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.

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.