The Florida Bar
The Florida Bar Journal
May, 2014 Volume 88, No. 5
Adrift in the Amendments Sea: Florida Courts Struggle for Logic and Consistency, Part II

by J. Michael Hartenstine

Page 26

Eighteen years after Flamingo Ranch Estates, Inc. v. Sunshine Ranches Homeowners, Inc., 303 So. 2d 665 (Fla. 4th DCA 1974), the Fourth District Court of Appeal again ruled on an amendment to subdivision restrictions in Holiday Pines Property Owners Association, Inc. v. Wetherington, 596 So. 2d 84 (Fla. 4th DCA 1992). Echoing, but surprisingly omitting citation to, Flamingo Ranch, the Holiday Pines court asseverated, “In determining the enforceability of an amendment to restrictive covenants, the test is one of reasonableness…. [A] reserved power to modify restrictions must be exercised in a reasonable manner so as not to destroy the general plan of development.”1 Applying this standard, the court invalidated an amendment approved jointly by a developer and two-thirds of the lot owners that created mandatory membership in a homeowners’ association and converted the subdivision into a “quasi-condominium development.”2 The amendment was not “a continuation of a scheme of development but a radical change of plans, altering the relationship of lot owners to each other and the right of individual control over one’s own property.”3 The court upheld a separate amendment establishing an architectural review board because it “was not a fundamental departure from the scheme of development.”4

As in Bay Island Towers, Inc. v. Bay Island-Siesta Association, 316 So. 2d 574 (Fla. 2d DCA 1975), the Holiday Pines court, without comment or analysis, extended the reasonableness rule to include lot owner-initiated amendments. If an amendment brought about an unreasonable change in the general plan of development, it did not matter whether the developer or the lot owners approved the amendment; in neither case would the amendment be valid.

Richardson v. Deerwood Club, Inc., 589 So. 2d 937 (Fla. 1st DCA 1991), questions that conclusion. The restrictions in Richardson designated access to a development via an entrance road along the east side of the development. The restrictions expressly authorized the developer to relocate the entrance road to another point along the east side. Instead, the developer, citing safety concerns, closed the entrance road on the east side and substituted a new entrance road on the south side. Paragraph 40 of the restrictions permitted amendments by the developer as long as the amendments conformed to the general purposes and standards of the restrictions. The developer amended the restrictions to authorize closure of the original entrance road and substitution of the new entrance road. The court ruled that the amendment was invalid because it did not conform to the general purposes and standards of the restrictions. (One wonders if this is a fair characterization of the amendment. It may not have conformed to the specific purposes and standards of the restrictions — it changed the location of an entrance road — but mere relocation of a road would seem to conform to the general purposes and standards of the restrictions — there was still an adequate entrance road to the development.)

An even more confounding part of the Richardson decision followed: “[W]e note that Deerwood may still seek to amend the covenants and restrictions pursuant to paragraph 41, which gives the developer the right to amend, so long as 75 percent of the lot owners consent.”5 Presumably paragraph 41 did not include the “general purposes and standards” limitation, since an amendment permitting relocation of the entrance road by whatever means would still fall short of the court’s view of the general purposes and standards of the restrictions. Is the court implying that there are no limitations on amendments adopted by lot owners, contrary to Bay Island and Holiday Pines, or is the court suggesting that relocation of the entrance road, while not conforming to the general purposes and standards of the restrictions, would not be an unreasonable change in the general plan of development? The latter position appears unlikely. A road relocation would seem to impact a “general plan of development” more than it would the “general purposes and standards” of restrictions. Unless the court’s opinion is dismissed as hopelessly inconsistent, it must stand for the proposition that lot owner amendments are not subject to the reasonableness rule. Yet Richardson has never been cited for this proposition, and the few subsequent Florida cases dealing with lot owner amendments have continued to apply the reasonableness rule.

