Florida Case Law & Florida Court Opinions - Florida Law
|Need Legal Help?|
NOT FINDING WHAT YOU NEED? -CLICK HERE
This court case was taken from the Florida Court's web site. Search our site for more cases - CLICK HERE
NOT FINAL UNTIL TIME EXPIRES TO FILE REHEARING
MOTION AND, IF FILED, DETERMINED
IN THE DISTRICT COURT OF APPEAL
TARA MANATEE, INC., a Florida
Case No. 2D02-3717
FAIRWAY GARDENS AT TARA
CONDOMINIUM ASSOCIATION, INC., )
a not-for-profit corporation, )
Opinion filed September 12, 2003.
Appeal from the Circuit Court for Manatee
County; Janette Dunnigan, Judge.
Thomas E. Maloney and Edmond E. Koester
of Quarles & Brady LLP, Naples, for
Andrew H. Cohen of Hankin, Persson, Davis,
McClenathen & Darnell, Sarasota, for
In this appeal, we are asked to determine whether the developer of a
nonphased condominium project is required to fund reserves for the maintenance of
condominium units that had not yet been constructed at the time that control of the
condominium association was turned over from the developer to the association. We
conclude that the developer is not required to fund maintenance reserves for unbuilt
units and, therefore, reverse the summary judgment entered in favor of Fairway
Gardens at Tara Condominium Association, Inc.
Tara Manatee, Inc. (Developer) was the developer of a twenty-building,
eighty-unit condominium project in Manatee County that is now operated by Fairway
Gardens at Tara Condominium Association, Inc. (Association). Prior to turnover of
control of the association, the Developer was operating under the developer guarantee
provision of section 718.116(9)(a)(2), Florida Statutes (1995), which states in relevant
A developer . . . who owns condominium units . . .
may be excused from the payment of his share of the
common expense which would have been assessed against
those units during the period of time that he has guaranteed
to each purchaser in the purchase contract, declaration, or
prospectus . . . that the assessment for common expenses
of the condominium imposed upon the unit owners would not
increase over a stated dollar amount and has obligated
himself to pay any amount of common expenses incurred
during that period and not produced by the assessments at
the guaranteed level receivable from other unit owners.
The premise of the developer guarantee provision is that a developer should be
excused from paying assessments on its units during the initial sales phase when its
units are typically unsold and, thus, not consuming services of the association. Joseph
E. Adams, Community Associations: 1998 Survey of Florida Law, 23 Nova L. Rev. 65,
75 (1998). Otherwise, the developer would bear a disproportionate burden in the
maintenance of the condominium. Id. However, the developer must guarantee that
assessments against nondeveloper unit owners will not exceed a stated dollar amount
and the developer must also agree to fund any deficit incurred in the operation of the
condominium (including funding of reserves, unless properly waived) during the
guarantee period. Id.
In this case, the Developer contended that there was no deficit at turnover.
However, the Association contended that there was a deficit of $44,009 because the
Developer failed to fund maintenance reserves for the units that had not yet been built.
The Developer refused to pay the $44,009 and sought a declaratory judgment
interpreting its obligations under the Declaration of Condominium and applicable
statutes. The Association answered and filed a counterclaim seeking a money
judgment for $44,009. Both parties filed motions for summary judgment. The trial court
granted the Association's motion and entered a final judgment in the amount of
$52,794.77, which represented the Association's claim for $44,009 plus prejudgment
At the summary judgment hearing the Association argued that when the
Declaration of Condominium was recorded the Developer became obligated to fund
reserves for the maintenance of all eighty proposed units. In support, the Association
first cited section 718.104(2), Florida Statutes (1995), which provides that "[u]pon the
recording of the declaration . . . all units described in the declaration . . . as being
located in or on the land then being submitted to condominium ownership shall come
into existence, regardless of the state of completion of planned improvements in which
the units may be located."
Next, the Association cited section 718.112(2)(f)(2), which contains a
requirement that the annual budget of common expenses include reserve accounts for
capital expenditures and deferred maintenance. The same subsection provides that
"prior to turnover of control of an association . . . the developer may vote to waive the
reserves or reduce the funding of reserves for the first 2 years." § 718.112(2)(f)(2). The
Association argued that the Developer was obligated to fund maintenance reserves for
all eighty units described in the declaration because the units came into existence when
the declaration was recorded and the Developer did not vote to waive or reduce the
reserves. Finally, the Association acknowledged that the condominium was being
operated under a developer guarantee authorized by section 718.116(9)(a)(2) and
asserted that the Developer's obligation under this provision included funding reserves
for unbuilt units because maintenance reserves are a common expense incurred upon
the recording of the declaration. And, if the Developer did not wish to fund these
reserves, it should have built a phased condominium or should have voted to waive or
reduce the reserves.
The Developer agreed that its unbuilt units came into existence when the
declaration was recorded, and therefore, all proposed units were subject to
assessments as they became due for the maintenance of common elements and built
units. The Developer also agreed that as part of the developer guarantee it was
obligated to ensure that reserves for constructed units and common elements such as
the pool and roads were fully funded. However, with respect to reserves for deferred
maintenance, the Developer argued that it was only obligated to fund reserves for the
maintenance of constructed buildings and common elements.
