Category Archives: Associations (Condo / Homeowners)

ASSOCIATION BOUND BY ARBITRATION PROVISION IN PURCHASE-AND-SALE CONTRACTS AND DEEDS

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When an association files a lawsuit pertaining to matters of common interest, the lawsuit is typically filed as a class on behalf of the owners that make up the association (i.e., the association’s members).  How do you deal with an arbitration provision that is included in an owner’s purchase-and-sale agreement or recorded in the deed?  The recent opinion in Lennar Homes, LLC v. Martinique at the Oasis Neighborhood Association, Inc., 47 Fla. L. Weekly D15c (Fla 3rd DCA 2021) dealt with this exact issue with a homeowner’s association ruling that the association was required to arbitrate its latent construction defect claims against the developer (homebuilder).

In this case, a community in Miami consisted of 26 townhouse buildings.  There was a broad arbitration provision in each owner’s purchase-and-sale agreement that included disputes relating to property damage.  Further, with each closing, a special warranty deed was recorded that included a nearly identical arbitration provision.

The association became aware of latent defects relating to the exterior walls of the buildings and filed a lawsuit against the developer (homebuilder).    The developer moved to compel the dispute to arbitration which was denied by the trial court because there was no specific agreement between the association and the developer that required arbitration and the lawsuit dealt with matters that the association was obligated to maintain.

The developer appealed contending that the association was bound by the arbitration provision in its members’ (the real property owners) purchase-and-sale agreements and deeds.   The Third District Court of Appeal, relying on the Second District Court of Appeal’s decision in Pulte Home Corp. v. Vermillion Homeowners Ass’n, Inc., 109 So.3d 233, 235 (Fla. 2d DCA 2013), agreed with the developer: “Consistent with our sister court’s analysis in Pulte, we hold that the Association’s right to proceed in its representative capacity in this case required it to abide by the members’ agreement with [the developer] to arbitrate this dispute.” Lennar Homes, supra.

As an aside, the association also argued that the arbitration provision in the purchase-and-sale agreement and special warranty deed should be deemed void against public policy under Florida Statute s. 720.3075(1)(b) that provides in material part: “It is declared that the public policy of this state prohibits the inclusion or enforcement of certain types of clauses in homeowners’ association documents, including declaration of covenants, articles of incorporation, bylaws, or any other document of the association which binds members of the association, which either have the effect of or provide that: A homeowners’ association is prohibited or restricted from filing a lawsuit against the developer, or the homeowners’ association is otherwise effectively prohibited or restricted from bringing a lawsuit against the developer.”   The Third District Court of Appeal found this argument unavailing as the purchase-and-sale agreement and special warranty deed, both of which included the arbitration provision, are not association documents (e.g., declarations of covenants, articles of incorporation, bylaws, etc.).

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

CLASS ACTION CERTIFICATION BY ASSOCIATION FOR “MATTERS OF COMMON INTEREST”

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Associations have authority to pursue as a class, on behalf of all of their respective members, lawsuits “concerning members of common interest to the members.”  Fla. R. Civ. P. 1.221.   This includes, but is not limited to, the common property or the areas in which the association is responsible.   But, what about matters or elements for which the association is not responsible or does not own?  For example, issues or damages relative to a specific unit or owner that are prevalent throughout?

The Third District Court of Appeal addressed this question in Allied Tube and Conduit Corp. v. Latitude on the River Condominium Association, Inc., 45 Fla. L. Weekly D1518a (Fla. 3d DCA 2020) when in affirmed a class certification by a condominium association relating to the removal and replacement of the condominium building’s defective fire sprinkler system.    In affirming the class certification by the condominium association, the Third District maintained:

Rule 1.221 expressly authorizes condominium associations to “institute, maintain, settle, or appeal actions or hearings in its name on behalf of all association members concerning matters of common interest to the members.” “[A]s to controversies affecting the matters of common interest . . ., the condominium association, without more, should be construed to represent the class composed of its members as a matter of law.”  “[T]he common interest provision of the rule has been interpreted to permit a class action by the association for a construction defect located physically within a unit, rather than in the common elements, if the defect is prevalent throughout the building.”  We, therefore, cannot say the trial court abused its discretion in finding that damages resulting from the replacement of the fire-sprinkler system throughout the building were a matter of common interest for purposes of certification at this stage of the litigation.

Allied Tube and Conduit Corp, supra (internal citations omitted).