For example, in Granuzzo v. Willoughby Golf Club, Inc., No. 432004CA1006 (Fla. 19th Cir. Ct. January 17, 2008), the circuit court ruled that an amendment by lot owners imposing mandatory membership in the community country club was unreasonable and destroyed the general scheme of development. The standard of review, the court stated — without citation to any authority but essentially quoting Flamingo Ranch — was “whether or not the power to amend the [restrictions] was exercised in a reasonable manner so as not to destroy the general scheme or plan of development of the Willoughby community.”6

Similarly, the court in Klinow v. Island Court at Boca West Property Owners’ Association, Inc., 64 So. 3d 177 (Fla. 4th DCA 2011), quoting the language of its earlier Holiday Pines opinion, stated that amendments to restrictions were subject to the test of reasonableness. “Reasonable,” the court observed means not arbitrary, capricious, or in bad faith.

In other words, as we stated in Holiday Pines, the modification of restrictions cannot “destroy the general plan of development.” Amendments which cause “the relationship of lot owners to each other and the right of individual control over one’s own property” to be altered are unenforceable. Such an alteration is considered a “radical change of plans….”

* * *

This court has defined a radical change as a change which would create an inconsistent scheme, or a deviation in benefit from that of the grantee to that of the grantor.7

The court’s treatment of the terms “arbitrary,” “capricious,” and “bad faith” as the equivalent of destroying a general plan of development is perplexing. Although an amendment made arbitrarily, capriciously, or in bad faith would not be reasonable, such amendment would not necessarily destroy a general plan of development.8 Likewise a logical, sensible, and well-meaning amendment — i.e., an inherently reasonable amendment — could be considered destructive of a general plan of development (Richardson is a case in point). The court’s opinion could have been clearer if the words “in addition” had been used instead of “in other words.”

Granting that a “radical” change is destructive of a general plan of development, what sort of change is “radical”? The court identifies three such changes: 1) an alteration of the relationship among the lot owners and individual control over one’s own property; 2) a change that creates an inconsistent scheme; and 3) a deviation in benefit from that of a grantee to that of a grantor.

The amendment under review in Klinow transferred lot owner responsibility for maintaining the lot’s driveway and sidewalk to the homeowners’ association, so that the association could institute a driveway beautification program. The court reasoned that this change was entirely consistent with the general plan of development — no inconsistent scheme results when uniformity is promoted. The court further concluded that the amendment actually benefitted the lot owners because uniform driveways would create a better-looking community; no shift in benefit from grantee to grantor exists when the lot owners benefit from the change. That is all the court needed to find that the amendment was “reasonable and beneficial” to the lot owners.9

But what about the radical change resulting from the amendment’s alteration of the relationship among the lot owners and individual control over one’s own property? The amendment transferred control of a lot owner’s driveway from the lot owner to the association. Was that not a radical change under the court’s own definition? Not necessarily. Taken literally, the court’s definition required both an alteration of lot owner control and an alteration of the lot owners’ relationship. Even so, would not the shift of maintenance responsibility for one’s driveway to the homeowners’ association — thereby ceding the judgment of the individual lot owner to the collective judgment of all the lot owners as expressed through the association — constitute an alteration of the lot owners’ relationship among themselves? The court did not answer, or even address these questions further undermining predictable application of the reasonableness rule.

Also contributing to the elusiveness of the reasonableness rule is Flescher v. Oak Run Associates, Ltd., 111 So. 3d 929 (Fla. 5th DCA 2013). The restrictions at issue in Flescher required each lot owner to pay the developer — not the association — each year a fixed assessment amount, which would vary annually with changes in the Consumer Price Index.10 The restrictions required the developer to use the assessments for various maintenance and other services that the developer provided to the community. The developer amended the restrictions to delete some of those services and the optional use of the assessments for reserves. The amendment also added a provision authorizing the developer to retain any excess assessment revenue over the costs incurred by the developer in providing the services.

