Purchase-Sale Contracts: “Did I Mention Godzilla’s Eggs?”

The number one question asked of real estate lawyers is probably something like, “Hey, I’m not getting cheated here, am I?” It may not be phrased exactly like that but it almost always has something to do with a purchase/sale contract for a house, condo, or timeshare agreement.  

Don’t get me wrong: you should have a lawyer look at the contract. Always. No exceptions. Having said that, there are “red flags” an average buyer can use to eliminate a property without having to pay a lawyer in order to confirm that it’s probably a bad deal.  

Maybe the first thing to consider is whether the piece of paper in your hand is a standard “FAR-BAR” contract. This is one approved by the Florida Bar Association in cooperation with the Florida Association of Realtors. An experienced realtor or lawyer can tell at a glance whether it has gone through any serious alterations. If it has, read every word. (You should anyway.) 

There should be general fairness in the contract to the buyer and seller as far as rights of inspection, binders, return of the binder if a party backs-out of the deal, and who pays for what inspections and other necessary costs of the sale. If the seller is paying all of the expenses, that’s a red flag. As the purchaser, you should ask yourself why the seller is being so generous. It may be a distraction so the buyer doesn’t notice a material defect.

All “material facts” affecting the property value should be disclosed by the seller, no matter what the “as is” rider may say. “Material facts” are defined in Florida case law as, among other things, any hidden defects in the property or structure itself that are known to the seller but would not be readily apparent to the average buyer; even one who makes a ‘reasonable’ inspection of the property.  

In practice, examples of such hidden defects that should be disclosed by the seller would be things like:

a) the fact that the lower floor floods every time it rains or even every other time it rains; 

b) the foundation footings were poured without the requisite reinforcing steel bars;

c) Godzilla previously nested in the backyard and her eggs are still incubating somewhere under the snapdragons.  

These serious hidden defects could affect a potential buyers’ decision and they should be disclosed.  Also, a seller cannot make a FALSE claim about a property (of a material fact) and expect the “as is” clause to limit their liability for such things as fraud, fraudulent misrepresentation, breach of contract and the usual gamut of charges that can arise from lying about something significant. (Not that anyone would do such a thing: just pointing it out.)  

No clause that I am aware of can relieve a person of responsibility when that person has intentionally lied and their lie caused some harm to another. This is one of the great things about the law, in general.

It may offer some confidence to a home buyer, but it still is no substitute for getting those independent inspections done and, by all means, hiring a lawyer to look at the contract. 

That’s just in case you are looking out into the backyard one day and start yelling at your wife, ”Hey! Was that FIRE I just saw coming out of that baby lizard’s mouth, or what?!”    

Gate River Run Photos

Welcome to tedbrownlaw.com (emphasis on condo/homeowner association & related real estate law in Northeast Florida).

Congratulations and good job to you folks competing in this year’s Gate River Run in Jacksonville.

About 300 pictures were taken at the 3-mile mark on River Rd, from the first runner going by until my digital camera ran out of memory: anywhere from 5 to 10 minutes. 

If you were in that group, chances are I got a picture of you: maybe even a picture of you with that cold St. Johns River water spray blowing by you from the incredible wind.

Follow the link below and take a look. Help yourself to the image. It’s my way of saying thanks for the inspiration. If I can ever figure a way to get my knees, ankles and other body parts to move backward in time, maybe I’ll be out there with you guys someday.

Here’s the link: http://picasaweb.google.com/tedkbrown/RiverRunTedBrown

And again, congratulations even if you only made it as far as our “Waffle Station”. It was the 4th year for us doing this, and my daughter’s idea when she was only 4 years old. You’ll see her in the pictures. She’s the seven-year-old who is ’pretty in pink’ handing out the waffles. 

Hope you enjoyed the run as much as we did watching all of you run it!

thanks again.

Sincerely, Ted K Brown

“No Dogs Allowed: Except Pit Bulls”

If condominiums ever go to the dogs you can bet, right up to your last dollar, that the last breed of dog they go to will be Pitbulls. 

Pet restrictions are found in virtually every declaration of condominium in the state of Florida. The restrictions are written by lawyers, but the limitations placed on pets are usually dictated by developers claiming to be listening to their marketing departments; or maybe they are listening to the little voices speaking to them inside their heads which come from their own prejudices, personal fears or past experiences.

Some pet restrictions are species-based. (”No dogs or cats, but cockatiels and rattlesnake hat-bands are okay.”) 

