MARKETABLE RECORD TITLE ACT: THE CLOCK MAY BE TICKING AGAINST HOMEOWNERS ASSOCIATIONS

Luxury Homes and Estates of Florida,

Real property in Florida is subject to the Marketable Record Title Act*. This Act is designed to remove encumbrances against property in order to promote free and clear alienability of property. The Act generally applies to remove clouds from title which have not been re-recorded for thirty years.

In other words, if a document was recorded effecting the property over thirty years ago the Act may remove the claim from your title completely.

A core concern of the Marketable Record Title Act is that there be no hidden interest in property that could later be asserted against the property owner. See Blanton v. City of Pinellas Park, 887 So.2d 1224, 1232 (Fla. 2004).

The Marketable Record Title Act can extinguish homeowners’ covenants and restrictions if same have been abandoned and not re-recorded in the thirty year timeframe. The failure to preserve by re-recording can be fatal to homeowners associations covenants and restrictions. See Berger v. Riverwind Parking, LLP, 842 So.2d 918, 922 (Fla. 5th DCA 2000).

Homeowners associations are permitted to preserve their covenants and restrictions by recording a statement of the homeowners association’s claim pursuant to 712.06 of the Florida Statutes. H&F Land, Inc. Panama City-Bay County Airport and Industrial District 736 So.2d 1167 (Fla. 1999). The legislature adopted the statutory notice mechanism to preserve covenants and restrictions in 1997. Before that date homeowners associations routinely filed amendments, restatements and consolidations of the covenants and restrictions all designed to give notice in the chain of title in order to safeguard the restrictions from extinction.

Accordingly, each homeowners association must record it or lose it.

*Chapter 712 of the Florida Statutes.

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Houston Short grew up in the Central Florida area, and continues to reside in Orlando with his family. He provides representation in arbitration actions for the American Arbitration Association and engages in alternative dispute resolutions including mediation both binding and non-binding arbitration, and settlement negotiations. He is an active member of the American Arbitration Association Panel Review Committee, the Orange County Bar Association, and the Florida Bar. He graduated from Florida State University in 1984 with a bachelors of science degree (cum laude) and received his juris doctor from the University of Florida in 1987 (with honors). Houston co-authored, "The Constitutionality of the Legislatures Mandate to Sever Counterclaims in Mortgage Foreclosure Action," the Real Property, Probate and Trust Law Section, The Florida Bar.

LIS PENDENS ARE NOT NECESSARILY FREE

Luxury Homes and Estates in Florida, November 2006

A lis pendens is a recorded document describing real property that provides notice to all the world of a dispute. In a purchase and sale contract a buyer will often retain the right to sue for specific performance. In the event a contract turns sour the buyer may file a lawsuit to force the sale of the property. A lis pendens is recorded in order to prevent the seller from transferring the property to a third party and thereby avoiding the jilted buyer’s claim.

Fairness requires that a bond be posted to protect the interests of a seller. The lis pendens places a red-flag in the chain of title and limits the marketability of the property. The practical effects of the lis pendens is that the owner oftentimes cannot sell or mortgage the property. If the proponent of a lis pendens turns out to not have had a valid claim the adverse economic consequences to the seller are obvious.

The Supreme Court of Florida has ruled that in circumstances where a lis pendens is recorded against property that is not related to a recorded interest (i.e., a deed or lien), the trial court has discretion to require a bond to serve as protection against damages arising from an unjustified lis pendens*. Although the court retains discretion a bond is likely wherein the facts are thin. The court will schedule an evidentiary hearing to learn all the potential damages. The type of damages that the bond should protect against include, but are not limited to, the seller’s attorney’s fees, mortgage carry expense, property taxes, insurance, and erosion in sale price.

A buyer seeking to tie up the property with a lis pendens may be asked to put his money where his mouth is.

Simple fairness requires that if you deprive a seller of the right to sell the property you should compensate the seller in the event the buyer ultimately loses the case.

Before the Supreme Court’s announcement some districts in Florida thought it mandatory to post a bond. In other jurisdictions the courts deemed the trial court to have discretion but also required that the seller prove irreparable harm.