For the first time in Florida appellate history, the Flescher court introduced a Restatement of the Law into the evaluation of an amendment to restrictions.11 The Restatement provides:

A developer may not exercise a power to amend or modify the declaration in a way that would materially change the character of the development or the burdens on the existing community members unless the declaration fairly apprises purchasers that the power could be used for the kind of change proposed.12

Applying the Restatement standard to the amendment under review, the Flescher court concluded that the amendment did not materially change the character of the development but did change the “burdens between the parties.”13 What was the change of burdens? It was not, the court conceded, any shift of the developer’s burdens to another person (the lot owners paid the same assessment amount with or without the amendment). Rather, it was the unreasonableness of the developer’s collecting assessments that were intended to fund stated expenses while eliminating the duty to apply the assessments to those expenses. The presumed consequence of the decision is that any excess of assessment revenue previously received by the developer over the stated expenses had to be applied by the developer to those expenses and not expended by the developer for any other purpose.

Even that outcome is not entirely clear from the opinion, which further muddled the reasonableness rule by its misguided attempt to construe the amendment in light of a supposed impermissible change of burdens between the parties. The court’s actual holding dealt only with the developer’s burdens and said nothing about any additional burden on the lot owners: “Therefore, we hold that the amendment was an improper exercise of the developer’s amendment power to the extent it relieves the developer of those burdens.”14

To confuse matters further, the court cites Flamingo Ranch for the proposition that the insertion of a reasonableness restraint on the amendment power is required due to the inherent inconsistency of that power with an elaborate set of restrictions. Perhaps, then, the court’s decision was not actually premised on a change in burdens — all that discussion was just dicta — but on a simple assessment that the amendment allowing the developer to keep money for itself that had been previously dedicated to definite stated expenses was unreasonable because it simply was inequitable.15 As to the portion of the amendment allowing the developer to retain excess assessment revenue (by which, one surmises, the court meant revenue received after the amendment took effect), the court ruled it valid. Although the amendment may “disappoint the homeowners’ expectations,” it did not “change the character of the community or the burdens between the grantee and grantor” since the assessment amount payable by the lot owners was not changed by the amendment.16

While the Flescher court’s reasoning and conclusions are opaque, the probable import of the court’s decision is that the amendment essentially was valid, but could not be applied retroactively. The court could have reached the same result far more directly by following the approach of the Carrigan decision: Uphold the amendment (since it did not shift burdens or change the general plan of development), but require that assessment revenue collected before the amendment be used for the originally stated expenses.

Did Woodside Village Supersede the Reasonableness Rule?
Hovering over the district and circuit courts’ struggle to elucidate a sensible framework for adjudging the enforceability of amendments to subdivision restrictions is Woodside Village Condominium Association, Inc. v. McClernan, 806 So. 2d 452 (Fla. 2002). In Woodside Village, the Florida Supreme Court held that an amendment to a condominium declaration adopted by the unit owners imposing substantial restrictions on the leasing of units was valid and enforceable even against those owners who acquired their units prior to the amendment. The court’s opinion said nothing about a uniform plan of development, a radical change of plans, an inconsistent scheme, a deviation in benefit between grantor and grantee, or even a reasonableness rule. None of the magic phrases or concepts that have guided Florida courts for the last 80 years in the adjudication of amendments to subdivision restrictions appears in Woodside Village, except for the concept of the relationship of the owners and the right to control one’s own property — and that concept, as treated in Woodside Village, has a completely different spin than appears in Holiday Pines.

Holiday Pines invalidated an amendment imposing mandatory association membership on lot owners because it altered the relationship of the owners and their right to control their own property. As the Holiday Pines court observed, “People elect not to purchase in condominiums because they do not want to restrict their control over their own property.”17 Whereas Holiday Pines regarded the freedom from such restriction as central to preserving a subdivision’s general plan of development, Woodside Village considered the lack of freedom from such restriction as central to the condominium form of ownership.

As early as 1975, the difference between subdivisions and condominiums was recognized in Hidden Harbour Estates, Inc. v. Norman, 309 So. 2d 180, 181-82:

[I]nherent in the condominium concept is the principle that to promote the health, happiness, and peace of mind of the majority of the unit owners since they are living in such close proximity and using facilities in common, each unit owner must give up a certain degree of freedom of choice which he might otherwise enjoy in separate, privately owned property. Condominium unit owners comprise a little democratic sub society of necessity more restrictive as it pertains to use of condominium property than may be existent outside the condominium organization.