Some pet restrictions are based on breed. (”Cats okay. Dogs okay as long as they are not Doberman pinchers, Rottweilers, bullmastiffs, cadaver dogs, or that wrinkly-breed that always makes me want to rush out to the nearest hospital for an emergency face-lift.”)

The majority of pet restrictions seem to be weight based. (”No pet that weighs more than 35 pounds. No pet-owner that exceeds 21% body fat. Oh, wait…”)

If you think this is funny, well, what may be funnier is that all of these restrictions are likely to hold up in court. (Except the one about body-fat.)

Florida’s Condominium Act, Section 718, gives condo developments tremendous latitude in pet restrictions. As long as the rules are clearly spelled out in the governing documents and consistently enforced throughout the association, they will usually be upheld. 

Efforts to change the limitations after-the-fact, once recorded with the county clerk, become something beyond ”tough”. Most declarations require a 2/3rds majority for passage of any amendment, including those that allows such things as a fierce, fat, Fido onto the property as a permanent resident.

Pet-loving, potential condo buyers should read the declaration carefully before signing on the dotted line and if they do not see anything specifically addressing the issue of pets, they should not take the word of the real estate agent or seller of the property that none exists. They should contact either a board member of the association or an officer (not an employee) of the association’s management company in order to get a definitive answer to the question of pets that are allowed by owners, or by renters, of the property. 

When asking keep in mind: there are always restrictions. The likelihood that NO pet restriction exists in the governing documents of a condominium is about as likely as Pitbulls replacing Dalmations on fire-engines. (They may not be as pretty but then again, you don’t have to worry about anyone messing with the firehoses.) 

Mediation Solves Problems

Going to court can cost you money.

Mediation costs money, too, but not as much.

When Florida homeowners violate community restrictions, association boards look for ways to persude them to come back into compliance. If persuasion didn’t work, court was the only solution up until 2004. That’s when the legislature passed a law requiring mediation before court.

This was a move in the right direction, but the 2004 statute was cumbersome. The program was overseen by the Dept. of Land Sales, the filing cost was high, and it took six weeks just to find out whether or not the Department would assign a mediator to your case.

Those stumbling blocks were pushed aside in a 2007 revision of the statute. Mediation is still required but now an association can go directly to the homeowner with their request. The homeowner, in turn, has 20 days to agree to the voluntary mediation before a court action can be filed. The cost of the mediation is evenly divided, but this can be negotiated.

After more than a dozen mediations since passage of the new law, I have yet to see one case go to court. This works out best for everyone involved, except maybe the lawyer who doesn’t get to charge those billable hours in preparing for and going to court to resolve what should be issues more easily resolved between, what amounts to, neighbors.

It’s one source of revenue this particular lawyer doesn’t mind missing out on because the real goal in any such dispute is to keep those restrictions and covenants contained in every Declaration doing what they are supposed to do: unite the homeowners behind a set of ideas that work to the benefit of each person living in the community. 

Overcrowded Condo Units -there goes the neighborhood?

The following was an actual letter to a condo association board 

(names are changed to protect privileged information) 

“Occupancy-by-the-numbers”, trying to restrict the number of people living in a single condo unit or a single family home is one way to suddenly find yourself in court.  A sluggish real estate market doesn’t change the fact that families find themselves needing to relocate. If they cannot sell their home, they will rent it in order to pay the mortgage. 

In turn, the neighbors they leave behind will pressure their association boards to contral the quality of those renters in order to keep property values up and to maintain the quality of the community. Association boards will need to be careful, however, that they do not attempt to control rentals to the degree that they end up violating state and federal housing laws.   

Occupancy restriction laws are well established. Restrictions based on family ties, for instance, do not hold up in any U.S. courtroom. It is impossible to define “immediate family” or any other phrase which attempts to narrow the definition of what constitutes a “family.” First cousins are considered “immediate” in some families and many households now include three-generations living under one roof. 

Three persons per-bedroom may sound crowded to some people. Not to my mother, though. She was the fourth of seven kids growing up in an 1800 square foot Kansas City home.  One friend of mine is the third of NINE children. A former co-worker who, a member of the Church of the Latter Day Saints, had five children of his own and adopted 2 more, then his Dad died and his Mom came to live with him, too. 

In the case of The Association, any limitation passed by the membership which places limits of 3 people-per-bedroom is actually “pushing it”, legally. The smaller the number, the more likely the rule is to be challenged on religious grounds (is it the same as saying, “no Mormons or Catholics allowed?”); challenged on racial grounds, (Hispanics and African Americans generally have larger families); and may be challenged by people already living in The Association, (it started out as only four people, but then the oldest kid moved back in with a new baby, the grandparents had medical problems so they moved in, and then the baby’s father showed up, too. And, oh yeah, he doesn’t have a job.) 