Without knowing more, the association was presumably seeking damages that were prevalent throughout the building but may not have been damages owned exclusively by the association.  This is the reason the association was seeking class certification.  It could be damages associated with the removal and replacement of fire sprinkler in individual units.  And, perhaps it is tied to the displacement of unit owners during this work.  Regardless, the association at the class certification hearing established that the defect and damages were prevalent throughout the building and, therefore, a matter of common interest to the association. There is great value in having the association pursue the class on behalf of all of its members opposed to individual unit owners separately suing, where certain owners may not have the economics to pursue such individual lawsuit.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

FLORIDA CONDOMINIUM ACT STATUTORY WARRANTIES — DIFFERENCE BETWEEN MANUFACTURER AND SUPPLIER

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A benefit to condominium unit owners and their associations is that Florida’s Condominium Act provides for statutory warranties that are extended from developers, the contractor, subcontractors, and suppliers. Fla. Stat. s. 718.203. These statutory warranties allow for direct breach of statutory warranty claims against the responsible party. The statutory warranties included in Florida’s Condominium Act are set forth at the bottom.

 

In The Port Marina Condominium Association, Inc. v. Roof Services, Inc., 38 Fla. L. Weekly D1876a (Fla. 4th DCA 2013), the Court discussed a breach of statutory warranty claim against a manufacturer compared to a supplier of building materials to a project. Florida’s Condominium Act does not provide a statutory warranty that extends to manufacturers. In this case, the developer hired a roofer to install a roof on boat storage building with a manufacturer guarantee from GAF (manufacturer) for the roofing product called TOPCOAT. After the condominium was turned over to the Association, leaks in the roof of the boat storage building were discovered. The Association was told that the leaks were due to the failure of the TOPCOAT product. A GAF manufacturer’s representative inspected the roof and advised that the product did not fail, rather it was the application of the product by the roofer that failed (which would not be covered by the manufacturer’s warranty, which typically does not cover workmanship).

 

The Association filed a complaint against the manufacturer (and others) for breach of the statutory warranties. The manufacturer moved to dismiss because Florida’s Condominium Act does not allow for a breach of a statutory warranty claim against a manufacturer. As it relates to a claim against a supplier, the Court explained:

 

The essential elements of a cause of action under this statutory provision against a supplier are: (1) the defendant is a supplier of materials to a condominium; (2) the materials failed to conform to the generally accepted standards of merchantability applicable to goods of that kind, or the materials failed to conform to the requirements specified in the contract; and (3) the failure of the goods to conform was a proximate cause of the plaintiff’s damages. See Leisure Resorts, 654 So.2d at 914. “Supplier” and “manufacturer” are not defined in Chapter 718, Florida Statutes. Black’s Law Dictionary defines “supplier” as “a person engaged, directly or indirectly, in the business of making a product available to consumers,” and “manufacturer” as “a person or entity engaged in producing or assembling new products.” Black’s Law Dictionary (9th ed. 2009).

 

The Port Marina Condominium, supra.

 

Whether the Association could properly assert a claim against GAF (manufacturer of TOPCOAT) is based on whether GAF was a supplier or manufacturer for purposes of the condominium project. The Court noted that the distinction would be whether GAF furnished, sold, or delivered anything to the entities involved in construction, i.e., “‘was in the business of making the product available to consumers,’” as opposed to merely “‘producing or assembling’” the product that Best Roofing, a roofing contractor [that applied the product], not a consumer, then purchased and used for the roofing project.” The Port Marina, supra.

The distinction between a supplier and manufacturer is not always clear as a manufacturer can be a supplier with respect to a given product. Typically, one would think of GAF as a roofing manufacturer where its materials are likely sold through distributors or retailers (e.g., supply companies). Where the supply company could certainly be a supplier if it sold products directly for purposes of the project, the manufacturer should not constitute a supplier.

In this case the Court allowed the Association to amend its Complaint to clarify that GAF was a supplier and not a manufacturer in order to survive a motion to dismiss. It is uncertain whether the Association pursued a claim against the manufacturer for breach of an express warranty. In particular, if the Association has an argument that the manufacturer breached the express warranty for TOPCOAT that was assigned or extended to it (oftentimes these manufacturer warranties state they are assignable or extended to the end user), then perhaps a breach of express warranty claim could have been asserted against it. While there could have been hurdles with this claim because privity of contract is generally required to assert a breach of express or implied warranty claim, this privity of contract requirement could have been negated if there was an assignable warranty.

 

Understanding the statutory warranties is important for Associations and condominium unit owners because it is a benefit that should be realized. Equally important is the manner in which allegations are pled in a complaint in order to survive any motions to dismiss and get the potentially responsible parties to the table.