Adopting this view, the Woodside Village court described condominium ownership as “unique territory.”18 Restrictions on leasing, the court said, are precisely the kind of restrictions that “distinguish condominium living from rental apartments or single-family residences. Hence, persons acquiring units in condominiums are on constructive notice of the extensive restrictions that go with this unique, and some would say, restrictive, form of residential property ownership and living.”19

Although the district court in Woodside Village opined that the amendment imposing the leasing restrictions was arbitrary, discriminatory, and oppressive because it destroyed the unit owners’ substantial property right to lease their units, the supreme court ruled that the unit owners “were on notice that the unique form of ownership they acquired when they purchased their units in the Woodside Village Condominium was subject to change through the amendment process, and that they would be bound by properly adopted amendments.”20 Amendments that were arbitrary, against public policy, or in violation of a constitutional right would be invalidated, but all other properly adopted amendments to condominium declarations would be upheld.

To hold otherwise, we would have to conclude that the right to amend a declaration of condominium is substantially limited, well beyond those limitations imposed by the Legislature in section 718.110(4) and (8). We would also be faced with the difficult task of deciding what subjects could be addressed by the amendment process, a task much better suited for the Legislature, as can be seen by its imposition of restrictions in section 718.110.21

The “hands off” approach to condominium amendments enunciated by Woodside Village is reminiscent of the Couch rule in Texas22 and consistent with the public policy favoring liberty of contract previously noted. Moreover, the experience of the Florida district courts in dealing with what subjects validly may be addressed by amendments to subdivision restrictions supports the Florida Supreme Court’s reluctance to face that “difficult” task in the condominium context. Why, though, given the difficulty of deciding which subjects may be amended, is the task better suited for the legislature in the condominium context but not in the subdivision context?23

At least one Florida court has addressed whether the Woodside Village approach to amendments should be applied to subdivisions. In Granuzzo, the circuit court ruled that Woodside Village did not apply outside condominium cases given the difference between condominium living and other forms of property ownership. The court’s refusal to extend Woodside Village to amendments in the subdivision context is understandable given the rationale of the Woodside Village decision, but there is a major problem as yet unaddressed — the rationale of Woodside Village is fundamentally flawed.

The logic of Woodside Village depends on an inaccurate, incomplete, and anachronistic distinction between condominiums and subdivisions. Condominiums are posited as unique communities of residents living in close proximity and using facilities in common, while subdivisions are imagined stereotypically as communities of spacious lots, where interaction with neighbors is avoidable, the home is one’s castle, and shared facilities are nonexistent. In the mid-1970s, that picture of condominium and subdivision living may have been largely true. By 2002, however, that picture was no more than a caricature.

The legislature first recognized condominiums as a legitimate form of real property ownership in 1963.24 Thereafter, apartments in high-rise buildings unquestionably could be individually owned, with shared ownership of the building structure and amenities.25 The early use of the condominium form of ownership was so predominately limited to tall apartment buildings that the word “condominium” in the popular lexicon came to denote the buildings themselves rather than a legal form of real property ownership.26 In those same years, most subdivisions followed the post-World War II pattern of large residential lots dependent on access by automobile. People in condominiums actually did live in much closer proximity and shared far more facilities than did people in subdivisions.

Restrictions for a typical 1950s subdivision tended to be brief. If an association of homeowners was prescribed, membership typically was voluntary, and the association rarely had assessment and lien powers. With the advent of planned unit developments in the 1970s, subdivision restrictions began to change. Elaborate declarations with comprehensive restrictions became increasingly common, as did mandatory membership in an association with assessment and lien powers. Those associations increasingly owned and maintained community roads and other amenities, which were shared by the lot owners through their membership in the association. Within these communities, the home was less a castle than a regulated housing arrangement. Independence to do what one wanted on one’s property was more and more a historical ideal than a practical reality.

This phenomenon was accompanied by the ever increasing creativity of real estate development lawyers. Why subject property to the extensive statutory regime governing condominiums if one could achieve the same objective through a zero-lot-line subdivision with a declaration and homeowners’ association providing virtually the same operational elements? As early as the 1980s, townhome developments embraced the homeowners’ association structure in lieu of a condominium structure. Both in physical and operational aspects, these homeowners’ association developments were nearly indistinguishable from condominium developments.27

The use of land condominiums further blurred the distinction between condominiums and subdivisions. Due to subdivision lot setback requirements, it sometimes would be advantageous to develop property for detached housing as a land condominium. From the street, the development might look like a standard subdivision, but it would be subject to the Condominium Act every bit as much as a neighboring multi-family condominium building.

