Article Courtesy of The Daily
Business Review
By Jeannie A. Hanrahan and Devon
A. Woolard
Published January 16, 2017
Homeowner association board members and their attorneys can
breathe easier now that two Florida appeals courts have clarified the deadline
for challenging an association's governing documents. Through an affirmative
defense based on time limitations, associations should see quick, concise and
more cost-effective resolution of lawsuits brought by condominium owners and
homeowners who question the validity of the governing documents of their
communities.
The recent court rulings establish that any challenge to the governing documents
must be brought within five years of their recording or, in certain situations,
five years from the date in which the challenger takes title to the property if
subsequent to the recording.
Florida's First District Court of Appeal brought clarification to this issue in
February 2016. A husband and wife had sued their HOA in July 2013 challenging
the validity of amendments to the HOA's restrictive covenants that were passed
in 2001 and 2005. The trial court ruled the amendments were not properly voted
on and invalidated both.
Subsequently, another homeowner entered the case and appealed to the First DCA,
claiming that the lawsuit was filed long after the five-year time limit on both
amendments had expired. Interestingly, the HOA did not present that defense at
trial. It became an issue only when the trial judge allowed the other homeowners
to intervene.
The appeals court found that the time limitation had in fact expired. Its
rationale was founded in part on a section of Florida statutes which provides
that "legal or equitable action on a contract, obligation or liability founded
on a written instrument ... shall be commenced within five years." The decision
was also based on one of its opinions issued in 2015 regarding the statute of
limitations and on a 2014 ruling by the Fourth District Court of Appeal.
In the case resulting in the 2015 opinion, a developer had recorded an amendment
to the restrictive covenants in December 2000. In March 2009, the HOA challenged
the validity of the amendment. The court held the association had failed to act
within the five-year time limit. It said that whether one is a condominium
association governed by Florida Statutes Chapter 718 or a homeowner association
governed by Florida Statutes Chapter 720 is determined by the association's
governing documents, including declarations, bylaws and articles of
incorporation including any amendments. Once a governing document or amendment
is recorded, the clock starts to run on a challenger's ability to contest the
validity of its controlling instrument.
Time Limit
The 2014 Fourth DCA ruling further solidifies the foundation on which HOAs and
others can turn back challenges to their governing documents based on the time
limit. The Fourth DCA held the five-year statute of limitations barred a
homeowner from contesting the validity of the association's membership
requirement.
In that case, the individual purchased a home in 2006 in a community that had an
HOA for its neighborhood and a master property owners' association, or POA, in a
development that had a mandatory membership requirement in a golf and country
club. In 2005, the HOA sued the POA over the latter's new requirement that every
homeowner join the club and pay dues. The country club joined the lawsuit, and a
settlement in 2010 required those who bought a home within the HOA after 2004
join the club and pay dues retroactive to their closing date.
That did not sit well with one HOA member, who later sued on three counts,
including one alleging the membership amendment was improperly enacted. The POA
argued the statute of limitations had expired and the trial court agreed, saying
the clock began ticking when the amendment was recorded in 2004 yet the lawsuit
was not filed until 2010.
The homeowner appealed to the Fourth DCA, which affirmed the trial court's
ruling after a rehearing. The opinion stated in part that "the statute of
limitations with respect to such a challenge began to run from the 2004 date the
amendment was recorded in the public records."
Both sides had agreed that the Florida statute regarding the five-year limit
applied. The appeals court rejected the argument that the clock started when the
home was purchased. It cited a Second DCA ruling involving financing of road
improvements in which the appeals court ruled that the clock runs either from
the date the assessments were created or the date they were approved.
The Fourth DCA also looked back to one of its prior opinions involving a
condominium development dispute in which the court had written: "Parties
engaging in transactions regarding real property must rely on the recorded
instruments affecting title to property. Where, as here, an amendment submitting
property to the condominium form of ownership has been recorded, it is a notice
to the world that the property is subject to all of the provisions and
regulations of the declaration."
HOAs and their attorneys can learn several lessons from the First and Fourth DCA
opinions. First, the start date is critical to any defense that the time limit
has expired. Second, documents need to be properly recorded so that there can be
no ambiguity as to that date. Armed with a precise calendar, associations can
defeat claims challenging the validity of their governing documents regardless
of their merit. |