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Determining whether your Master Association is an HOA or a Condo - April 26th, 2017

April 26 th, 2017

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Cuevas, Garcia & Torres, P.A.

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Andrew Cuevas, Esq. - President
e-mail: acuevas@cuevaslaw.com

Tel: (305) 461-9500
Fax: (305) 448-7300

Introduction

Mr. Andrew Cuevas, Esq., is the President of Cuevas, Garcia & Torres, P.A., and Vantage Property Title Company. Cuevas, Garcia & Torres, P.A., provides legal services in the areas of Community Association Law, Corporate Law, Real Estate law, and Business Immigration, including title insurance services through Vantage Property Title Company. If you have any questions regarding this article or any other questions, you may contact Mr. Cuevas at (305) 461-9500 or via e-mail at acuevas@cuevaslaw.com. If you are interested in reading previous newsletters, please visit Newsletters, and then choose the area of law you are interested in.

Determining whether your Master Association is an HOA or a Condo

As a Member of the Real Property and Probate Section of the Florida Bar, the communications shared among attorneys at times brings to my attention interesting issues being faced by my colleagues. One recent exchange was whether the Master Association of a community, which had various subassociations, should be treated as a Home Owner Association pursuant to Florida Statute Chapter 720 (the "HOA Act") or as a Condominium Association pursuant to Florida Statute Chapter 718 (the "Condo Act"). The Developer, as explained by one of my colleagues, had created the Master Association governing documents requiring the Master community to be operated pursuant to the HOA Act and it included certain provisions that were extremely favorable to the Developer in its management of the Master Association and the common elements of the community.

One might think that the difference between being governed by the HOA Act and the Condo Act is minor, but that would be totally incorrect understanding of the impact of these two statutes. There are many more restrictions established in the Condo Act on the allowable operations of the Association, including issues related to annual elections, budgeting, material alterations, and insurance requirements, just to name a few. However at times Developers prefer to have the Master Association (which is what they usually stay in control of for many years) to be operated under the HOA Act as it gives them more flexibility in the association operations. It is true that over the years the HOA Act is slowly but surely following the lead of the Condo Act and is being amended piece by piece by the Florida Legislature, but there is still a long way to go.

In the case of Downey v. Jungle Den Villas Recreation Association, Inc., 525 So. 2nd 438 (FL 5th DCA 1988), the Developer had initially established the community by creating several subassociations which were all condominium units. A separate entity was formed by the Developer for the ownership, operation and management of the recreational facilities for the use of the condominium unit owners, with membership being a required obligation that was protected by covenants running with the land. The subassociations eventually purchased the recreational facility when the Developer lost the property to a mortgage foreclosure. However, the issue was that the Master Association documents required that the Master Association be controlled and operated pursuant to the requirements of the HOA Act, not the Condo Act.

The Court in Jungle Den established what came to be known as the "constituency test", which provided that if all of the constituents of a master association were condominium unit owners, the master association would thereafter need to be operated as a condominium association, irrespective of the creative wording utilized by Developer counsel. This "constituency test" was subsequently incorporated into Florida Statute Chapter 718.103(2)

The point of this article is that just because there is a specific covenant or restriction running with the land in the form as a Declaration of Condominium or Declaration of Covenants and Restrictions, one should not assume that what is stated in such governing document is "bible." At times covenants established by Developers are in fact unenforceable as being contrary to established statutory law or judicial precedent. As one infamous politician once said, "you can put lipstick on a pig but it is still a pig." Likewise, just because your governing documents say so does not mean that it is so.

This article is solely a partial explanation of all the issues related to the topic of this newsletter, and is not to be considered legal advice. Associations should seek legal advice for all issues related to their governing documents and enforceability. This Newsletter is for informational purposes only and should not be relied upon as a legal opinion.

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