The Marketable Record Title Act ("MRTA")

There's been lots of discussions regarding the Marketable Record Title Act ("MRTA") lately with some of the most back and forth discussions coming from the Real Property, Probate and Trust Law ("RPPTL") section of the Florida Bar.  This piece of legislation is very complicated and it is nothing short of amazing how different facts can produce different legal opinions. 

Recently Chapter 720 of the Florida Statutes, also known as the Homeowners' Association Act ("the Act"), was revised to provide for a more expeditious process to file a Notice of Preservation.  The Notice of Preservation is done before the covenants expire against any lots, which is usually the 30th anniversary of the date the covenants were recorded.  Note the word "usually."  I'll get back to that later.

The Act also contains a section for revitalization of expired covenants, which is a whole different process from preservation.  Once covenants have expired against any lot a homeowners' association is left with only revitalization to try and breathe new life into the old covenants.

The hard part for most non-lawyers to understand is covenants can expire against just one lot, but not all the lots.  It's not as simple as saying the covenants are 30 years old and because no Notice of Preservation was filed, they cease to exist.  Covenants can be preserved in a number of ways, including a reference on a recorded plat by the Official Records Book and Page.  Covenants recorded on a plat in such a way do not expire which is why I used the word "usually" with caution.

Covenants can also be preserved in the chain of title to a lot by the recording of a deed which references the covenants by the Official Records Book and Page within the last 30 years.  This is why a title search is necessary before an opinion can be rendered whether or not the covenants expired against that particular lot.  

Once covenants have expired against a lot the HOA cannot enforce those covenants against that lot or usually cannot collect assessments from that owner. There's that pesky word "usually" again.  The exception to this rule regarding the collection of assessments would be very fact specific and based on a theory of unjust enrichment.  An example would be when an association owns the roads and the lot owner uses those roads to get to and from their home.  It would be unfair for the owner to use the roads but not be required to contribute to the repair and maintenance of those roads, which is called unjust enrichment.  The court would have to make such a determination based on the facts specific to that lot.

2016 Senate Bill 7031 - HOA Declarations Exemption from Marketable Record Title Act

I personally think this bill is a bad idea.  We have enough problems with HOAs which are governed by ancient documents written decades ago!

Bill Text Senate Bill 7031

Proposed language:

712.03 Exceptions to marketability.—Such marketable record 33 title shall not affect or extinguish the following rights: 34 (10) A covenant or restriction of a homeowners' 35 association or mandatory property owners' association.

Revitalization Question

Today I answered a question on www.avvo.com regarding the revitalization process and I think it is important to post the question and my response in this blog for those who do not or have not visited the Avvo website.

Question:

Our HOA's CC&R's have expired and an attempt is being made to revitalize the Declaration. In the interim, I am told we are a voluntary association and a not-for-profit corporation governed under FS617. 

Can the previous Board simply "take over" the corporation and run it without ratification by the owners? There is no confidence in the current Board and their continuing possession of documents, control over Management Company and bank accounts is regarded as hostile. Do owner/shareholders have a right to reorganize under any law?

Response: 

Here's a crash course on the Marketable Record Title Act (MRTA) and revitalization process governed by Fla. Stat. 720.403 - 720.407: 

1. It is possible for the Declarations to be valid against some lots, but not all. The Declarations can be preserved by being specifically referenced in a deed by the Official Record Book and Page Number or by reference to a plat that has the deed restrictions recorded on the plat. An analysis of each lot is required to determine if the deed restrictions have been extinguished by MRTA against that lot because the last reference is more than 30 years old. 

2. Revitalization can be used to breathe new life into the Declarations if they have ceased to govern one or more lots. 

3. The Declarations have no force and effect against those lots where the deed restrictions have expired and there is no duty to obey the restrictions or pay assessments. If the Declarations are revitalized they are not retroactive -- meaning the HOA cannot go back and collect assessments for the period of time between expiration and revitalization. 

4. It takes at least a majority of the homeowners to approve revitalization. It could be more if the Declarations require more than a simple majority to approve amendments to the Declarations. 

5. Revitalization is a very strict process which requires the HOA to appoint an organizing committee and to have a court reporter present at a meeting to vote on revitalization. While written consents can be used to gather the votes, if the bylaws and articles of incorporation do not provide for written consent the HOA is required to hold a meeting so homeowners can vote in person or by proxy (if proxies are allowed). 

6. If revitalization is approved by the homeowners the HOA has to apply to the Dept. of Economic Opportunity (DEO) for revitalization and, if granted by DEO, re-record the Declarations, index them against each lot and deliver a copy of the revitalized Declarations to each homeowner. The revitalized Declarations cannot be more restrictive than the original Declarations, although there are a few exceptions in the statute. 

To answer your question, in the interim the HOA still has bylaws and articles of incorporation which must be honored, including having elections and annual meetings. 

The revitalization statute was recorded in 2004. My opinion is this statute presents a constitutional issue on property rights and contract impairment for anyone who purchased their property before the statute was enacted. Statutes cannot be applied retroactively to change existing contracts and the Declarations, bylaws and articles are contracts between the HOA and the homeowner. This issue has not, to my knowledge, been litigated. 

If you feel your HOA is not following the procedures for revitalization properly you should consult with a HOA lawyer for an opinion. If revitalization is granted by DEO and you feel the HOA did not follow the procedures in the statute and any requirements in the Declarations, bylaws and articles (which is required by the revitalization statute), you have a very short period of time to petition DEO for an administrative hearing to challenge the revitalization.