 

Fla. Stat. s. 718.203

(1) The developer shall be deemed to have granted to the purchaser of each unit an implied warranty of fitness and merchantability for the purposes or uses intended as follows:

(a) As to each unit, a warranty for 3 years commencing with the completion of the building containing the unit.

(b) As to the personal property that is transferred with, or appurtenant to, each unit, a warranty which is for the same period as that provided by the manufacturer of the personal property, commencing with the date of closing of the purchase or the date of possession of the unit, whichever is earlier.

(c) As to all other improvements for the use of unit owners, a 3-year warranty commencing with the date of completion of the improvements.

(d) As to all other personal property for the use of unit owners, a warranty which shall be the same as that provided by the manufacturer of the personal property.

(e) As to the roof and structural components of a building or other improvements and as to mechanical, electrical, and plumbing elements serving improvements or a building, except mechanical elements serving only one unit, a warranty for a period beginning with the completion of construction of each building or improvement and continuing for 3 years thereafter or 1 year after owners other than the developer obtain control of the association, whichever occurs last, but in no event more than 5 years.

(f) As to all other property which is conveyed with a unit, a warranty to the initial purchaser of each unit for a period of 1 year from the date of closing of the purchase or the date of possession, whichever occurs first.

(2) The contractor, and all subcontractors and suppliers, grant to the developer and to the purchaser of each unit implied warranties of fitness as to the work performed or materials supplied by them as follows:

(a) For a period of 3 years from the date of completion of construction of a building or improvement, a warranty as to the roof and structural components of the building or improvement and mechanical and plumbing elements serving a building or an improvement, except mechanical elements serving only one unit.

(b) For a period of 1 year after completion of all construction, a warranty as to all other improvements and materials.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

HOMEOWNERS ASSOCIATIONS AND COMMON LAW IMPLIED WARRANTIES

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The Florida Supreme Court’s decision in Maronda Homes, Inc. of Florida v. Lakeview Reserve Homeowner’s Association, Inc., 38 Fla. L. Weekly S573a (Fla. 2013) has been a long awaited decision for both homeowners associations and home builders.

 

This case started when a homeowners association sued the home builder of the residential subdivision for common law breach of implied warranties of fitness and merchantability (also known as the warranty of habitability in the residential context) due to construction defects. The association asserted that infrastructure, particularly as it pertained to the storm water drainage system, was defective and was causing substantial flooding and other damage (e.g., severe soil erosion, damage to roadways, etc.).

 

The trial court entered summary judgment for the home builder finding that common law implied warranties do not extend to infrastructure, private roadways, drainage systems, retention ponds, or other common locations in a subdivision because these structures (or construction improvements) do not immediately support the homes.

 

On appeal, the Fifth District reversed the trial court holding that the common law implied warranties are applicable to the facts of the case. The Fifth District maintained that the common law implied warranties “have application to improvements to real property that not only support residences in a structural sense, but also apply to improvements which provide ‘essential services’ for the habitability of homes.” Maronda Homes, supra. Essential services for the habitability of homes include “roads for ingress and egress, drainage systems to divert flooding, retention ponds to correct water flow damage, and underground pipes (whether they be storm water or sanitary sewer pipes) which are necessary for living accommodations.” Id. In other words, the Fifth District held that the common law implied warranties apply to structures / construction improvements in a subdivision that immediately support the homes in the form of essential services. Id.

 

After the Fifth District’s holding, the Florida Legislature enacted Florida Statute s. 553.835 which it intended to apply retroactively (meaning the homeowners association would have no claims against the home builder in Maronda). This statute was enacted as a reaction to the Fifth District’s ruling to apply common law implied warranties to improvements that support the homes in a subdivision. This statute provided:

 

“There is no cause of action in law or equity to a purchaser of a home or to a homeowners association based upon the doctrine or theory of implied warranty of fitness and merchantability or habitability for damages to offsite improvements.”

 

Offsite improvements were defined in the statute as follows:

 

“(a) The street, road, driveway, sidewalk, drainage, utilities, or any other improvement or structure that is not located on or under the lot on which a new home is constructed, excluding such improvements that are shared by and part of the overall structure of two or more separately owned homes that are adjoined or attached whereby such improvements affect the fitness and merchantability or habitability of one or more of the adjoining structures; and

(b) The street, road, driveway, sidewalk, drainage, utilities, or any other improvement or structure that is located on or under the lot but that does not immediately and directly support the fitness and merchantability of the home itself.”

 

Based on this new statute, the Florida Supreme Court needed to determine (a) whether the statute applied retroactively and (b) if it did not apply retroactively, do the common law implied warranties apply to structures / construction improvements in a subdivision that immediately support the homes in the form of essential services.