The Supreme Court removes any doubt: (1) the court retains discretion to require a bond; and (2) the seller need not show irreparable harm but merely demonstrate damages will likely flow from the cloud on title.

*The Supreme Court case is Medical Facilities Development, Inc. v. Little Arch Creek Properties, Inc., 675 So.2d 915 (Fla. 1996).

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Houston Short grew up in the Central Florida area, and continues to reside in Orlando with his family. He provides representation in arbitration actions for the American Arbitration Association and engages in alternative dispute resolutions including mediation both binding and non-binding arbitration, and settlement negotiations. He is an active member of the American Arbitration Association Panel Review Committee, the Orange County Bar Association, and the Florida Bar. He graduated from Florida State University in 1984 with a bachelors of science degree (cum laude) and received his juris doctor from the University of Florida in 1987 (with honors). Houston co-authored, "The Constitutionality of the Legislatures Mandate to Sever Counterclaims in Mortgage Foreclosure Action," the Real Property, Probate and Trust Law Section, The Florida Bar.

WHAT HAPPENS IF THE COST TO BUILD A HOME EXCEEDS THE CONTRACT PRICE?

Luxury Homes and Estates in Florida, October 2006

There has been an explosion of home building in Central Florida. Builders often execute contracts for homes that will not be built and closed until over a year passes. The contract price is frozen, however, a cost spiral fueled by oil price increases and competition for raw materials with foreign countries and natural disasters have impacted builders.

In some cases the cost to actually construct the home exceeds the sale price.

Many builders saddled with the additional costs demand a price increase or threaten to walk off the job. The buyer should not panic.

Even under extreme situations where materials are not only more expensive but actually unavailable, Florida courts have held such not to be grounds for a price increase or to excuse non-performance.

There is little Florida caselaw dealing with the principal of commercial impracticability. However, those cases which address the issue hold that unexpected difficulties or expenses will not excuse a party to a contract from performance. North American Van Lines v. Collyer, 616 So.2d 177 (Fla. 5th DCA 1993); and City of Tampa v. City of Port Tampa, 127 So.2d 119 (Fla. 2nd DCA 1961). In City of Tampa, the court strict measure:

Inconvenience or the cost of compliance, though they might make compliance a hardship, cannot excuse a party from the performance of an absolute and unqualified undertaking to do a thing that is possible and lawful. Parties sui juris bind themselves by their lawful contracts, and the courts cannot alter them because they work a hardship. The rights of the parties must be measured by the contract which they themselves made. A contract is not invalid, nor is the obligor therein in any manner discharged from its binding effect, because it turns out to be difficult or burdensome to perform. It has been said that difficulties, even if unforeseen and however great, are no excuse, and that the fact that a contract has become more burdensome in its operation than was anticipated is not ground for its recision.

Florida’s legal position as to commercial impracticability, as stated in the above-cited language, reflects a traditional notion that performance is excused only when actually impossible. See also Valencia Center, Inc. v. Public Supermarkets, Inc., 464 So.2d 1267, 1268 (Fla. 3rd DCA 1985). (Although impossibility of performance can include extreme impracticability of performance, the courts are reluctant to excuse performance that is not impossible, but merely inconvenient, profitless, and expensive.)

In the final analysis, a builder will have little success arguing for a price increase merely because there is no profit left in the house or because he must come out of pocket to complete construction.

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Houston Short grew up in the Central Florida area, and continues to reside in Orlando with his family. He provides representation in arbitration actions for the American Arbitration Association and engages in alternative dispute resolutions including mediation both binding and non-binding arbitration, and settlement negotiations. He is an active member of the American Arbitration Association Panel Review Committee, the Orange County Bar Association, and the Florida Bar. He graduated from Florida State University in 1984 with a bachelors of science degree (cum laude) and received his juris doctor from the University of Florida in 1987 (with honors). Houston co-authored, "The Constitutionality of the Legislatures Mandate to Sever Counterclaims in Mortgage Foreclosure Action," the Real Property, Probate and Trust Law Section, The Florida Bar.

