Florida HOA Lawyer Blog

The law firm of Siegfried, Rivera, Lerner, De La Torre & Sobel would like to congratulate our associate attorney Georg Ketelhohn on being named the recipient of the 2011 Eddy McIntyre Community Service Award by the National Gay and Lesbian Task Force. We are very proud to have Georg as a member of the firm.

Here's an excerpt from The Miami Herald's "Gay South Florida" blog on the announcement along with a link to the complete article:

WASHINGTON, May 11 -- The National Gay and Lesbian Task Force announced today that it will honor Georg Ketelhohn at the 15th annual Miami Recognition Dinner on Saturday, Oct. 15, at the Fontainebleau Miami Beach. This major fundraising event recognizes individuals for their outstanding contributions to the social, cultural, political and humanitarian needs of the lesbian, gay, bisexual and transgender (LGBT) community.

"Georg is the consummate activist. He sacrificed his law career to co-chair the successful campaign to defend the Human Rights Ordinance against repeal," says Liebe Gadinsky, Task Force board member. "It was then that he became a hero to me and countless others, who may not know him but will forever benefit from his leadership, dedication and brilliance."

Ketelhohn, who will receive the 2011 Eddy McIntyre Community Service Award, is a litigator with the firm of Siegfried, Rivera, Lerner, De La Torre & Sobel, P.A., and serves as board treasurer for Florida Together, Florida's statewide federation of LGBT and allied organizations.

Click here to see the full story on The Miami Herald's blog.

For some time now an association assessment debtor was precluded from arguing that their failure to pay assessments which led to their association's foreclosure of the debtor's unit (or lot) was due to the association's failure to maintain the common areas. In other words, an owner's failure to pay assessments could not be justified on the basis of the association's failure to perform its duties. In far simpler terms, the courts have held that the ol' "tit for tat" argument was not sufficient to avoid paying assessments.

In the 1987 case of Abbey Park HOA v. Bowen, the 4th District Court of Appeal held just that. In this seminal case, Bowen failed to pay her monthly assessments, which resulted in Abbey Park HOA filing an action to foreclose its claim of lien against Bowen. In response, Bowen filed an answer, affirmative defense and counter claim. The affirmative defense asserted that Bowen was not liable for the assessments because Abbey Park failed to maintain the common elements as per the declaration of covenants. The counter claim sought a mandatory permanent injunction to compel Abbey Park to maintain the common elements and damages for Abbey Park's alleged breach of the declaration.

In reliance on an earlier 1980 4th DCA opinion, Sandles v. Sheridan Lakes, the 4th DCA held that the affirmative defense of failure to maintain the common elements "is inadequate as a matter of law." Since then, courts have routinely held that an association's failure to maintain common elements is not a viable excuse to avoid paying assessments.

Fast forward to a brand new decision, E. Qualcomm v. Global, issued April 27, 2011: In this very recent 4th DCA case where the court's opinion is still wet on the page and the parties still have time to appeal, the assessment debtors alleged as an affirmative defense that their association failed to maintain the common areas and, as a result, the owner was entitled to a "set-off." The owner also raised a counter claim for the association's alleged failure to maintain the common areas.

You're right if you think this sounds familiar to the Abbey Park case. So why did the 4th DCA reverse the trial court's summary judgment ruling entered in favor of the plaintiff/association? Some might argue that this new case eviscerates Abbey Park.

Whoaa... slow down!

The E. Qualcomm v. Global holding is not at all contrary to the long standing principle that a counter claim for failure to maintain common areas is not a viable defense to an association assessment foreclosure. In this recent case, while it's true the appellate court reversed the summary judgments that were granted by the trial court in favor of the association as to possible damages due to the defendant as a result of the counter claim and the association's assessment foreclosure, the appellate court did not reverse the assessment foreclosure summary judgment because the association failed to maintain the common areas. Rather, it did so because the association had not properly refuted the set off counter claim used as an affirmative defense.

