Odds are if you live in Florida you have either dealt directly with homeowners associations (HOAs)or condominium owners associations (COAs) in one way or another or know someone who has. The Florida legislature has granted HOAs and COAs far reaching power to collect assessments from its members and enforce its covenants and restrictions, often called the Declaration, against offending (and sometimes non-offending) homeowners and condo owners.
Most disputes between owners and associations concern the collection of unpaid assessments. When a home or condo unit is purchased in a deed restricted community, the real property which the owner has purchased is encumbered by covenants and restrictions which run with the land (meaning they continue to encumber the real property despite a change in ownership of the real property). These covenants and restrictions outline the relationship between the owner and the association and act as a contract between the owner and the association. They typically obligate the owner(s) to pay assessments and other amounts to the association and also grant the association lien rights against the real property for unpaid assessments. Therefore, if the assessments go unpaid, the association may proceed with recording a lien against the property and foreclosing the lien in the same manner as mortgages are foreclosed by mortgagees. However, before an association can record a lien against an owner’s property for unpaid assessments, Florida Statutes 718.121(4) and 718.116(6)(b), governing COAs, and 720.3085(4)(a) and 720.3085(5), governing HOAs, require the association to provide the owners with notice of its intent to record a lien and notice of its intent to foreclose the lien before it can proceed with filing an action to foreclose its lien.
Disputes between owners and associations concerning unpaid assessments typically arise in two instances:(1) unpaid assessments which come due while the owner is the owner of the property, and (2) unpaid assessments which came due prior to the owner acquiring title to the property. The latter instance will be the remaining focus of this post.
Most covenants and restrictions grant the association the right to record a lien for unpaid assessments and contain language similar to the following: “[T]he assessments shall be the personal obligation of the person who was the owner of such real property at the time the assessment first became due and payable.” Also, pursuant to the covenants and restrictions, associations’ lien rights are almost always subordinate to first mortgages recorded against the property (and sometimes subordinate to all mortgages of recorded depending on the specific language in the covenants and restrictions). Such a subordination provision has the effect of extinguishing the association’s lien when a first mortgagee forecloses on its mortgage and the property is sold at a mortgage foreclosure sale. Some covenants and restrictions contain specific language stating that the association’s lien is extinguished upon transfer of title of the property pursuant to mortgage foreclosure or a proceeding in lieu thereof (such as a deed in lieu of foreclosure).Others take it a step further by providing that the obligation to pay assessments to the association does not pass to successors in title to the property unless specifically or expressly assumed by them. The cumulative effect of the foregoing provisions is that a purchaser of a property at a mortgage foreclosure most often is not personally obligated to pay the association unpaid assessments which came due prior to its acquisition of title to the property, and the association most often does not have a valid lien against the property for those amounts which came due prior to the transfer of title. Yet, despite the often clear and unambiguous language of the covenants and restrictions, associations, their attorneys and their management companies frequently send notices to new owners who acquire a property at a mortgage foreclosure sale demanding the new owner pay to the association assessments and other amounts which came due prior to the new owner’s acquisition of title to the property.
Association counsel often argue that Florida Statute 720.3085(2)(b), stating “[A] parcel owner is jointly and severally liable with the previous parcel owner for all unpaid assessments that came due up to the transfer of title” obligates a third party purchaser at a mortgage foreclosure sale to pay the assessments which came due prior to the third party acquiring title to the property. Florida Statute 718.116(1)(a) contains similar language imposing joint and several liability upon subsequent owners. However, Florida case law holds that the application of Florida Statute 720.3085(2)(b) is an unconstitutional impairment of contract rights when the covenants and restrictions contain language contrary to that of Section 720.3085(2)(b). See Pudlit 2 Joint Venture, LLP v. Westwood Gardens Homeowners Association, Inc., 169 So.3d 145 (Fla. 4th DCA 2015) (“[I]n summary, the trial court’s reliance on Section 720.3085(2)(b) rather than the provisions of the declaration violated appellant’s right against the impairment of contract, where appellant was a third-party beneficiary of the declaration.”); See also Ecoventure WGV, Ltd. V. St. Johns Northwest Residential Association, Inc., 56 So.3d 126 (Fla. 5th DCA 2011) and Coral Lakes Community Association, Inc. v. Busey Bank, N.A., 30 So.3d 579 (Fla. 2d DCA 2010). It is important to note that Section 720.3085(2)(b) would arguably apply to impose joint and several liability on third party purchasers at a mortgage foreclosure sale if the Declaration specifically incorporated Section 720.3085 (or 718.116) and its future amendments. See Kaufman v. Shere, 347 So. 2d 627 (Fla. 3d DCA 1977).