These innovations in land development made it impossible to determine from physical appearance whether any townhome or detached housing development was a condominium or a subdivision. Moreover, unless Woodside Village is understood to apply only to residential condominiums,28 how is any of the supreme court’s rationale comprehensible in the context of commercial condominiums? There are no residents living in close proximity in a commercial condominium, but the condominium form of ownership is no more unique in a residential setting than in a commercial setting. Once the court’s rationale of living in close quarters is taken away, as it must for commercial condominiums, what underlying theory is left to support the court’s position that judicial intervention is unwarranted in amendments to condominium declarations absent arbitrariness or a violation of public policy or constitutional right?

What is left is the statutory nature of condominiums. With the enactment of F.S. §718.102, effective January 1, 1977, every Florida condominium then existing or thereafter created was made subject to the Condominium Act.29 As the supreme court noted, “condominiums are a creature of statute.”30 That very fact is the sole legitimate rationale for Woodside Village.31 The legislature has preempted to itself the creation and regulation of condominiums32 and may specify the conditions under which condominium declarations may be amended as it sees fit.33 It is not merely the difficulty of specifying those conditions that makes the task suitable for the legislature, as Woodside Village contends, it is the very ability of the legislature to specify those conditions for a creature of its own making that justifies the court’s declining to intervene on amendments to condominium declarations.

Quo Vadis, Thou Reasonableness Rule?
The Florida court decisions on amendments to subdivision restrictions are like ships adrift at sea. One solution to the discordant decisions would be to adopt the liberal Woodside Village/Couch approach to validate all amendments that avoid arbitrariness and do not violate public policy or constitutional rights. There is nothing to preclude the supreme court from embracing this approach, but considering the substantial investment made by Florida courts over the decades in developing the general plan of development theory and the reasonableness rule, it is hard to conceive the supreme court going in that direction. The supreme court has carved out condominiums alone for this more liberal treatment, and as long as that treatment is grounded in the notion that condominiums are creatures of statute and subject to legislative control, this distinctive treatment of condominiums has an intellectually sustainable foundation. There is, on the other hand, no room left for repetition of the outdated Hidden Harbour characterization of the distinction between condominiums and subdivisions. Hidden Harbour should never again be cited for that proposition.

Short of applying the Woodside Village rule to subdivisions, adoption of §§6.10 and 6.21 of the Restatement (Third) of Property: Servitudes would introduce a coherent rationale for adjudicating amendments to subdivision restrictions. Section 6.10 deals with amendments made by lot owners,34 and §6.21, set forth above, deals with amendments made by developers.

With respect to communities governed by F.S. Ch. 720,35 adoption of §6.21 would require amendment by the legislature of F.S. §720.3075(5) to conform the language of the statute to the language of §6.21. For example, “materially change the character of the development” would be substituted for “destroy the general plan of development.” For communities exempt from Ch. 720, adoption of §6.21 would be within the province of the courts. Presently in Florida case law, with the possible exception of Richardson, there is no distinction between the standards applied to amendments adopted by developers and amendments adopted by lot owners. This has led to confusion in the cases, and the elegantly simple language of §6.21 would do much to confine evaluation of developer-amendment cases to the actual concerns relevant to the exercise of a developer’s power to amend.

Adoption of §6.10 to deal with amendments by lot owners in communities subject to Ch. 720 could be accomplished by legislative amendment of F.S. §720.306(1)(c) — to conform the language of the statute to the language of §6.10 — or by court ruling.36 For communities exempt from Ch. 720, adoption of §6.10 would be left to the courts. Section 6.10 identifies three classes of amendments. One class, described in subsection (1), includes amendments that extend the term of the declaration, make administrative changes, or limit uses that threaten the reasonable enjoyment of property in the community. These amendments require the approval of two-thirds of the voting rights or such other number as the restrictions may provide. A second class, described in subsection (2), concerns nonuniform amendments and amendments that would violate a community’s duties to its members. These amendments require the approval of each adversely affected lot owner unless the declaration fairly apprised purchasers of the potential for such amendments. The third class, described in subsection (3), deals with amendments that prohibit or materially restrict uses within individually owned lots or change the method of allocating voting rights or assessments. These amendments require unanimous approval.

