February 2002

MEMORANDUM TO CLIENTS

The new year has brought forth many significant judicial decisions. Community associations will want to take special note of one of the most important cases decided by the Florida Supreme Court regarding Florida community associations. The decision will greatly impact restriction enforcement. Next month we anticipate discussing a United States Supreme Court decision addressing disability issues that will impact association employment and handicap housing issues.

LEASING RESTRICTIONS: NO MORE VACANCIES

Too many homes in your development rented out? Thinking of amending your declaration of condominium or covenants to limit leasing of property? The Florida Supreme Court just made it easier for Florida associations to adopt leasing and other restrictions.

In Woodside Village Condominium Association, Inc. v. Jahren, 27 Fla. L. Weekly S34a (Fla., Jan. 3, 2002), the Court unanimously ruled that a declaration amendment adopted by owners at Woodside Village, a condominium development located in Clearwater, which restricted the leasing of units was valid. The original Declaration included a provision allowing for leasing of units; however, many owners became concerned the development would deteriorate because many units were leased.

Just as countless other communities have considered, Woodside Village owners sought owner occupants who would take better care of the community, who would protect unit values, and who would volunteer to assist the association. Because an association cannot require an owner to occupy a unit, the solution was to restrict leasing. Thus, two-thirds of the owners amended the Declaration to limit the leasing of units to no more than nine months in any given year.

Two unit owners who bought their units as investments to lease before the amendment sued to have the amendment declared invalid. Agreeing with the investor owners, the trial court and the Second District Court of Appeal ruled the lease restriction could not be enforced against the two owners because the restriction was adopted after the two owners purchased their units (See May 2000, Memorandum to Clients). The Association appealed to the Supreme Court. The high court agreed to hear the case because of a conflict with decisions from other appellate courts which upheld the validity of amendments imposing lease restrictions on owners.

The Supreme Court recognized that the majority of courts in other states have held that amendments restricting leasing could be enforced against owners who purchased their units before the amendment was adopted. The Court explained that the investor owners knew when they purchased their units that the Declaration could be amended and that they would be bound by any amendments. The Court recognized the special concept of condominium living:

It is apparent from the circumstances giving rise to its adoption that the amendment was intended to promote owner occupancy of the condominium units, a goal certainly consistent with the concept of condominium living as originally contemplated by the legislation authorizing the condominium form of land ownership. ... Indeed, it is restrictions such as these that distinguish condominium living from rental apartments or single-family residences.

Thus, condominium developments appear to justify a higher level of regulation.

The Court acknowledged the concerns raised by the investor owners as valid. However, the Court determined that it is up to the legislature to limit the authority of unit owners to amend their declarations. In answering the question of how far two-thirds of the condominium owners can go in restricting leasing rights of all unit owners, the court stated as follows:

Although we believe such concerns are not without merit, we are constrained to the view that they are better addressed by the Legislature. If condominium owners are to be restrained in their enactment of such lease restrictions, it is appropriate that such restraint be set out in the legislative scheme that created and regulates condominiums and condominium living.

One Justice in a concurring opinion went one step further and specifically called on the legislature to place restrictions on condominium owners= ability to alter the rights of existing owners.

The Woodside decision arose in the context of condominium unit leasing; nonetheless, the decision=s rationale should extend to homeowners= and cooperative associations. Associations considering similar restrictions on leasing should remember that the Court first examined the amendment process to determine whether Woodside Village followed its declaration=s procedures. Feel free to contact the firm with your questions.

FIRM NEWS

Please clap your hands for our attorneys Ilisa L. Carlton and Christopher J. Schuster who were recently admitted to practice before the U.S. District Court for the Southern District of Florida.

Please note that the firm will be closed in recognition of the national and state observance of President=s Day on Monday, February 18, 2002.

8 2002 by Gelfand & Arpe, P.A.