The court did not even mention its own prior holding in the landmark Abbey Park case. Perhaps the court didn't do so because it wasn't necessary. Here, the appellate court reversed the partial summary judgment of foreclosure in favor of the association because it found the association had not properly refuted them. Maybe if the association had argued the rationale of Abbey Park during its summary judgment hearing, then if the trial court had included a detailed discussion of the effect of Abbey Park in its resulting order, perhaps at least the partial summary judgment of foreclosure entered on behalf of the association would have survived?

In any event, during the appeal, the defendant paid its assessment deficiency. The debtor's decision to pay the back assessments due and owing could also be the reason why the appellate court did not rely on its prior Abbey Park decision. It did not have to, as the issue was mooted by the debtor's payment (or, could it be the result of the fact that the lawyer who initially lost the trial court portion of the Abbey Park case is now a sitting judge on the 4th DCA?). Sadly, this also means that we'll never get the needed clarity, and this case will, no doubt, be misconstrued to mean something contrary to what it actually does mean. Nevertheless, the decision does highlight yet another reason for associations to properly maintain the common areas/elements.

The community association attorneys at our firm have seen our share of delay tactics and legal ploys by lenders in the aftermath of the robosigner-fueled faulty foreclosures that clog the courts. However, the opinion filed today by the Third District Court of Appeal has caught our collective attention as one of the most glaring examples of the problems with lenders' blatant disregard for following the most basic and essential rules of the entire process.

The ruling should prove embarrassing for Citibank, as it paints the picture of a financial institution's improper attempts to promote its own interests, much to the obvious detriment of a condominium association. In the ruling, the court chronicles a history of disturbing facts about how Citibank managed to maintain a condominium at the Jade Winds Association in an "extended limbo" since April 2009.

The Third District details how Citibank failed to notify the attorneys for the condominium association of its Emergency Motion to Cancel and Reschedule Foreclosure Sale, which Citibank's attorney presented to the court at the last minute on the date of the sale in October 2010. In addition, Citibank asserted that it needed additional time to determine whether the defendant qualifies for a loan modification, which was completely false and misleading since the condominium association held title to the residence as of August 2009.

Notably, the court observes that: "Unfortunately, the irregularities did not end there." The condominium association filed and won a Motion for Sanctions against Citibank, which also provided that "the court further orders that the sale scheduled for January 4, 2011, SHALL NOT be cancelled." Appallingly, less than a month after this order on December 30, 2010, Citibank filed a second Motion to Cancel, this time requesting that the sale be postponed until after February 1, 2011, to enable it to complete its review of foreclosure documentation. This second motion omitted the fact that the sale had previously been reset with a court order indicating that it cannot be cancelled. And, true to form, Citibank again failed to mail a copy of the Motion to Cancel Sale to the attorneys for the condominium association.

The appeal comes as a result of Citibank being granted its second sale cancellation based purely upon "affidavit review" without notice to the condominium association. The court found that Citibank clearly failed in its obligation to serve the attorneys for the condominium association with the second motion and notify them of the hearing. Highlighting Citibank's misconduct, the court observed that "Citibank knew that its actions were inappropriate." The Third District concluded that "[b]ased on Citibank's actions, this condominium unit has basically been in extended limbo since April 2009, which is when the final judgment of foreclosure was entered in favor of Citibank. It is time for this condominium unit to be sold."

In addition to reversing the court order on the second Motion to Cancel and issuing directions to set the foreclosure sale, the opinion also states that "the Division Circuit Court judge and/or Foreclosure Master Calendar judge are free to impose appropriate sanctions against Citibank and/or its counsel based on the aforementioned conduct."

This decision is emblematic of the severe problems with the banks' handling of foreclosures in the wake of the meltdown in the housing market. This type of misconduct hinders the recovery in residential real estate that is starting to take hold, and it is our hope that cases such as this will serve to expose banks for their appalling and embarrassing misconduct.