The panoply of standards presently controlling the adjudication of amendments to subdivision restrictions and the application of those standards by the Florida courts are too diverse and inconsistent to reliably guide either practitioner or judge. The reasonableness rule that nominally controls the cases arose from the dubious finding by Flamingo Ranch of an “inherent inconsistency” in restrictions providing for the possibility of amendment — an inconsistency that was equally present in Woodside Village but that did not instill in the supreme court an urge to imply a reasonableness restraint. That alone demonstrates the fallacy of Flamingo Ranch.

Nevertheless, so much case law has been invested in the reasonableness rule that it seems unlikely that the supreme court would resolve the existing discord among opinions by substituting the Woodside Village rule for the reasonableness rule. A further impediment to substitution of the Woodside Village rule is that application of the rule to subdivisions would necessitate an admission that reliance in Woodside Village on the perceived differences between condominiums and subdivisions was misplaced — an admission the court may be unwilling to make.

Given the proper case, the supreme court could redefine and clarify the reasonableness rule in its application to subdivisions, much as the court did in Woodside Village with respect to condominiums. Adopting the standards of §§6.10 and 6.21 of the Restatement (Third) of Property: Servitudes, either legislatively or judicially, would advance this goal.

1 Holiday Pines Prop. Owners Ass’n, Inc. v. Wetherington, 596 So. 2d 84, 87 (Fla. 4th DCA 1992).

2 Id.

3 Id. at 88.

4 Id. at 87.

5 Richardson v. Deerwood Club, Inc., 589 So. 2d 937, 939 (Fla. 1st DCA 1991).

6 Granuzzo v. Willoughby Golf Club, Inc., No. 432004CA1006 at 11 (Fla. 19th Cir. Ct. Jan. 17, 2008).

7 Klinow v. Island Court at Boca West Property Owners’ Association, Inc., 64 So. 3d 177, 180 (Fla. 4th DCA 2011) (citations omitted). In a footnote, the court characterized Holiday Pines as a case involving a condominium association; in fact, the association in Holiday Pines was not a condominium association.

8 For example, an amendment imposing a 50 percent late fee for payments received one day late might be deemed capricious, but the excessive late fee could hardly be said to destroy a development’s general plan.

9 Klinow, 64 So. 3d at 181.

10 The court’s opinion states that the assessment amount would vary yearly, but does not reveal that the variance was tied to the Consumer Price Index, which is evident from an examination of the respective declarations recorded in the Public Records of Marion County. The assessments were intended to compensate the developer for its maintenance and other services to the community. Significantly, the declarations did not tie the amount of the assessments to the developer’s actual costs. If the costs exceeded the assessment revenue, the developer would have to bear the deficit. The declaration was silent on how to deal with surpluses. The amendment adopted by the developer ostensibly was intended to clarify that any surplus stayed with the developer, without any obligation to apply the surplus to future expenses.

11 Restatement (Third) of Property: Servitudes (2000).

12 Id. at §6.21.

13 Flescher v. Oak Run Assocs, Ltd., 111 So. 3d 929, 932 (Fla. 5th DCA 2013). Note that the “burdens between the parties” language does not mirror the Restatement wording, which only focuses on changing the lot owners’ burdens. The court presumably adopted this language to incorporate the “deviation in benefit from that of the grantee to that of the grantor” phrasing of Klinow and Flamingo Ranch, both of which the court cited immediately after its reference to the Restatement.