Get Your Share of Surplus Funds Remaining After a Foreclosure Sale

Luxury Homes and Estates in Florida, August 2006

Foreclosure actions are routinely filed by banks against homes if the borrower defaults in payment. Homeowners can also be subject to foreclosure actions for failure to pay homeowner’s association dues, assessments or mechanics liens.

As a result of the foreclosure process a sale is scheduled wherein the property is auctioned by the Clerk of the Court. If the bidding is zealous the property may sell for an amount far exceeding the judgment. The extra monies are retained by the court and designated as “surplus funds”.

A new Florida statute has been enacted dealing with surplus funds. The new law establishes a 60 day deadline to make a claim after the foreclosure sale is completed.

In the event that you are holding a subordinate interest in property and the bidding exceeds the value of the superior lien, mortgage or interest, you must make a claim within 60 days of the sale otherwise your rights in the surplus funds can be extinguished.

Accordingly, if you are named as a party in a foreclosure action you should carefully monitor the sale and if surplus funds are generated you must act quickly to make a claim.

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Houston Short grew up in the Central Florida area, and continues to reside in Orlando with his family. He provides representation in arbitration actions for the American Arbitration Association and engages in alternative dispute resolutions including mediation both binding and non-binding arbitration, and settlement negotiations. He is an active member of the American Arbitration Association Panel Review Committee, the Orange County Bar Association, and the Florida Bar. He graduated from Florida State University in 1984 with a bachelors of science degree (cum laude) and received his juris doctor from the University of Florida in 1987 (with honors). Houston co-authored, "The Constitutionality of the Legislatures Mandate to Sever Counterclaims in Mortgage Foreclosure Action," the Real Property, Probate and Trust Law Section, The Florida Bar.

Lease Option/Renewal Deadlines Are Not Written In Stone

Luxury Homes and Estates in Florida

If you miss a lease renewal deadline consult an attorney.

Leases often grant the tenant the right to renew the lease for an additional term. However, tenants routinely forget to give the appropriate notice. Once the error has been discovered the tenant provides a delinquent notice.

The landlord may terminate the lease in order to sell the property or re-let the premises and collect higher rent. The tenant can suffer extreme hardship due to loss of business location and loss of investment from build out of the premises. The courts can and do intervene on behalf of tenants to reinstate and mandate the renewal of a lease for an additional term. The courts recognize that it may be inequitable for a landlord to seize upon a technical breach to deny a tenant valuable property rights. The court may reinstate and renew the lease if the following factors are presented:

1. the delay in giving notice of renewal is slight;
2. the delay did not prejudice the landlord; and
3. the failure to renew the lease would cause the tenant extreme hardship.

A myriad of other factors are considered by the court and are deemed persuasive including whether or not the landlord allowed the tenant to make improvements and additional investment in the premises. The tenant will argue that he acted in reliance upon the renewed lease in making substantial improvements. The courts deem it unfair for a landlord to allow the tenant to make improvements only to snatch away the property.

The courts are also anxious to hear whether or not the landlord continued to have an open dialogue with the tenant and never objected to the tardy notice.

The tenant bears the burden to demonstrate that his failure to renew the lease was a product of a mistake, accident or other special circumstances.

In short, if you missed a deadline to renew your lease all may not be lost. A court of equity can intervene to renew the lease.

*See Dungan v. Haige, 54 So.2d 201 (Fla. 1951); Ledford v. Skinner, 328 So.2d 219 (Fla. 1st DCA 1976); Friendship Park Property Corporation v. Shaw, 505 So.2d 456 (Fla. 1st DCA 1987); and Thrifty Dutchman, Inc. v. Florida Supermarkets, Inc., 541 So.2d 634 (Fla. 3rd DCA 1989).

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Houston Short grew up in the Central Florida area, and continues to reside in Orlando with his family. He provides representation in arbitration actions for the American Arbitration Association and engages in alternative dispute resolutions including mediation both binding and non-binding arbitration, and settlement negotiations. He is an active member of the American Arbitration Association Panel Review Committee, the Orange County Bar Association, and the Florida Bar. He graduated from Florida State University in 1984 with a bachelors of science degree (cum laude) and received his juris doctor from the University of Florida in 1987 (with honors). Houston co-authored, "The Constitutionality of the Legislatures Mandate to Sever Counterclaims in Mortgage Foreclosure Action," the Real Property, Probate and Trust Law Section, The Florida Bar.

