August 2006

Vol. XVI No. 8

STOP THE PRESSES:

GOVERNOR VETOES COMMUNITY ASSOCIATION LEGISLATION

Each of the bills summarized in the firm=s 2006 Legislative Update were signed by the governor except the two bills that would have had the greatest impact upon community associations.

The Governor vetoed House Bill 391 and Senate Bill 1556. The former bill would have significantly changed the Condominium, Homeowners= and Cooperative Acts. The latter bill would have reformed the method of terminating condominiums.

Both bills are the subject of hearings by the Department of Business and Professional Regulation. Hearings have begun in many localities. Comments can be provided through the State of Florida=s internet website.

Copies of the 2006 Legislative Update summary and each of the new laws together with the Governor=s veto messages can be found at the firm=s website, www.gelfandarpe.com. Simply click on the ASpecial 2006 Statutory Update Materials@ tab for bill text.

TAXATION: DOCK RENTERS MAY NOT HAVE TO PAY TAXES

Living in South Florida, many communities are located adjacent to water. Many of these communities facilitate boat use by providing either Awet slips@ or Adry slips.@ A wet slip is located in the water where a boat is moored. A dry slip is a located on land where a boat is stored.

In the quest for new revenues, the State has started to tax some community=s slips. Can these slips be taxed as real property? The answer may depend on whether the slip is Awet@ or Adry,@ and if wet, then who owns the sea bottom under the slip.

In Burklow & Associates, Inc. v. Brown, 31 Fla. L. Weekly D1634 (Fla. 1^st DCA, June 14, 2006), the owners of wet slips located at a yacht club filed an action challenging the property appraiser=s Areal property@ tax assessments levied against the 40 wet slip renters. The wet slips were leased from the State of Florida to the yacht club for five years. The lease provided that the wet slips could never be owned by the renters, the State retaining ownership.

The yacht club consisted of an office building, a parking lot and a large structure containing 129 dry slips. The dry slips were owned as condominium units; thus, the unit owners were taxed on their ownership of real property. The yacht club sublet the wet slips to renters who had the right to use the yacht club property.

The property appraiser levied Areal property@ tax assessments against the renters relying on the amounts paid to sublease the wet slips. The renters argued that the property appraiser erred in assessing the wet slips as real property instead of personal property. The trial court issued a judgment holding the wet slip tax valid.

The Florida appellate court disagreed and reversed the decision of the trial court. The appellate court found that the wet slip owners did not have an ownership interest in real property; thus, the property appraiser erroneously assessed the wet slips as real property. The court pointed out that a leasehold estate in real property owned by the State of Florida can only be taxed as Aintangible personal property.@

Associations and others having docks on waterways leased from the State should check their tax returns to verify they are not being erroneously assessed for real estate taxes.

CONTRACTS: A FLORIDA CLAIMANT MAY HAVE TO FILE A LAWSUIT IN ANOTHER STATE

What happens if a dispute arises with a company which you hired? The phenomenal increase in interstate commerce, especially due to the internet and other inexpensive communications may mean the company Anext door@ may be in the next state! Thus, before signing a contract or Aclicking@ accept, read the contract carefully because it may contain a clause that provides that lawsuits can only be filed in another state.

In DVDPLAY, INC. v. DVD 123 LLC, 31 Fla. L. Weekly D1508 (Fla. 3^rd DCA, May 31, 2006), a Florida appellate court ruled that the contract contained a Aforum selection@ clause which required that lawsuits be filed in California. DVDPlay, a Delaware corporation principally located in California, entered into a franchise agreement with DVD 123 LLC, a Florida limited liability company for the operation of kiosks that rent and sell DVDs.

Following a dispute among the parties, DVD 123 sued DVDPlay in a Florida circuit court. DVDPlay filed a motion to dismiss for improper venue, a procedure asserting that the lawsuit was filed in the wrong place. The trial court found that DVDPlay repudiated the agreement; thus, it could not rely on the clause in the agreement which stated lawsuits had to be filed in California.

The Florida appellate court held that the Aforum selection@ clause, which tells the parties where they have to file a legal action, survived either party=s failure to perform under the franchise agreement. The appellate court found that the language of the franchise agreement indicated the parties intended that the forum selection clause survive the termination of the franchise agreement. The appellate court reversed the order of the trial court and remanded for entry of dismissal for improper venue.

This decision emphasizes the importance of reading contracts before signing so that you do not inadvertently give up rights. Here, the Florida limited liability company gave up its right to sue in a Florida court.

ANNUAL MEETINGS

As a reminder, Associations should schedule annual meetings far enough in advance to ensure that a location for the meeting is available and that counsel is available to attend. It is not too early to schedule for 2007 meetings because many dates have been reserved.

The firm is proud to announce the selection of Michael J. Gelfand as a member of the >Florida Legal Elite= as published in Florida Trend. The selection is notable because it represents peer recognition for lawyers whom other lawyers hold in the highest regard and with whom they have worked or would recommend to others.

On August 11, 2006, Michael Gelfand will be lecturing at the Florida Bar=s Real Property, Probate & Trust Law Section=s 26^th Annual Legislative and Recent Case Law Update on AMorphing Condominium Law into Homeowners= Associations.@ To register, please contact The Florida Bar at www.flabar.org.

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s information is provided for general information purposes only, may no 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.