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Enforceability of Board Adopted Rules Regulating Leases in Condominiums

Regulating Leases in Condominiums

Many community associations in the State of Florida are looking for ways to combat the growing number of rentals in their communities. About a year ago, the Second District Court of Appeals issued an opinion in Le Scampi Condominium Association, Inc. v. Hall, Case No. 2D15-3208 (Fla. 2d DCA 2016), which could help community associations trying to find a solution their rentals problems.  The ruling in Le Scampi appears to stand for the proposition that associations whose declarations give authority to the association to adopt rules and exercise control over leasing can implement more stringent restrictions on the leasing of properties within the community.

Background of Le Scampi

Le Scampi Condominium Association, Inc. (“Le Scampi”) filed a lawsuit against the Halls (owners within the community) to prevent the Halls from leasing their unit for less than one month and without its prior approval in violation of leasing rules adopted by Le Scampi. The Halls did not dispute that they had rented their unit for less than one month and without Le Scampi’s prior approval.  Instead, the Halls argued that the rules imposed by Le Scampi were unenforceable, because the rules conflicted with their unrestricted right to lease their unit under Le Scampi’s declaration of condominium.

Provisions at Issue in Le Scampi

The provisions in Le Scampi’s declaration cited by the Court and relevant to the dispute between Le Scampi and the Halls follow:

  1. Sale, Lease, or Transfer. Subject to the provisions of subparagraph B below, a unit owner may without restriction under this Declaration sell, give, devise, lease or otherwise transfer his unit, or any interest therein, to his spouse, or to his child, parent, brother, sister, grandchild or descendant, or to any one or more of them, or to any Trustee of a Trust, the sole beneficiary of which is the unit owner or his spouse, child, parent, brother, sister, grandchild or descendant, or any one or more of them, or to any other existing unit owner. Notice of any such unrestricted transfer shall be given to the Board of Directors of the Association within thirty (30) days following consummation of such transfer.
  2. Notice to Association of Certain Transfers. Whenever a unit owner shall propose to sell, give, devise, lease or otherwise transfer his unit, or any interest therein, to any person other than a person or entity described in subparagraph A above, said unit owner shall give the Association not less than thirty (30) days prior written notice of the proposed transfer, which notice shall briefly describe the type of transfer proposed by the unit owner and shall state the name, address, and financial and character references of the proposed transferee. The notice shall also include a copy of the proposed contract for sale, lease or other document, if any, affecting said transfer.

Le Scampi’s rules, as cited by the Court, and relevant to the dispute between the parties follow:

  1. Units may be rented, subject to the approval of the Association, as set forth in Paragraph 7 above. All leases or rental agreements must be in writing, must include Rules and Regulations, and must be submitted to the Association prior to the actual occupancy of the unit by the tenant. No lease or rental agreement shall be binding until approved by the Association in writing.
  2. Units may not be leased or rented for a period of less than one (1) month.
  3. The Association shall have the right to evict any tenant of any owner in the event the tenant openly violates the Rules and Regulations and refuses to abide by same. Such power may be exercised by either the owner of such rented unit or the [A]ssociation and when so exercised shall be done so in accordance with those provisions as set forth in Section 83.40, et. seq., of the Florida Statutes

It is important to note that the approval and screening process is not referenced in the provisions of the declaration and is only established in the leasing rules adopted by Le Scampi’s Board of Directors.

Trial Court’s Ruling

The trial court issued a judgment in favor of the Halls based on its finding that a conflict existed and the language in Le Scampi’s declaration superseded any leasing restrictions adopted by Le Scampi’s Board of Directors.  The trial court’s ruling conforms to a long line of cases in the State of Florida stating or implying that owners have the unrestricted right to rent or lease their property and that any limitation on that right not specifically stated in an association’s declaration is unreasonable and unenforceable. Le Scampi appealed the trial court’s decision.

Second District Court of Appeals’ Ruling

The Second District Court of Appeals disagreed with trial court’s ruling and ruled in favor of Le Scampi. It ruled that the applicable provisions (recited above) do not provide that the right to sell, lease or transfer a unit subject the declaration is unrestricted. The appeals court interpreted the provisions of Le Scampi’s declaration to impose a prior-notice requirement and specifics as to what must be contained in such notice, but it does not otherwise address an owner’s right to sell, lease or transfer his or her unit to persons other than family members. The appeals court concluded that because the controlling provisions of the declaration did not expressly grant owner the unrestricted right to sell, lease or transfer his or her unit, a court cannot bestow such a right on the owners and the provisions in the Le Scampi’s rules governing rentals requiring prior approvals and disallowing rentals for periods of less than one month were not in conflict and, therefore, enforceable.

Community associations should review their governing documents to see if the Second District Court of Appeals’ ruling in Le Scampi can be used to help resolve their rental problems.

 

Posted in Legislation
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