Age restrictions are allowed because they represent an entirely different “legal-animal”. Age restrictions hold-up under legal scrutiny if the community started out with the restrictions already in place and every buyer was notified before closing the sale. You cannot impose such a restriction later, retroactively.  In other words, only new residents would have to qualify as the above-50-set. 

There is a way to do it, though. A 3-per-bedroom rule change may pass muster on the grounds of safety, health, nuisance and so forth. Condominiums are given some additional leeway because of the close-quarters that go with condo-living. But attempting to restrict, retroactively, a 2-per-bedroom rule, for instance, and an association runs an increased risk that someone will challenge the rule’s legality arguing the rule’s existence is based on some reason other than maintaining “peace and quiet” or the capacity of the plumbing. 

As for requiring proof of legal entry into the U.S., I will say that putting such an amendment into a declaration of condominium or covenants is a place where no Association should want to go. 

Once, I talked to a man who was visiting Florida from Holland with his family. He was “visiting” for four months! He didn’t have a green card, a driver’s license or anything other than a passport (which was not even stamped because it doesn’t have to be) to show that he was in the country “legally”. It is not required in the U.S. He and his family of four were staying in a rented condominium. 

If he had been turned down as a tenant by the association where he stayed, he probably would have simply gone somewhere else. The real threat of legal action in this situation comes from the owner of the condo. He just lost a tenant and maybe didn’t make his mortgage payment because of it. He might be mad enough to challenge the restriction.

Foreign visitors are not required to prove that they are properly present in this country. (At least, not to the Holiday Inn, Avis, Disney World, or to condo associations.) In fact, the Florida Department of Tourism spends a great deal of money encouraging them to come to the state, stay, and spend as much money as they like while they are here. 

Unit owners could potentially pitch a fit if an Association interfered with their right to lease, rent or otherwise legally make a profit from their property. Requiring renters to show proof that they are legally present in the country is constitutionally unenforceable. If a unit owner challenged it, they may even get the A.C.L.U. to provide legal services at no charge.  

Condominium restrictions hold up if they are reasonably based on health, welfare, safety, nuisance, or preservation of property values.  In order to institute such rules without a required vote on an amendment change to the declaration, there must be no conflict with the other governing documents and the imposed rule must, practically speaking, have an advantage that is so obvious, it would not even require an explanation to your average person. 

If it falls into some “gray area” then an amendment is required. Or, it may be patently discriminatory against an identifiable interest group. 

These are some of the considerations eavery association should consider before changing their rules or amending their declaration.

Survival of Assessments

The new law allowing delinquent assessments in homeowners associations was great news for association boards but terrible news for real estate investors.

The law which went into effect July, 1st of 2007, makes a parcel owner jointly and severally liable with the previous parcel owner for all unpaid assessments that came due up to the time of transfer of title, regardless of how title was acquired. This applies to banks who take a property through foreclosure actions.

Before Florida Statute 720.3085 was passed, homeowners associations almost always had to “eat” the delinquent assessments when a member’s house went into foreclosure. This meant that all of the money the happless homeowner did not pay to the association, had to be divided up among the remaining homeowners able to pay the assessments or, more frequenlty perhaps, the association just did without a few mowings of the common area, had to forego purchase of some equipment for the community playground or cut back on some other amenities. The new law assures members of the association that each parcel will contribute their fair share to the budget; even if it takes awhile to collect the money, through a foreclosure sale for instance.

 This is bad news for real estate investors who historically have picked up properties at sales, sometimes at bargain rates, only to “flip” the parcel to another buyer with almost no period of actual ownership. The investor will now have to factor into his profit/loss analysis any outstanding assessments on a parcel before making a bid on the courthouse steps.

This is not an iron-clad remedy by any means. Because this law is new, it remains untested in the courts. Associations should continue to protect their interests by filing a claim of lien whenever a member falls behind in payments. If a foreclosure action instituted by a bank or mortgage company names the association as a defendant, the association’s lawyer should file an answer to the complaint to insure that the interests of the HOA are protected in case a court decides that the association failed to give notice to prospective buyers by failing to file a claim of lien in a timely matter or to protect its interests in a foreclosure action.

Florida Real Estate Blog of Ted K. Brown

Please return to this blog in the near future as I intend to post articles of interest to first time home buyers, home owners, home owner associations and condominium boards.