Beware of an Unconditional and Continuing Guaranty

Luxury Homes and Estates in Florida

A standard business loan often requires an owner to execute a guaranty. Before signing a guaranty legal advice should be obtained regarding the ultimate financial exposure. Lenders often insert continuing and unconditional guaranty language. This type of guaranty renders a guarantor liable for all past, present and future obligations of the business. The exposure is almost unlimited. The business may incur a mountain of debt and in the event of default the guarantor is ultimately liable.

A dangerous aspect of executing a continuing guaranty is that the guarantor need not be contacted before new debt is obtained. A business may incur debt to the detriment of the guarantor without his or her knowledge.

A continuing guaranty remains effective until revoked. The guaranty is not limited to the life of the loan obtained contemporaneously with the guaranty and will not expire simply by a lapse of time.

Furthermore, even though the loan is paid in full the guarantor is not relieved of liability for new debt acquired by the business years after the original loan was paid.

The continuing and unconditional guaranty also applies to vendor and supplier accounts. Guarantees are routinely required in credit applications submitted by suppliers. If a business fails, closes its doors and files for bankruptcy the guarantor remains liable on all debt. Therefore, an individual should avoid signing an unconditional and continuing guaranty if he or she does not control the business debt or business accounts.

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Houston Short grew up in the Central Florida area, and continues to reside in Orlando with his family. He provides representation in arbitration actions for the American Arbitration Association and engages in alternative dispute resolutions including mediation both binding and non-binding arbitration, and settlement negotiations. He is an active member of the American Arbitration Association Panel Review Committee, the Orange County Bar Association, and the Florida Bar. He graduated from Florida State University in 1984 with a bachelors of science degree (cum laude) and received his juris doctor from the University of Florida in 1987 (with honors). Houston co-authored, "The Constitutionality of the Legislatures Mandate to Sever Counterclaims in Mortgage Foreclosure Action," the Real Property, Probate and Trust Law Section, The Florida Bar.

“Sexual Harassment – How To Avoid Litigation.”

Luxury Homes and Estates in Florida

There has been an explosion of employee lawsuits concerning sexual harassment. If you want to improve your chances of defending such a case you must be proactive.

First, there is no liability for circumstances of which you have no knowledge. The employee must provide you notice of the harassment. Once you receive notice of the claim, either oral or written, you must respond immediately. You should create a notebook or file to document every phase of the process. Please call upon the alleged victim to fully explain all the reasons, facts and incidents which that person deems harassment. Please understand that your mission should be to write an exhaustive statement.

Recently, I was involved in the initial meeting scheduled after receipt of a sexual harassment claim. I hired a stenographer, had the alleged victim sworn, interviewed the victim, and transcribed the entire meeting.

The reasons for doing so were to two fold: (1) I wanted a complete statement, under oath, from the party alleging harassment; and (2) I wanted to make sure that the story did not change or was embellished after the employee visited an attorney.

Second, request all documents, e-mails, notes, letters, cards or diaries saved by the victim pertaining to the harassment. You may be surprised to learn that your employees keep diaries. Diaries are often a tool recommended by attorneys cultivating potential harassment claims. By asking the question you can get an affirmative “no” and therefore avoid the specter that a diary will be subsequently fabricated.

Please write a letter to the alleged victim asking for all documentation or confirming that no documents exist.

Third, react openly, honestly and with sensitivity to the complaint. Often-times innocuous statements or comments are perceived as harassment. Validating the person’s concern and preventing uncomfortable future statements can avoid claims.

Fourth, conduct an investigation and question the alleged perpetrator. Again, exhaust the alleged perpetrator’s response to each of the alleged incidences of sexual harassment. Let the perpetrator know that a claim has been presented.

Instruct the perpetrator that there can be no retaliation for the claim. Also instruct the perpetrator to cease all offensive activities and unnecessary communication with the alleged victim.

Solicit the names of other employees, vendors or customers who have witnessed the alleged harassment. Interview the witnesses and document their memories with regard to the alleged events.