The same analysis of statutorily imposed joint and several liability via Section 720.3085(2)(b) on third party purchasers at a mortgage foreclosure sale likely applies to the application of Section 718.116(1)(a) on third party purchasers of a condo unit at a mortgage foreclosure sale. Unsuspecting third party purchasers frequently find themselves in a dilemma after acquiring title via a mortgage foreclosure sale. Many of them desire to sell their property, but the sale is unnecessarily delayed by the association’s recording of a lien for assessments coming due prior to the new owner’s acquisition of title. Others are threatened with foreclosure by the association for unpaid assessments that came due prior to their ownership. In either scenario, it’s advisable to have competent, experienced counsel review the documents in question, advise the owner as to the possible outcomes and negotiate a release of the lien and personal liability for those amounts which came due prior to the owner’s acquisition of title.
Non-Compete Agreements are increasingly commonplace in the State of Florida. On a basic level, a non-compete agreement, also called a restrictive covenant, is most often a contract between an employer and an employee (or independent contractor) whereby the employee or independent contractor agrees not to compete with the employer in the same profession or industry for a specified period of time upon termination of the employer-employee/independent contractor relationship.
In the State of Florida, non-compete agreements are governed by Florida Statute 542.335 which contains several requirements in order for a non-compete agreement to be considered a valid, enforceable agreement:
- The non-compete agreement must be reasonable in time, area, and line of business
- It must be in writing and signed by the party against whom enforcement is sought; and
- It must be justified by a “legitimate business interest” which may include, but is not limited to: (a) trade secrets, (b) confidential business information, (c) substantial relationships with specific customers/clients, (d) customer/client goodwill associated with (i) an ongoing business practice via a trade name, trade mark, service mark or trade dress, (ii) a specific geographic location or (iii) a specific marketing or trade area; or (e) extraordinary or specialized training.
Additionally, the non-compete agreement must be reasonably necessary to protect the legitimate business interest justifying the non-compete agreement.
One issue that is often a point of contention in a lawsuit to enforce a non-compete agreement is a disagreement concerning the time period in which the non-compete agreement is “in effect” or enforceable. For instance, suppose a non-compete agreement between an employee and employer prohibits the employee from competing with the employer for a period of 2 years following termination of employment. The employee is terminated and shortly thereafter, the employee begins to compete directly with the former employer. Suppose further that the former employer desiring to enforce the non-compete agreement does not learn of the former employee’s breach of the agreement until a few months prior to the expiration of the 2 year non-compete period. The former employer immediately seeks counsel and a lawsuit is subsequently filed to enforce the non-compete agreement on behalf of the former employer prior to the expiration of the 2 year non-compete period. The lawsuit seeks a preliminary and permanent injunction against the former employee to prevent the former employee from competing with the former employer and violating the non-compete agreement. Upon review of the complaint and a copy of the non-compete agreement, the attorney representing the former employee will undoubtedly argue that the lawsuit is moot because the term of the agreement will expire before the former employee will be able to obtain an injunction, and moreover, any injunction that the former employer obtains will only enjoin the former employee from competing for the small amount of time remaining on the 2 year non-compete period.
However, assuming the court finds the non-compete agreement reasonable and enforceable, case law in Florida bestows upon the court the discretion to equitably extend the term of a non-compete agreement when a breach of the non-compete agreement has been shown. Meaning, the court has authority to enter an injunction for an entire 2 year period as opposed to only the few months remaining on the non-compete period. See Michele Pommier Models, Inc. v. Diel, 886 So.2d 993, 995 (Fla. 3d DCA 2004) (“It is well established that Florida case law permits a non-compete period to be equitably extended to allow for what was intended in the bargain.”). This is what happened in Capelouto v. Orkin Exterminating Co. of Florida, 183 So.2d 532, 534 (Fla. 1966) where the Court enjoined a former employee from competing with his former employer for a period of 2 years from the date the injunction was entered instead of only for the short time remaining on the term of the non-compete agreement. (“…the appellee-employer was entitled to have a period of two years during which the appellant-employee would not be inc competition with it and in contact with its customers in the arena involved.”); See also Kverne v. Rollins Protective Serv., 515 So.2d 1320 (Fla. 3d. DCA 1987).
However, it’s important to note that a court is not necessarily required to equitably extend the non-compete period when a breach of a non-compete agreement has been shown; it’s up to the court’s discretion. See Sunbelt Rentals, Inc. v. Dirienzo, 487 F.Supp.2d 1361, 1363 (S.D. Fla. 2007). Whether a court is inclined to extend a non-compete period will be determined by the individual facts of each case and the evidence presented to the court which may justify extending the non-compete period. For instance, if the court finds the damage or harm caused by a breach of a non-compete agreement is nominal, then the court may decline to equitably extend the duration of non-compete period. Likewise, if the court determines that the plaintiff can be adequately compensated in the form of damages, or that the plaintiff failed to timely seek enforcement of the non-compete agreement despite knowledge of defendant’s breach of same, then these facts may lead the court to decline to extend the non-compete period.