Association Living 101 [Part 1: Your Governing Documents]

I have always wanted to write a book about HOAs and COAs, otherwise known as homeowner associations and condominium associations. I even considered titles like "HOAs for Dummies" or "Welcome to Flori-duh" (inspired by my friend who founded CyberCitizens for Justice). Since my busy professional life makes it unlikely I will ever finish the book, I figured a would start a series of blogs to pass on the information. Let's see how often I get to post the blogs.

Here's the first blog: Know Your Governing Documents!!!

The governing documents of any association (HOA or COA) are the Declarations (also known as Decs, CC&Rs, covenants, deed restrictions, etc.), the Bylaws, the Articles of Incorporation and any published (preferably recorded) Rules & Regulations.

Rule #1:Statutes trump Decs, Decs trump Articles, Articles trump Bylaws and Bylaws trump Rules and Regulations when there is a conflict between the laws and the documents or between the documents themselves.

Exception to the Rule: When determining if the statutes overrule the documents, you have to check the first few paragraphs of the Decs, Bylaws and Articles to see if any of them state the association was formed and organized pursuant to Florida Statute 720, 718, 617 or 607 "as amended from time to time."

This is important because your documents are a contract and disputes are resolved by the courts by applying contract theory. The Florida Constitution prohibits the application of new laws to retroactively change contracts. If the documents do not include those magic words "as amended from time to time," then you have to look to the version of the statute that existed in the year your documents were recorded. This is a rule reinforced by the Florida Supreme Court in the awe of Cohn v. The Grand Condominium, which was created by earlier condo cases.

Exception to the Exception: If a statute is enacted as a matter of public policy, or is remedial or curative, it can still overrule a contract.


Rule #2: What statutes apply? If you live in a HOA, then Fla. Stat. 720 (the HOA Act) applies as well as Fla. Stat. 617 if your HOA is a not-for-profit corporation, and Fla.Stat. 607 if it is a for-profit corporation. Most are non-profit, but not all. Also portions of Fla. Stat. 607 could apply to non-profits if Fla. Stat. 617 is silent on the issue and the specific provision does not affect non-profit status. Other statutes could apply as well, such as the prohibition to publishing "dead beat lists" in the Florida Consumer Credit Practices Act (Fla. Stat. 559).

If you live in a condo, Fla. Stat. 718 (the Condo Act) takes the place of Fla. Stat. 720.

Other statutes govern mobile home parks, co-ops and timeshares.

Townhomes are usually organized as HOAs even though the have the features of a condo.

Rule #3: in HOAs, the restrictions must be recorded in the Declarations. The Bylaws can clarify. The restrictions contained in the Decs, but they can't contain restrictions not in the Decs and cannot grant authority to the HOA not in the superior document, the Declarations. This rule was created by the case of S&T Anchorage v. Lewis. This means, as an example, if the Decs don't grant the HOA authority to impose assessments, then that right cannot be created by putting it in the Bylaws.

This rule does not apply to condo docs. The courts have held condo Bylaws can create new restrictions, like prohibiting pets. The courts only explanation for this has been to proclaim condominium associations "are creatures of statute" meaning they are created by statute. I don't get the logic here, but there are differences between the two types of associations in multiple areas while some sections of 720 and 718 are identical.

Rule #4: For a document to be enforceable against an owner, it must be recorded. This is so the document is "in the chain of title" of the association members and they have notice of the document. Decs and Bylaws are recorded in the official records of the county where the land is located and the Articles are recorded with the State of Florida Division of Corporations (www.sunbiz.org). After 1995 associations were required to record all documents in the county records, so it is not uncommon to see one recording in the county records containing all three documents.

Myth #1: Despite popular belief, the State of Florida does not approve these documents are make any determination if a HOA is mandatory or voluntary. Their job is to record your corporate filing, not rule on the content.

Myth #2: The county clerks do not check documents to see if they are legal or contain necessary provisions and clauses. Their job is to record your associations documents and collect a fee for doing so. Their job is not to give legal advice or make a determination if the language in the documents is legal or if the document has been executed properly. A search of county records in any county will reveal a lot of recorded garbage. There are a number of HOAs claiming to have supreme power over your constitutional rights when, in fact, they have no authority. Condos don't usually have this problem because their documents are not subject to termination by the Marketable Record TitleAct, Fla. Stat. 712. That's a whole other chapter.

Reading and understanding your documents and the statutes are your best defense against a dictatorship of an association. Participation in meetings is the next best defense. Don't wait for a problem to get involved or read the documents. By then it's usually too late.

Stay tuned for more blogs!

Barbara Billiot Stage, Esq.

Marketable Record Title Act ("MRTA")

The Marketable Record Title Act ("MRTA"), known as "MARTA", is getting a lot of attention these days as older homeowner associations (HOAs) are reaching their thirty-year anniversary. Under MRTA, deed restrictions expire after thirty years unless the HOA takes proactive steps to preserve them or revitalizes them after they have expired.

There is a lot of controversy with associations that did file a Notice of Preservation, but failed to comply with the statute, making their notices defective.   It is important to review the statute for the year in which the preservation was recorded because it has changed substantially.  Previously, the statute required the members, by majority vote, approve a new set of Declarations and those Declarations could not be more restrictive than the originals.  The current statute allows for the Board of Directors to vote to preserve the deed restrictions, but there are still notice requirements and filing requirements that are sometimes overlooked.