 

The Florida Supreme Court, agreeing with the homeowners association, held that (a) the statute did not apply retroactively, and (b) the Fifth District’s ruling was correct with their “essential services” test or standard to “determine whether a defect in an improvement beyond the actual confines of a home impacts the habitability and residential use of the home.” Maronda Homes, supra.

 

However, what the Florida Supreme Court importantly touched upon was the enforceability or constitutionality of Florida Statute s. 553.835 moving forward. Under this new statute, if the homeowners in Maronda sued today, its common law implied warranty claims would be barred by virtue of this statute (since its claims were asserted after the enactment of the statute).

 

An important portion of the Florida Supreme Court’s opinion provides:

 

“Article I, section 21 of the Florida Constitution declares the right to access the courts, stating that ‘The courts shall be open to every person for redress of any injury, and justice shall be administered without sale, denial or delay. In Kluger v. White, 281 So.2d 1, 3-4 (Fla. 1973), this Court interpreted the meaning of the phrase ‘redress of any injury.’ It held that where a cause of action exists under the statutory or common law of Florida, the Florida Legislature may not abolish that action unless it provides a reasonable alternative for redress of injuries, or demonstrates an overpowering public necessity for its abrogation and no other means by which to meet that necessity.”

 

Here, Lakeview Reserve [association] contends that section 553.835 violates article 1, section 21, because it abolishes the cause of action for breach of the implied warranties and fails to provide a reasonable alternative or demonstrate an overpowering public necessity for that abrogation. Maronda Homes…allege that although section 553.835 curtails the cause of action for breach of the implied warranties, it preserves other viable remedies that may exist in tort, contract, or by statute, such as negligence, misrepresentation, and rescission.

 

Section 553.835 violates the right of access to courts because it attempts to abolish the common law cause of action for breach of the implied warranties for certain injuries to property. In section 553.835(4), the Legislature establishes its intent to abolish some implied warranties by expressly limiting a cause of action for their breach by eliminating “offsite improvements for that action’s scope, even if such improvements impact the on-site habitability of the home….The statute even provides that the purpose of the law is to place limitations on the applicability of the doctrine or theory of implied warranty of fitness and merchantability, and to reject the decision by the Fifth District Court of Appeal in the Maronda case. This is a clear violation of separation of powers because the Legislature does not sit as a supervising appellate court over our district courts of appeal.”

 

Based on this portion of the decision, a homeowners association that has potential claims for “offsite improvements” after the enactment of s. 553.835 may still have these common law implied warranty claims based on an argument that the statute violates constitutional rights. If the statute is determined to violate constitutional rights by trying to abrogate common law implied warranties, the association will still have to satisfy the “essential services” standard set forth by the Fifth District and approved by the Florida Supreme Court in Maronda.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

STATUTORY IMPLIED WARRANTIES FOR CONDOMINIUM ASSOCIATIONS

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Statutory implied warranties are a valuable tool for condominium associations (as well as purchasers of units) of newly formed condominiums.  The warranties provide the association with direct claims to assert against the developer, the general contractor, subcontractors, and even suppliers, if there is defect with the condominium.  The specifics of the implied warranties, and the timing as to when these statutory warranty claims must be brought, can be found in Florida’s Condominium Act, specifically Fla. Stat. s. 718.203.

 

Recently, in Harbor Landing Condominium Owners Association, Inc. v. Harbor Landing, L.L.C., 2012 WL 254971 (Fla. 1st DCA 2012), a condominium association initiated a lawsuit that included a breach of the statutory implied warranty claims provided for in Fla. Stat. s. 718.203.  The association sued, amongst other entities, the manufacturers of coating that was applied on the exterior railings.  The association argued that the statutory implied warranties extended to the manufacturer because the manufacturer was a supplier (and a statutory implied warranty claim extended to suppliers).  While there are certainly situations whereby a manufacturer could also be a supplier, in this case, the manufacturer of the coating did not supply the exterior railings.  Rather, a separate entity supplied the railings.  For this reason, the court said that the statutory implied warranties could not extend to the manufacturer of the coating applied to the railings (since a different entity supplied the railings). This ruling simply means that the association could bring the statutory warranty claim against the supplier of the railings, just not the manufacturer of the coating.

 

The relevance of this case is that if there are defects with a condominium, particularly a recently built condominium, it is important for the association (or unit owner) to seek legal counsel to best preserve rights in seeking recourse based on the defects.  This includes the appropriate entities to sue as well as the arguments / claims to include against the entities based on the asserted defects.

 

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.