Court Declares Retroactive Approval of Condominium Material Alterations Unlawful
In Bailey v. Shelborne Ocean Beach Hotel Cd’m. Ass’n., Inc. Case Nos.: 3D17-0559 and 3D17-0767 (Fla 3d DCA July 15, 2020) the Florida Third District Court of Appeals addressed whether the Condominium Act (i.e., Chapter 718 of the Florida Statutes) requires approval of repairs that are also alterations and whether the approval must occur before the work is performed. In this case, the condominium association financed two major construction projects over a four-year period with seven special assessments totaling more than $30 million. The project was initially approved by the association’s board of directors – not the membership. Once the work was completed, seventy-five percent of the unit owners voted to approve the project.
Unit owners sued the condominium association for allegedly violating F.S. §718.113(2)(a)’s material alteration approval requirements, and the individual directors for breach of fiduciary duty for violating Chapter 718. The condominium association conceded the pool paver repairs and the reinforcement under the townhomes were not necessary repairs. The trial court granted summary judgment ruling all work except for the pool pavers and reinforcement were necessary repairs and maintenance. However, the trial court did not find a violation of §718.113(2)(a) because the unit owners voted to ratify the work after the fact.
On appeal, Florida’s Third District Court of Appeals analyzed whether §718.113(2)(a) requires unit owner approval for a material alteration or substantial addition when the repair is considered a necessary repair. The appellate court also reviewed whether the unit owner approval for a material alteration must occur before the alteration.
The Court held there is an express exception to the prohibition of material alterations and substantial additions without owner approval for “maintenance of the common elements” that are the responsibility of the association.” Since the work performed by the condominium association, with the exception of the pool pavers and reinforcement, was necessary and reasonable it did not meet the definition of a material alteration or substantial addition. Therefore, the board was authorized to unilaterally approve the work.
However, and more importantly, as to the pool pavers and reinforcement work, the Court held that the retroactive approval by the unit owners was not valid. The Court held the statute requires unit owners to approve material alterations or substantial alteration prior to the work commencing. This ruling that upends decades of Department Business and Professional Regulation arbitration decisions upholding the practice of after the fact unit owner approval of material alterations.
This decision is an important lesson for all community associations that if an owner vote is required for any alterations or additions to the common elements, the association MUST seek a vote of the unit owners to approve the work prior to it being commenced.