FLORIDA’S 3RD DISTRICT COURT OF APPEAL SAYS 100% MEANS 100%

The Facts: Unit owner Angelica Avila and several other unit owners at the Biscayne 21 Condominium didn’t take the money. Instead, the Owners voted against selling their units to TRD Biscayne, LLC, a developer attempting to terminate the condominium to redevelop and resell the property.

Don’t miss yesterday’s Condo Craze and HOAs episode where we break it all down.

The declaration of condominium required the unanimous assent of all unit owners to terminate the condominium. But the Association, acting on behalf of TRD Biscayne and now the owner of most of the units, didn’t take no for an answer. Instead, the Association amended the declaration to change the unanimity requirement in the declaration to the current statutory floor of at least 80% of the unit owners’ assent to terminate the condominium. The Owners filed suit and sought an injunction to block this change and the resulting termination, arguing that the declaration contained provisions requiring unanimity to terminate the condominium or amend any provision that impacts the voting rights of the unit owners.

Important to note is that the condominium was built in 1974, and the declaration of condominium did not contain Kaufman language or “as amended from time to time” language incorporating future amendments to The Florida Condominium Act.  The Condominium Act in 1974 required unanimity in order to terminate.

The court first noted that the declaration had a clause which stated that “an amendment altering.. .the voting rights of any of the Owners of the Condominium . . . shall require the approval of one hundred (100%) percent of the Owners.   The 3^rd DCA first opined that decreasing the percentage required for termination was an amendment that impacts the voting rights of the unit owners and therefore unanimity was required.

Just like is happening all over our state, over time, the developer accumulated more and more units.  Then, when it owned enough units to amend the declaration, voted to amend the declaration to reduce the unanimity requirement to only 80% as allowed under the current termination provision of The Condominium Act.  The association then approved a plan of termination thus forcing the owners’ hand to file a lawsuit in order to prevent the termination.

The unit owners argued that the amendment to the declaration voided their right to veto a termination and therefore materially altered their voting rights.  The developer claimed this was nonsense because the owners still had the right to vote; therefore their voting rights were not materially altered.  The court held that by requiring a unanimous vote for termination, the declaration originally gave every unit owner an effective veto over any termination plan, which would be lost if the amendments at issue here were enforced.  The court agreed that while the Owners’ voting rights aren’t eliminated, they surely have been changed, modified, or made different in some particular characteristic—they no longer have the characteristic of a veto.  Comparing the present situation to others involving federal elections, the court held that the attempt to alter the declaration was clearly an illegal attempt to dilute the voting rights of the owners and clearly the voting rights of the owners were materially altered because of the amendment to the declaration.

It's no secret that developers smell blood in the water.  They know that in condominiums that are at least 30 years old, the owners will have to pony up funds for:

1.  A Phase One Study by an architect or engineer;

2.  Most likely a Phase Two Study by an architect or engineer;

3.  Mandatory Repairs required to pass the Milestone Inspection;

4.  Mandatory Reserve Studies;

5.  The mandatory contribution of reserves contained in the Structural Integrity Reserve Study;

6.  Massive insurance payments;

7.  For some high-rise condominiums, mandatory installation of fire sprinklers or an Engineered Life Safety System.

Paying these bills will not be easy for the owners, many of whom will look to sell to developers.  Is it fair for a few owners or even one owner to refuse to sell to the developer thus prohibiting everyone else from terminating the condo?  If you think so, understand that one owner may cause many others to go into foreclosure.  Or, do we take the position that the documents say what they say and that’s it?

Well, the 3^rd DCA thought these issues are so significant that it certified the following questions to The Florida Supreme Court:

MAY AN AMENDMENT ALTERING THE VOTING THRESHOLD REQUIRED TO TERMINATE A CONDOMINIUM PASS WITHOUT UNANIMOUS APPROVAL WHERE A CONDOMINIUM DECLARATION BOTH: (1) REQUIRES THE UNANIMOUS APPROVAL OF THE UNIT OWNERS BEFORE EITHER TERMINATING THE CONDOMINIUM OR PASSING ANY AMENDMENT TO THE DECLARATION OF CONDOMINIUM ALTERING A UNIT OWNER’S “VOTING RIGHTS” AND (2) LACKS LANGUAGE PURSUANT TO KAUFMAN V. SHERE, 347 SO. 2D 627 (FLA. 3D DCA 1977), AUTOMATICALLY INCORPORATING RELEVANT STATUTORY CHANGES INTO SUCH CONTRACTUAL PROVISIONS?

         I’m guessing that within 9 months to a year, The Florida Supreme Court will answer these questions.  The answers will have massive ramifications on hundreds if not thousands of condominiums throughout the state; and it will determine whether a single owner can prevent a condo termination where everyone else wants out, desperately.