Fifth, after completing your investigation the management of the company must weigh the truth of the allegations. Write down limitations and controls designed to curtail the offensive behavior of the alleged perpetrator. Next, let the alleged victim know of the actions that you have taken.

The victim should be told in writing to contact you in the event further harassment does occur. Any future reports of harassment must likewise be investigated.

The management team must determine whether or not the alleged harassment is real and/or whether modifications in behavior can be achieved to avoid future harassment in the workplace. Each case is unique and must be decided in a rational way.

Management cannot afford to ignore reported harassment. If harassment continues after it has been reported and management has done nothing to ameliorate the situation the employee’s claims are ripe for litigation.

Employers should have written policies concerning sexual harassment. The policy should provide clear reporting instructions to any employee who feels that they have been a victim. An employee must be able to report to someone other than their immediate supervisor because often-times harassment occurs to subordinate employees.

In conclusion, it is suggested that each employer exhaust the victim of all facts supporting the claim. The company must investigate the complaint including, but not limited to, confronting the perpetrator. The company must take corrective action in order to avoid future incidents of sexual harassment. The company must monitor the situation to determine that its actions have been successful.

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Houston Short grew up in the Central Florida area, and continues to reside in Orlando with his family. He provides representation in arbitration actions for the American Arbitration Association and engages in alternative dispute resolutions including mediation both binding and non-binding arbitration, and settlement negotiations. He is an active member of the American Arbitration Association Panel Review Committee, the Orange County Bar Association, and the Florida Bar. He graduated from Florida State University in 1984 with a bachelors of science degree (cum laude) and received his juris doctor from the University of Florida in 1987 (with honors). Houston co-authored, "The Constitutionality of the Legislatures Mandate to Sever Counterclaims in Mortgage Foreclosure Action," the Real Property, Probate and Trust Law Section, The Florida Bar.

“Covenants Not to Compete.”

Luxury Homes and Estates in Florida

An employer with a business has much to lose if a dissident employee sets up a competing company. The employer could lose valuable trade secrets, confidential business information, or customer lists. In reaction to the threat employers went too far and required menial or low level employees to execute a covenant not to compete restricting their employment opportunities for a specified time and in a defined geographic area. The employee saddled with such a restrictive agreement could not find alternative employment.

The legislature attempted to level the playing field. Employers are entitled to enforce covenants not to compete in order to protect legitimate business interests. However, the covenant not to compete must be narrowly tailored to only protect legitimate business interests. 542.335 of the Florida Statutes provides that a non-compete can be enforced as long as: (1) an agreement is in writing; and (2) the employer is attempting to protect: (a) a trade secret; (b) valuable confidential business information; (c) substantial relationships with customers, patients or clients; or (d) extraordinary or specialized training invested in the employee.

Once the employer proves that it is attempting to protect a legitimate business interest the burden switches to the employee to claim that the restriction is overly broad or not reasonably tailored to protect the employers business.

An employer can seek to enjoin the employee from working in a competing company or starting his own company. Attorney’s fees may also be awarded to the prevailing party. The statute is designed to stop “unfair” competition, not competition per se. The balance undertaken by the court is to protect businesses but at the same time not unreasonably interfere with an individual’s right to work.

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Houston Short grew up in the Central Florida area, and continues to reside in Orlando with his family. He provides representation in arbitration actions for the American Arbitration Association and engages in alternative dispute resolutions including mediation both binding and non-binding arbitration, and settlement negotiations. He is an active member of the American Arbitration Association Panel Review Committee, the Orange County Bar Association, and the Florida Bar. He graduated from Florida State University in 1984 with a bachelors of science degree (cum laude) and received his juris doctor from the University of Florida in 1987 (with honors). Houston co-authored, "The Constitutionality of the Legislatures Mandate to Sever Counterclaims in Mortgage Foreclosure Action," the Real Property, Probate and Trust Law Section, The Florida Bar.

“Homeowner’s Associations May Prohibit Parking Cars In The Street”

Luxury Homes and Estates in Florida

Recently I was asked to research whether or not a homeowner’s association could prevent its members from using the street in front of their houses as a parking lot. Several homeowners in the subdivision routinely parked in the roadway which presented an obstacle to traffic and otherwise decreased the aesthetics of the neighborhood.

