the Association’s governing documents did not authorize for the Association’s approval of a unit transfer. Here, the unit owner was permitted to transfer title of his Unit to an LLC without approval of the Association.
It may be easier, and less expensive, to inquire from the Association as to the proper procedure for transfers and leases and always report changes in ownership to the Association (regardless whether same is required). In the event there is a valid, recorded amendment requiring approval or imposed rules and/or procedures pertaining to sales, transfers, and/or leases, it is best for an owner to be informed prior to modifying title rather than risking legal action for failure to comply with the Association’s governing documents.
Carolina Sznajderman Sheir is a partner at Eisinger Law and her practice focuses on real estate law, community association law, commercial litigation and developer representation. She can be reached at firstname.lastname@example.org or 954-894-8000 ext. 238.
Alessandra Stivelman is a partner at Eisinger Law, Board Certified Specialist in Condominium and Planned Development Law and is an AV-rated attorney. She focuses her practice on community association and real estate law and can be reached at email@example.com or 954-894-8000 ext. 304.
Eisinger Law., is a full service Florida law firm focusing on community association law, real estate law, developer representation, commercial litigation, corporate law, insurance law and estate planning. For more info visit eisingerlaw.com.