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A Few Notes About the Florida Supreme Court Ruling in Cohn v. The Grand CAI
Lisa Magill
April 20, 2011
The Cohn decision follows long-standing precedent in Florida regarding the applicability of statutory amendments to condominium or community association operations. If the governing documents of the association contain "magic language" incorporating statutes (in this case, the Condominium Act) as amended from time to time, statutory changes impact operations, rights and obligations of owners, the association governing the owners and, in some cases, third party vendors or service providers.
With this recent ruling by the Florida Supreme Court you've probably heard statements similar to those below over the past month or so:
"Florida legislators cannot impair contract rights. Since the declaration for my condominium doesn't limit co-owners from serving on the board together, my wife and I are entitled to both serve at the same time if we are elected."
"Since the declaration for my condominium does not allow the board to suspend my use rights, I am entitled to use any part of the common areas. It doesn't matter whether I pay assessments or not."
"The declaration doesn't include amendments to the law, therefore this board doesn't need to bother with the so called 'mandatory' arbitration process, we go straight to a lawsuit to address owner violations."
I've thus far refrained from providing an analysis of the case on this blog. Since the ruling seems to have created somewhat of a panic among community leaders and managers, a discussion of the broader issue is appropriate.
Article I, Section 10, of the Florida Constitution prohibits the legislature from passing a law “impairing the obligation of contracts”. The U.S. Constitution does pretty much the same. Declarations of community associations are considered, for most purposes, to be contract. So, the general rule is new laws cannot change the specific rights and obligations set forth in community association Declarations. However, like all general rules in the law, there are exceptions. The three major exceptions (that come into play most often with respect to community associations) are:
The "Magic Language" Exception:
This is basically an agreement to be bound by future changes to the law. The Florida Supreme Court explained that both state and federal court cases in Florida have held that parties to a contract (declaration) voluntarily decide whether the details are protected or allow for future changes to the law. By incorporating the law "as amended from time to time" in the governing documents, the parties (owners, the declarant, the association) agree that the declaration is subject to future changes in the law.
The Procedural/Remedial vs. Substantive Exception:
This provision in the constitution has been interpreted, by the courts, to only prohibit legislative changes to pre-existing “substantive” contract right. In very general terms, substantive laws address rights and obligations, while procedural laws describe the manner in which those rights and responsibilities are exercised (procedure) and enforced (remedy). The analysis necessary to determine what is considered "substantive" and what is considered either "procedural" or "remedial" is often tricky. Disagreements whether something is substantive or procedural/remedial often wind up in the courts (including the dispute in the Cohn case over allocation of voting rights). This new case reminds us to conduct the analysis before automatically acting as if the new law controls, especially when the governing documents do not contain the "magic language" referenced above.
The Compelling Public Purpose Exception:
Just because a law impairs a substantive contract right doesn't mean it is always unconstitutional (either on a state or federal level). If it can be shown the law is necessary or appropriate to achieve some compelling public purpose, it will trump pre-existing contracts. Think about minimum wage or child labor laws. Think about housing discrimination laws or life and safety regulations. It was not unusual for early deed restrictions to prohibit people of color (not stated that way) from buying property or living in a community. It was and still is not unusual for state and local governments to adopt new building codes for life and safety purposes that apply to existing buildings.
Now, think about the ruling from the other end of the spectrum. If new laws didn't apply to existing communities (unless there was "magic language") many owners would not have the right:
- to attend or participate at board meetings
- to review financial records
- to display the U.S. flag
- to invite public officials or candidates to speak
- to prevent the board from materially altering or substantially changing condominium common elements
- to install hurricane shutters and much, much more
Consequently, there is no reason to be overly alarmed as a result of this Florida Supreme Court ruling. Yes; you may want to discuss the pros and cons of adding language to the governing documents to incorporates future statutory changes with counsel. Yes; you should consult with counsel before taking action solely in reliance on the language contained in new laws. However, you should not automatically assume none of the laws apply to you (as owners, community leaders, managers, etc.) simply because you cannot find the "amended from time to time" language in the documents governing your community.
http://www.floridacondohoalawblog.com/