I researched Florida case law and found no controlling case. Accordingly, I expanded the scope of my research to foreign jurisdictions. Courts in other jurisdictions have upheld an association’s regulation over roadways and have entered injunctions against homeowner’s to prevent parking in the street. Specifically, the case of Verna v. The Links at Valley Brook Neighborhood Association, Inc. is a case prohibiting street parking. That case arose out of New Jersey and was decided in January of 2004.

In that case, a homeowner parked his work van in his driveway. The association’s restrictions prohibited parking of commercial vehicles at the homeowner’s property. Once the homeowner’s association delivered a letter complaining of the violation, the homeowner simply began parking his commercial van in the street.

The case went to court and the homeowner argued that the municipality controlled the streets: not the association. The court disagreed.

The court found that the association’s parking regulations promoted a neighborhood scheme which was created by the deed restrictions. Furthermore, the homeowner as a matter of contract agreed to additional regulations restricting parking.

The second case in support of the association’s right to restrict parking is Maryland Estates Homeowner’s Association v. Karen Puckett and Chris Schallert. The case essentially held that a homeowner must abide by all restrictions including restrictions against parking in the street. The homeowner cannot pick and choose which rules he will obey.

Foreign case law supports an association’s efforts to restrict street parking. Florida courts will likely prohibit parking in the street provided the restriction is found in the covenants and restrictions.

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Houston Short grew up in the Central Florida area, and continues to reside in Orlando with his family. He provides representation in arbitration actions for the American Arbitration Association and engages in alternative dispute resolutions including mediation both binding and non-binding arbitration, and settlement negotiations. He is an active member of the American Arbitration Association Panel Review Committee, the Orange County Bar Association, and the Florida Bar. He graduated from Florida State University in 1984 with a bachelors of science degree (cum laude) and received his juris doctor from the University of Florida in 1987 (with honors). Houston co-authored, "The Constitutionality of the Legislatures Mandate to Sever Counterclaims in Mortgage Foreclosure Action," the Real Property, Probate and Trust Law Section, The Florida Bar.

“When Dealing With A Bank You Had Better Get It In Writing”

Luxury Homes and Estates in Florida

Bank officers routinely meet with borrowers to talk about troubled loans. The banker and the borrower oftentimes leave the same meeting with divergent views regarding the parties’ obligation and agreements. The bank’s subsequent attempt to enforce its loan documents may invite retaliatory lawsuits.

In the 1980’s there was a plethora of litigation against banks claiming unfair collection practices. Borrowers would often claim that the bank made promises to extend credit or change the terms of a loan but would break the promise.

The lawsuits added to the costs of commercial lending because it created uncertainty with regard to the liability of participating banks. Accordingly, the Florida legislature engineered Statute 687.0304. This statute bars anyone from filing a case relying upon an alleged oral credit agreement.

In order to have an enforceable agreement against a bank the agreement must be (1) in writing; (2) express consideration; (3) set forth relevant terms and conditions; and (4) must be signed by both the bank and the borrower.*

Therefore, if you have negotiated with a bank manager that the bank will not foreclose, call the loan in default or seek default interest, attorneys fees or costs, the agreement is not binding unless an agreement is written and signed.

The statute has been tested in appellate courts and has survived judicial scrutiny.

In the final analysis, unless there is a written document there is no agreement with a bank.

*See 687.0304(2)

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Houston Short grew up in the Central Florida area, and continues to reside in Orlando with his family. He provides representation in arbitration actions for the American Arbitration Association and engages in alternative dispute resolutions including mediation both binding and non-binding arbitration, and settlement negotiations. He is an active member of the American Arbitration Association Panel Review Committee, the Orange County Bar Association, and the Florida Bar. He graduated from Florida State University in 1984 with a bachelors of science degree (cum laude) and received his juris doctor from the University of Florida in 1987 (with honors). Houston co-authored, "The Constitutionality of the Legislatures Mandate to Sever Counterclaims in Mortgage Foreclosure Action," the Real Property, Probate and Trust Law Section, The Florida Bar.