14 Id. at 933.

15 In its discussion preceding the holding, the court erroneously represents the Florida Supreme Court’s Loch Haven decision as recognizing that the power to amend restrictions must be exercised “in a reasonable manner so as not to destroy the general plan.” Id. at 932. As noted above, the supreme court’s opinion did not hold that the reasonableness rule applies to amendments to restrictions. What the supreme court actually said was, “More recently, however, courts have begun to require that the reserved power be exercised in a reasonable manner so as not to destroy the general plan.” Nelle v. Loch Haven Homeowners’ Ass’n, Inc., 413 So. 2d 28, 29 (Fla. 1982). This was an observation, not a directive.

16 Flescher, 111 So. 3d at 933.

17 Holiday Pines Prop. Owners Ass’n, Inc. v. Wetherington, 596 So. 2d 84, 88 (Fla. 4th DCA 1992).

18 Woodside Vill. Condo. Ass’n, Inc. v. McClernan, 806 So. 2d 452, 462 (Fla. 2002).

19 Id.

20 Id.

21 Id. at 460.

22 Couch v. Southern Methodist University, 10 S.W.2d 973 (Tex. 1928).

23 The legislature has enacted legislation governing amendments by subdivision developers, but that legislation is no more instructive than prior case law. Fla. Stat. §720.3075(5) provides that developer amendments are “subject to a test of reasonableness [Holiday Pines, 596 So. 2d at 87], which prohibits the developer from unilaterally making amendments to the governing documents that are arbitrary, capricious, or in bad faith [Klinow v. Island Court at Boca West Property Owners’ Association, Inc., 64 So. 3d 177, 180 (Fla. 4th DCA 2011)]; destroy the general plan of development [Flamingo Ranch Estates, Inc. v. Sunshine Ranches Homeowners, Inc., 303 So. 2d 665, 666 (Fla. 4th DCA 1974)]; prejudice the rights of existing nondeveloper members to use and enjoy the benefits of common property [Blue Reef Holding Corp., Inc. v Coyne, 645 So. 2d 1053, 1054 (Fla. 4th DCA 1994)]; or materially shift economic burdens from the developer to the existing nondeveloper members [Klinow, 64 So. 3d at 180; and §6.21 of the Restatement].” The legislature has also enacted Fla. Stat. §720.306(1)(b) and (c) governing amendments generally. Subsection (b) implies that any amendment to restrictions is valid if it conforms to the requirements of law and does not violate subsection (3), which prohibits certain alterations to a lot owner’s voting rights and assessment obligations without the lot owner’s consent. The reference to the requirements of law likely incorporates the limitations of case law, including the reasonableness rule.

24 Fla. Stat. Ch. 711 (1963).

25 Some common-law condominiums were created in Florida prior to adoption of Fla. Stat. Ch. 711 (1963), but “money sources were reluctant to enter the condominium market; and builders, developers, and mortgage brokers wanted a statute expressly sanctioning the condominium form of ownership.” McCaughan, The Florida Condominium Act Applied, 17 U. of Fla. L. Rev. 1, 2 (1964–65). Unlike Fla. Stat. §718.102 (Supp. 1976), which made all condominiums subject to the Condominium Act, Fla. Stat. §711.08(1) (1963) (emphasis supplied) made application of the 1963 condominium act to condominiums permissive: “A condominium may be created by recording in the public records of the county wherein the land to be included is located a declaration….” “The permissive word ‘may’ was used advisedly in saying that ‘a condominium may be created.’ This is because the authors of the act did not wish to jeopardize the legality of existing condominiums or to lay down a legal strait jacket, which would preclude those benefits of condominium ownership that might otherwise arise.” McCaughan, The Florida Condominium Act Applied, 17 U. of Fla. L. Rev. at 27 (1964–65).

26 “‘Condominium’ means that form of ownership of real property created pursuant to this chapter, which is comprised entirely of units that may be owned by one or more persons, and in which there is, appurtenant to each unit, an undivided share in common elements.” Fla. Stat. §718.103(11).

