Condo Association allowed to pursue construction bond

In an interesting split decision, the 1st District Court of Appeal has decided that, under Florida law, a condominium association may sue under a performance bond issued by a surety in favor of a developer and enforcable only by the 'owner and its ... successors'.

In a decision yet to be published (Marseilles Condominium Owners Ass'n, Inc. v. Travelers Cas. and Sur. Co. of America --- So.3d ----, 2009, App. 1 Dist., October 30, 2009), the majority held that the condo association is a "successor" to the owner (the developer) who may enforce the bond. This is interesting; as the dissent points out, the association does not typically step into the shoes of the developer except insofar as it ultimately manitains and controls the common elements of the condo -- the association is not a successor in ownership (it never owns the units or the common areas). Therefore, doesn't it seem like a stretch to deem an association which is not a successor in ownership to be a party able to enforce a bond which expressly limits its protection to the owner and its successors?

The Wall Street Journal reported today that 1 in 7 households with mortgages are either in the foreclosure process or delinquent in payment on their first mortgage. Based on data from the Mortgage Bankers Association, this report suggests that delinquencies are at a new highest rate since the beginning of the present 'crisis.' As existing home sales and the broader economy recover, a solution for homeowners without the ability to pay for their homes has yet to arrive.

Kelo, 4 years on

Goverment Attorneys and libertarians alike recall that four years ago, the Supreme Court upheld the condemnation of property for economic development in Kelo v. City of New London. The leaders of New London, CT, envisioned the replacement of a residential neighborhood with new condos and offices to enhance and support a nearby Pfizer facility. The court held that the city of New London was not prohibited from taking land from one private owner to turn it over to another in the name of this redevelopment project. This was a landmark eminent domain opinion which offended many Americans and touched off a wave of state-level legislation across the nation limiting the scope of condemnation powers. (In Florida, we amended the constitution to say that "private property taken by eminent domain ... after January 2, 2007, may not be conveyed to a natural person or private entity except as provided by general law passed by a three-fifths vote of the membership of each house of the Legislature.")

It was pointed out Wednesday, in a Wall Street Journal opinion piece (which called the Kelo decision "one of the worst in recent years"), that Pfizer has decided to shut down its R&D headquarters in New London, CT, and the condemned neighborhood stands bulldozed and vacant.

While it sparked outrage, the Court's opinion may very well have been constitutionally sound, and, ultimately, the political process worked; the Kelo story helped to raise awareness and spur the legislative shift toward restricting condemnation powers. But that doesn't help Ms. Kelo.

Proposed Change to Fla. RCP 1.110(b)

The Florida Supreme Court's Task Force on Residential Mortgage Foreclosure Cases made oral arguments to the Florida Supreme Court last week and requested, among other things, a change to the rules of procedure to require residential foreclosures to be instituted by a 'verified' complaint -- in other words, requiring the Plaintiff to swear to the contents of the initial pleading. The court seems to be perceiving that many high-volume foreclosure firms bring suits in a loose and disorganized manner, and the testimony pointed to the "lost note" count that is almost invariably included in foreclosure complaints despite the fact that the plaintiff is usually able to 'locate' the note at the last minute. As any attorney who practices in the foreclosure field knows, this perception is accurate in many cases, and some foreclosure matters are handled without the professionalism that should be expected from attorneys. Nevertheless, it is not clear why foreclosures ought to be subject to standards different from those imposed on the parties when commencing any civil matter. Don't the rules of professionalism, 57.105, and other standards already in place and applicable to ALL civil actions provide the necessary incentives to ensure accurate pleading?

FHA lending to more condo purchasers?

The FHA has decided to relax underwriting criteria for loans secured by residential condominiums, the Miami Herald reports. Every little bit helps... Perhaps traditional bank lenders will one day follow suit, even for loans that are not federally insured.

Changes to Construction Defects statute

Last week, changes to Chapter 558, Florida Statutes, became effective. Chapter 558 was enacted in 2003 to provide an alternative dispute resolution process to supposedly reduce the need for litigation by requiring a person who is making a damage claim for construction defects to follow certain procedures before initiating litigation. In short, before a property owner may sue a contractor, the property owner is required to notify the contractor of the defect and give the contractor an opportunity to examine the defect (including examination requiring destructive testing). If the contractor agrees that there is a defect, he is given an opportunity to repair it or offer to settle the matter. If the parties still disagree, the property owner may file his lawsuit. These procedures apparently applied to all construction contracts irrespective of the desire of the owner and contractor, though there was some ambiguity as to whether the legislature intended it that way. The recent bill changes Chapter 558 while preserving the basic concept.

The most important change, as far as my clients tend to be concerned, is that the notice that previously was mandated for all contracts for improvement is now optional if the parties agree in writing to opt out, and that in the event that the parties do opt out, the notice provisions do not apply to the contract. The bill also clarifies that Chapter 558 is generally inapplicable to projects prior to completion (C/O). Finally the bill prohibits Chapter 713 liens for persons who do destructive testing or for restoration work, raising interesting questions but having little practical significance. (I can think of instances where a contractor or materialman would be hired to do restorative work or furnish materials after destructive testing, unaware that the project is restorative in nature and provides no lien rights).

The changes to the law are an improvement insofar as ambiguity has been removed and the parties may contract around its provisions.

News to no one: Record Foreclosures in Lake

The Orlando Sentinel yesterday confirmed what I suppose we all knew: Lake foreclosures shatter record-bad mark again. 878 foreclosures set the record for volume in 2006; incredibly, there have been 4,965 foreclosures this year (2009) in Lake County (through the end of October). The article suggests that the rate of increase is slowing -- nice news, but one wonders how much of the change in change is a temporary result of the drastically increased foreclosure filing fees instituted earlier this year. Here's hoping the trend continues and that the constructions and real property markets can be extracted from flux...