In the case of Susan Cohn v. The Grand Condominium Association, Inc., the Florida Supreme Court affirmed the opinion of the Third District Court of Appeal, finding that a 2007 amendment to Section 718.404, Florida Statutes, was unconstitutional as applied to The Grand Condominium Association ("The Grand"). Siegfried Rivera Lerner De La Torre and Sobel P.A., represented PH Hotel, Inc. and PH Retail, Inc., the owners of all of the commercial and retail units at the property, who had a significant stake in the outcome of the appeal .

In 1995, the legislature enacted laws which addressed association voting and provided that ". . . where the number of residential units in the condominium equals or exceeds 50 percent of the total units operated by the association, owners of the residential units shall be entitled to vote for a majority of the seats on the board of administration." Because The Grand's declaration was recorded in 1986, this section never applied to it. However, in 2007 the legislature amended this law to add that "[t]his subsection shall apply retroactively as a remedial measure."

Because this amendment would require that the voting scheme at The Grand be changed, the association filed suit seeking a declaration from the court that the amendment was an unconstitutional impairment of contract (a Declaration of Condominium operates as a contract). The circuit court found that the amendment, as applied to The Grand, was unconstitutional. Cohn appealed, and the Third District Court of Appeal affirmed the lower court's ruling. Cohn then appealed to the Supreme Court, which also affirmed the decision stating that because the amendment would change the distribution of voting power, the retroactive application of this section of the Florida Statutes must be invalidated because it constituted an impairment of the obligation of contract.

In analyzing the application of the 2007 amendment to The Grand's Declaration, the court applied the three step balancing test set forth in the landmark case of Pomponio v. Claridge of Pompano Condo., Inc. in order to determine whether the amendment was constitutional (and therefore did not impair the contractual rights of the parties).

The first question for the court to answer was: "Was the law enacted to deal with a broad, generalized economic or social problem?" The court answered the question in the negative as there was no explanation ever given as to why the "retroactive" provision was enacted.

The second question for the court to answer was: "Does the law operate in an area which was already subject to state regulation at the time the parties' contractual obligations were originally undertaken, or does it invade an area never before subject to regulation by the state?" The court answered the second question in the negative. When The Grand was organized in 1986, the Condominium Act was in effect. However, legislation regarding mixed-use condominiums did not come into existence until 1995. Because of the specific language in The Grand's Declaration stating that it was subject to the terms of "the Condominium Act of the State of Florida in effect as of the date of recording this Declaration," the Supreme Court found that the amendment did not apply to The Grand.

The third and last question for the court to answer was: "Does the law effect a temporary alteration of the contractual relationships of those within its coverage, or does it work a severe, permanent, and immediate change in those relationships irrevocably and retroactively?" The court found that the amendment would be "severe, permanent, and immediate."

In its analysis, the Third District Court of Appeal stated that "voting arrangements in a condominium are of great importance, and the change imposed by subsection 718.404(2) operates as a substantial impairment of the existing contractual relationship." For PH Hotel and PH Retail, a change in the voting scheme of The Grand would have been severe, permanent and immediate, as their voting rights (2 commercial votes and 2 retail votes) on The Grand's Board would have been obliterated.

Cohn has since filed a Motion for Rehearing of the Supreme Court's opinion, making arguments such as: "Condominiums are no longer subject to the legislature's regulation and control . . . The 4th DCA previously warned of the danger of locking condominiums into the laws in existence as of the date the declaration is recorded . . . Citizens now have no idea what laws apply to them . . . Developers now get to determine the extent of the legislature's authority . . . Condominiums are now the only entity or industry that decides for itself whether or not to be bound by new laws . . . Elimination of police powers . . . Heavily regulation (sic) industries can no longer be regulated."

The fact that the Supreme Court found an amendment to the Condominium Act to be unconstitutional - as it applied to The Grand - does not render the entire Act meaningless. There are hundreds of thousands of condominiums in Florida that do not have "amendment" language in their governing documents, and it was likely not the intent of the Supreme Court to invalidate the Condominium Act as it applies to them.

What it does mean, however, is that any new amendment at issue in a particular condominium is going to have to be analyzed on a case by case basis applying the three-step test set forth in Pomponio.