Gelfand & Arpe, P. A.

 

August 2008

LEGISLATIVE UPDATE C PART III:

VETO OF HB 679 CONCERNING HOMEOWNERS= ASSOCIATIONS

With literally only moments to spare, Governor Crist vetoed House Bill 679. As our June summary repeatedly mentioned, Bills were to become effective A if signed by the Governor . ...@ In this instance, the veto blocks most of this year= s legislation intended to change the Homeowners= Association law, as well as one change to the Condominium Act= s meeting provisions. The changes to the Homeowner= s Association Act, ' 720.3085 concerning liens and foreclosures were not affected by the veto.

The Governor explained in his veto message that the legislation would exempt certain community association swimming pools from regulation. Because the pool exemption would create a substantial potential danger to the public, the Governor vetoed the Bill. It is understood that the Governor was subjected to significant lobbying concerning the pool provisions.

The Governor= s veto re-enforces the lesson that seemingly dissimilar provisions should not be combined in one bill, as well as the need for the public to confirm that bills have not been vetoed before taking action! Copies of the Governor= s Veto Message together with this year= s Bills, and new Laws are available at www.gelfandarpe.com by clicking on A Statutory Update.@

WHAT IS MATERIAL AND JUSTIFICATION TO CANCEL A SALES CONTRACT?

Is a budget a guarantee? Last year the Florida Legislature said A NO@ when amending the Condominium Act, ' 718.503 and .504. In the first test of these new provisions, an appellate court agreed with the Legislature.

Florida unit owners, associations and developers will all be affected by D&T Properties, Inc. v. Marina Grande Associates, Ltd., 33 Fla L. Weekly D1516 (Fla. 4th DCA June 11, 2008). The appellate court in one decision addressed budgeting, the Legislature= s ability to clarify a law, and the definition of a A material alteration.@ The lawsuit had its genesis in 2004 when Marina Grande Associates, a condominium developer, drafted an Offering Circular to sell units which contained a budget as required by the Condominium Act. The next year, the developer contracted to sell a unit to D&T Properties. The sale papers included the developer= s Offering Circular. Pursuant to the Condominium Act the buyer could cancel the contract if the developer made material alterations or modifications to the Offering Circular.

We witnessed after the 2004 hurricanes skyrocketing increases in Florida of association operating expenses. The increased expenses led the developer to increase its Offering Circular= s budget by thirty-six percent. In large part, the increases resulted from higher property insurance and electricity expenses. In addition, not quite ten percent of the budgeted increase was to change the standard cable television system to a A state of the art multimedia system.@ Thus, the buyer sought declaratory relief in the courts to determine whether the budget increase could be the basis for the buyer cancelling the purchase contract.

In the meantime, the Legislature amended the Florida Condominium Act= s Offering Circular requirements. The amendment specifically stated that the change was to A clarify@ the law. The legislature expressly recognized that Offering Circular budgets will change to account for expenses that increase beyond a developer= s control.

Initially, the appellate court determined that the Legislature may A clarify existing law.@ When a law is clarified, then that determination may have retroactive effect. This point is significant because the Legislature has stated in many amendments that a new law was adopted to A clarify@ the Condominium Act. Because new laws usually apply only to situations that occur after the law= s adoption, the decision confirms that clarifications may have retroactive impact.

In addition, the appellate court tackled the continuing issue of what is A material.@ To assist the decision making process, the court examined dictionary definitions. Material is not merely just something that is perceived which is a very low threshold. Instead, utilizing an A objective@ test, the court found that in this context the term A material@ meant:

Something significant, a change that would appreciatively affect or influence the function of use or appearance of the building.

This definition may be of assistance for associations that deal with architectural changes.

Interestingly, the appellate court commented that internet access is becoming a necessity of modern life. Thus, adding internet service expenses would not be a material alteration of the budget under the circumstances. While the 21st Century has brought many changes, the judicial recognition of the importance of internet access may be significant.

Thus, all who participate in Florida community association governance will find this decision of interest. Florida condominium and homeowners associations will appreciate the narrower definition of what is material. Computer afficionados will appreciate the recognition of the internet= s status.

this information is provided for general information purposes only, and may not be relied upon and is provided without obligation or fee. It is distributed to the firm's association clients to provide a general comment of recent legal changes. This information is not legal advice, representation counsel or opinion. 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.

8 2008 by Gelfand & Arpe, P.A.