March 2003

MEMORANDUM TO CLIENTS

RESTRICTIVE COVENANTS: MAY RESTRICTIONS BE ABANDONED?

What happens if an owner builds a home too close to the street in violation of the community association’s set-back restrictions? The answer may depend on whether others in the community have also built homes in violation of the restrictions. An association may lose its ability to enforce its restrictions if too many properties violate the set-back restrictions.

A Florida appellate court recently addressed a situation where homeowners built their home in violation of an association’s set-back restrictions. In Payne v. Cudjoe Gardens Property Owners Association, Inc., 28 Fla. L. Weekly D1 (Fla. 3^rd DCA, December 18, 2002), the Association sued the homeowners to enforce deed restriction set-back requirements. The Association claimed the homeowners built their home without first submitting building plans to the Association for approval. The restrictions subjected the property to set-back restrictions and provided that all building plans for new homes or modifications to existing homes be approved by the Association.

The homeowners asserted that because many other homeowners were also in violation of the deed restrictions, the Association could not enforce the restrictions against them. Aerial photographs of the subdivision confirmed the existence of sixty-four violations. Other violators were also identified. The homeowners sought the disclosure of information and documents from the Association relating to earlier set-back waivers and variances. The trial court granted summary judgment in favor of the Association because the homeowners, before building their home, failed to submit building plans to the Association along with a request for a variance to the set-back requirements.

On appeal, the homeowners argued that they were entitled to information and documents relating to earlier waivers and variances to determine whether other property owners were granted variances even though they did not submit building plans prior to construction. The appeals court agreed that the homeowners were entitled to the information in order to prove their case and reversed the trial court’s decision. The court pointed out that the homeowners were not the only property owners whose property violated the set-back requirements. "In short, the purpose of the restriction, where 68 properties are in violation, is difficult to defend at this juncture," the court stated.

The appellate courts may be recognizing "abandonment" as a new defense to restriction violation complaints. This appears different from the waiver defense which requires the intentional relinquishment of a right. This also appears different from selective enforcement which requires a reasonable reliance on association conduct by a homeowner before the violation. Abandonment would require no association action at all. It is an association’s "inaction" that may lead to the defense.

The Payne decision emphasizes the importance of timely enforcing restrictions equally to all homeowners. If an association does not enforce its restrictions against numerous homeowners, an association risks losing the ability to enforce the restrictions down the road. Thus, it is important that associations have a set procedure for handling violations and responding to homeowners who seek variances to set-back requirements and to stick to that procedure.

CONTRACTS: A PENNY SAVED MAY BE POUND FOOLISH

What happens if you sign a document thinking it means one thing; but, what the document means is not what you think? You may stand to lose a lot of money!

A recent appellate court decision discussed the situation where a debtor executed a document acknowledging a debt and agreed the debt would be payable "upon the sale" of specifically described property. In Secretary of Veterans Affairs v. Roma, 28 Fla. L. Weekly D349 (Fla. 5^th DCA, January 31, 2003), the court ruled that the document, titled a "mortgage," was not in fact a mortgage but an assignment of sales proceeds. The Serdaris owed the supplier of their pizza restaurant $60,000.

The Serdaris executed an instrument which was recorded in the public records. When the property was sold, the supplier did not receive the proceeds of the sale to pay the debt. The supplier then filed suit to foreclose upon the property.

On appeal, the supplier argued the parties intended that the document be a mortgage on real estate. The court pointed out that although there was evidence that the parties intended that the instrument secure the debt, there was no evidence that the parties intended that the real estate secure the debt. The court ruled the recorded instrument was not a mortgage on real estate; thus, the property was not subject to foreclosure.

In a concurring opinion, Judge Pleus pointed out that this was a good example of what can happen when you try to save on attorney’s fees. The Roma decision emphasizes the importance of reviewing all documents carefully and thoroughly before execution.

FIRM NEWS

The firm is pleased to announce that Jason H. Carls has become an associate attorney. Jason received his Juris Doctorate from Fordham University School of Law and his bachelor’s degree, with honors, from Muhlenberg College. During law school Jason was an Associate Editor of the Environmental Law Journal and acted as mediator in small claims court. Jason is also admitted to practice law in New York and he joins the firm having experience as a lead counsel on labor issues before mediators and arbitrators.

We also congratulate Jason and his new bride, Kimberly on their recent nuptials.

This information is provided for public information purposes only and is provided without obligation or fee. It is distributed to the firm's association clients to provide a general notice of recent legal changes. This information is not to be considered as legal advice. The changes in the law may not have been reviewed by Florida courts and may be subject to further challenge. Before taking any action you are urged to consult with counsel to ensure that your legal rights are protected.

© 2003 by Gelfand & Arpe, P.A.