As we discussed in our main 2018 Community Association Legislative Update post, this year’s statutory amendments included one of the biggest efforts to date to help community associations avoid the disaster of their governing documents being extinguished by the Marketable Record Title Act (MRTA). As a basic premise, if a community’s governing documents are subject to extinguishment by MRTA, they must be preserved before the 30-year anniversary of the original governing documents being recorded (the legal analysis is actually much more complicated, but this is an easy starting point). If they are not preserved, associations’ covenants and restrictions effectively cease to exist thereby losing their rights to collect assessments and enforce use restrictions.
As a preface to this post, determining whether and how MRTA applies to specific community associations is a very complicated legal issue that needs to be addressed by an association’s legal counsel on a case-by-case basis, particularly given the dire consequences of failing to properly preserve the governing documents of a community. The new changes to the statute, as helpful as they may be, do not change this reality.
Here is a summary of the new preservation procedure that was passed in HB 617 and will go into effect October 1, 2018:
NEW PRESERVATION PROCEDURES
- At any time during the relevant 30-year period following the effective date of the root of title for the covenants and restrictions of a property owners’ association, an association may preserve and protect those covenants or restrictions from extinguishment by filing any of the following:
- A written notice in accordance with Section 712.06 (similar to the method under the old law); or
- A summary notice in substantial form and content as required under Section 720.3032(2); or an amendment to a community covenant or restriction that is indexed under the legal name of the property owners’ association and references the legal name of the property owners’ association and references the recording information of the covenant or restriction to be preserved.
- Failure of a summary notice or amendment to be indexed to the current owners of the affected property does not affect the validity of the notice or vitiate the effect of the filing of such notice.
- The statute is unclear as to whether additional notifications must be provided to owners regarding preservations. Please speak to your association’s legal counsel in order to take advantage of the new preservation procedures.
NEW SUMMARY NOTICE REQUIREMENTS FOR PRESERVATION
- Association may preserve and protect covenants from extinguishment under MRTA by recording the new summary preservation notice, which must include:
- The legal name of the association;
- The mailing and physical addresses of the association;
- The names of the affected subdivision plats and condominiums or, if not applicable, the common name of the community;
- The name, address, and telephone number for the current community association management company or community association manager, if any;
- Indication as to whether the association desires to preserve the covenants or restrictions affecting the community or association from extinguishment under the MRTA;
- A listing by name and recording information of those covenants or restrictions affecting the community which the association desires to be preserved from extinguishment;
- The legal description of the community affected by the covenants or restrictions, which may be satisfied by a reference to a recorded plat; and
- The signature of a duly authorized officer of the association, acknowledged in the same manner as deeds are acknowledged for record.
- A copy of the notice, as recorded, must be included as part of the next notice of meeting or other mailing sent to all members.
- The original signed notice must be recorded in the official records of the clerk of the circuit court or other recorder for the county.
While the new Summary Notice method of preservation appears at first glance to be a more straightforward process than the previous method, there are different issues that are raised in the new statutes that must be addressed for each individual community, including identifying the proper method of notice for the meeting at which the Summary Notice will be authorized by the Board, the manner in which the executed Summary Notice is provided to the membership following recording, properly identifying the governing documents to be preserved, and properly identifying the property subject to those governing documents.
Finally, HB 617 also included minor changes to the old method of preservation, and added that governing documents can be preserved by a recorded amendment under certain conditions. However, without following those conditions, the amendment method could be ineffective for purposes of preservation. Additionally, amendments recorded prior to the effective date of the new statute may not qualify for preservation purposes.
Unfortunately, while the new statutes do help associations, the preservation of governing documents remains a detailed legal process that must be handled carefully in order to ensure an association can continue to operate as originally intended. Consulting with experienced legal counsel is critical.