If the Florida Supreme Court is bothered by its unpopularity in the Florida Legislature, its decision in Cohn v. Grand Condominium Ass’n, No. SC10-430, released last Thursday, doesn’t show it. In a case of particular relevance to Condominium Association lawyers, the Court had no trouble finding the Legislature’s 2007 amendment to Florida Statutes Section 718.404(2), which made certain Condominium Board Membership requirements apply retroactively, to be unconstitutional.
Brief Fact Summary of Cohn:
The Grand is a mixed-use condominium that was first organized in 1986. It has 1210 units, more than 2/3 of which are residential, but under the Grand’s condominium declaration, residential unit owners can hold a maximum of 3 out of 7 board seats (2 of 7 seats are allocated to commercial unit owners, 2 to retail unit owners, and a 5th seat is elected at-large). In 1986, that arrangement was kosher.
In 1995, the Florida legislature decided that such arrangements weren’t fair to residential unit owners, and passed section 718.404(2), mandating that residential unit owners must be given a majority of board seats if they own a majority of the units in a mixed-use condo. But that only applied to condominiums organized after the date of section 718.404(2)’s passage. In 2007, the legislature amended that section, in attempt to give it retroactive effect on condominiums that were already in existence.
Analysis of the Court’s Decision
Condominium associations occupy a unique area of Florida law. The peculiaraties of condominium law account for what is perhaps most notable about the Cohn decision. In most cases, declaring a statute unconstitutional is a big deal, and a step that courts try to avoid. But the Court in Cohn had so little trouble reaching that result that it addressed the issue in a short per curium opinion.
The reason may be that Cohn is, in a sense, no more than a new application of long-established principles of Florida condominium law. The Court has long held that condominium declarations are treated as establishing a set contractual relationship that sets terms not only for the first purchasers, but for all subsequent owners.
It has also made clear over and again that the precise terms of the declaration, and the law in effect at the time that the declaration was made, rather than the current state of the law, forever govern that relationship, unless the declaration includes language indicating the intent to incorporate statutory amendments. And if that language is absent, the Florida Constitution renders the legislature utterly powerless to “impair” the contractual rights of any party by changing anything about the relationship of condominium unit owners.
Condominium unit owners are in a unique relationship, the Court has explained, and the nature of that relationship requires that the bargain unit owners entered into from the start be preserved, in all its details, whether or not the law changes over time.
From that perspective it is not so hard to understand why the Court so matter-of-factly concluded that Section 718.404(2)’s board representation rules could not be applied to a condominium, like the Grand, which is governed by a declaration that predates the enactment of those rules.
But it is interesting to compare this result — affirming that the Court will preserve condominiums’ status quo setup in order not to deprive owners of what they paid for — with the Court’s 2003 decision in Woodside Village Condominium Ass’n v. Jahren, 806 So.2d 452 (Fla. 2002). In Woodside, the Court held that a condominium association, by amending the declaration, could deprive other unit owners — investors who had relied on the declaration’s provision allowing owners to rent out their units and purchased units for that express purpose — of their ability to rent out their units. Reading these decisions together, it seems that for condominium unit owners, what the legislature can’t take away, your neighbors can!
But looking a bit deeper at the Court’s reasoning in both cases, the ultimate deciding factor in each was the language of the condominium declarations at issue. In Woodside, the declaration broadly allowed amendments so long as the right procedures were followed. By contrast, in Cohn, the declaration did not specifically incorporate changes in the law into the Declaration.
The lesson from both cases then is the same: before you purchase a condominium, make sure you read every last word of the fine print! And if you are drafting a Declaration for a client, be careful about how you indicate what (if any) statutory changes, and to what potential amendments to the declaration, should be part of the arrangement.