27 For example, two adjacent townhome developments from the 1980s on Longboat Key — Harbour Oaks at Longboat Key Club, a Condominium, containing 56 residential units, and Harbour Oaks II, a Subdivision, containing 42 units — look and function almost identically. Harbour Oaks at Longboat Key Club is governed by a declaration of condominium recorded in Official Records Book 1638, page 1340, and Harbour Oaks II is governed by a declaration of restrictions recorded in Official Records Book 1828, page 2431, Public Records of Sarasota County. The lot owners in Harbour Oaks II live in exactly the same close proximity as the unit owners in Harbour Oaks at Longboat Key Club. Owners in both developments are subject to similar regulations, and the respective associations have similar assessment and lien powers.

28 Assuming Woodside Village does apply to commercial condominiums, commercial unit owners could be at risk for amendments eliminating originally permitted uses. For example, suppose a commercial unit is used for a bar and an amendment is adopted prohibiting use of any unit for bar purposes due to the annoyance caused to a majority of the unit owners. Would the bar owner’s right to operate the bar thereby terminate under Woodside Village? Unless the amendment is found to be arbitrary, the bar is probably closing. Drafters of condominium declarations can protect against this possibility by specifying authorized uses as appurtenances to the applicable condominium units pursuant to Fla. Stat. §718.106(2)(e).

29 In an unfortunate demonstration of circular definitions, Fla. Stat. §718.103 (Supp. 1976) defined “condominium” as “that form of ownership of real property which is created pursuant to the provisions of this chapter….” This definition, which was avoided in the original incarnation of the Condominium Act, Fla. Stat. §711.03(7) (1963), remains even in the current version of the statute. Removal of the circular definition would improve the statute.

30 Woodside Vill., 806 So. 2d at 456; accord, Tranquil Harbour Dev., LLC v. BBT, LLC, 79 So. 3d 84, 86 (Fla. 1st DCA 2011) (“a condominium is strictly a creature of statute…”). Prior to 1977, this would not have been true.

31 The Couch theory of amendments as valid implementations of the very provisions of an instrument creating the amendment power could also justify the Woodside Village holding. Woodside Village incorporated this theory by finding that unit purchasers “were on notice that the unique form of ownership they acquired when they purchased their units in the Woodside Village Condominium was subject to change through the amendment process, and that they would be bound by properly adopted amendments.” Woodside Vill., 806 So. 2d at 461. Nevertheless, the emphasis in Woodside Village on the unique nature of condominium ownership negates a conclusion that the decision was based on that theory alone. If it were based on that theory alone, Woodside Village logically would have to apply to amendments to subdivision restrictions.

32 The legislature has elected to regulate condominiums with exquisite detail. The Condominium Act now consumes more than 70 pages of the Florida Statutes.

33 To the extent legislative specification of those conditions impairs vested rights, a constitutional analysis of the Contract Clause is implicated. See Pomponio v. Claridge of Pompano Condominium, Inc., 378 So. 2d 774 (Fla. 1979). A discussion of the retroactive application of statutory amendments is beyond the scope of this article.

34 Section 6.10 actually deals with owners in any common-interest community, which includes both subdivisions and condominiums. Because there is no inherent meaningful distinction between subdivisions and condominiums, the Restatement does not differentiate between them. It would be logical for the supreme court to apply §6.10 to condominiums, but that would require the court to overrule Woodside Village, which is improbable.

35 Not all subdivisions subject to restrictions are governed by Ch. 720. For example, under the definitions of Fla. Stat. §720.301, Ch. 720 only applies to a community if there is an association having assessment and lien powers and mandatory membership.

36 Fla. Stat. §720.306(1)(c) is not an exclusive list of limitations on amendments. Subsection (b) also incorporates limitations imposed by law, which would include case law.

J. Michael Hartenstine is a shareholder of Williams Parker Harrison Dietz & Getzen in Sarasota and concentrates his practice in the representation of commercial and residential developers. He is board certified in real estate and is a member of the Condominium and Planned Development Committee of the Real Property, Probate and Trust Law Section. Hartenstine is a magna cum laude graduate of Harvard College and received his J.D., with distinction, from Duke Law School. The author thanks Lisa Gonzales Moore for her research assistance in the preparation of this article.

This column is submitted on behalf of the Real Property, Probate and Trust Law Section, Margaret Ann Rolando, chair, and Kristen Lynch and David Brittain, editors.

[Revised: 05-27-2014]