On appeal, the Developer frames the issue as whether maintenance
reserves for unbuilt units are an "incurred" common expense for which the Developer is
liable under the developer guarantee provision. The determination of whether these
reserves are an incurred common expense turns on a determination of what event
triggers the requirement that they be funded. The trial court cited Hyde Park
Condominium Ass'n v. Estero Island Real Estate, Inc., 486 So. 2d 1 (Fla. 2d DCA
1986), and concluded that the Developer became obligated to fund full reserves for all
eighty units at the time the declaration was recorded because at that time "the eighty
units came into existence." While we agree that the units came into legal existence
upon the recording of the declaration, we do not agree that the obligation to fund
deferred maintenance reserves for the unbuilt units also arose at that time.
In Hyde Park, the Hyde Park Condominium Association filed suit against
the owners of Units D1-7 for failure to pay assessments for common expenses. 486 So.
2d at 2. The owners denied responsibility for paying assessments because the property
owned consisted of lots rather than constructed units. Id. The trial court found that lots
1-7 of Unit D were unimproved property and were not "units" subject to assessments.
Id. This court reversed. Id. We noted that the Hyde Park Condominium declaration
provided that all units were liable for a proportionate share of the common expenses in
the same proportion as such units share in the common elements. Id. We concluded
that the unimproved lots were units:
Under the 1969 Act, condominium property includes
land, all improvements, all improvements on the land, and all
easements and rights with the condominium. § 711.03(9)
[Fla. Stat. (1969)]. A "unit" is that part of the condominium
property "which is to be subject to private ownership."
§ 711.03(13)(emphasis added). "Common elements" are
defined as "portions of the condominium property not
included in the units." § 711.03(4)(emphasis added).
Therefore, under the 1969 Act, the only type of private
ownership available within a condominium is a "unit."
Id. Hyde Park stands for the proposition that all units, whether built or unbuilt, must
share in assessments for common expenses of the condominium. For example, if only
five units are constructed and sold in a fifty-unit condominium, assessments for the
expense of maintaining the roads, landscaping, and common elements, such as a pool,
would be levied against all fifty units and not just the five that were already constructed.1
Hyde Park does not stand for the proposition that deferred maintenance reserves for
unbuilt units become an incurred common expense at the time a declaration is recorded
and, therefore, does not support the trial court's order in this case.
We conclude that the requirement to fund reserves for deferred
maintenance is not triggered by the recording of a declaration of condominium. We
reach this conclusion by construing section 718.112(2)(f), which addresses what must
be included in an annual budget, and more specifically subsection 718.112(2)(f)(2),
which addresses reserve accounts. This subsection provides in part:
In addition to annual operating expenses, the budget
shall include reserve accounts for capital expenditures and
deferred maintenance. These accounts shall include, but
are not limited to, roof replacement, building painting, and
pavement resurfacing, regardless of the amount of deferred
maintenance expense or replacement cost, and for any other
item for which the deferred maintenance expense or
1 Developers are permitted to close on completed units within each substantially
completed building in a condominium development, provided the common facilities
serving the completed units have been substantially completed. § 718.104(4)(e), Fla.
replacement cost exceeds $10,000. The amount to be
reserved shall be computed by means of a formula which is
based upon estimated remaining useful life and estimated
replacement cost or deferred maintenance expense of each
reserve item. The association may adjust replacement
reserve assessments annually to take into account any
changes in estimates or extension of the useful life of a
reserve item caused by deferred maintenance. This
subsection does not apply to budgets in which the members
of an association have, by a majority vote at a duly called
meeting of the association, determined for a fiscal year to
provide no reserves or reserves less adequate than required
by this subsection. However, prior to turnover of control of
an association by a developer to unit owners other than a
developer pursuant to s. 718.301, the developer may vote to
waive the reserves or reduce the funding of reserves for the
first 2 years of the operation of the association, after which
time reserves may only be waived or reduced upon the vote
of a majority of all nondeveloper voting interests voting in
person or by limited proxy at a duly called meeting of the
We conclude that, based on the wording of this statute, a developer is not
required to fund deferred maintenance reserves for unbuilt units. The formula
prescribed to determine amounts to be reserved is based in part on the "remaining
useful life" of each reserve item. The phrase "remaining useful life" suggests that the
"useful life" of an improvement has already begun. The useful life of a unit in terms of
maintenance does not commence until it is built because unbuilt units do not deteriorate
and accrue maintenance needs. Furthermore, the provisions of section 718.112(2)(f)(2)
whereby a developer may vote to waive or reduce the funding of reserves must be read
to apply only to reserves that are required to be funded. We find no requirement to fund
maintenance reserves for unbuilt units and, therefore, no waiver was necessary.
Accordingly, we reverse the summary judgment entered in favor of the
Association and direct the trial court to enter summary judgment in favor of the
Reversed and remanded.
SALCINES and CANADY, JJ., Concur.
LEGAL HELP FORUM - Potential Client ? Post your question.
LEGAL HELP FORUM - Attorney? Answer Questions, Maybe get hired!
NOW - CASE
LAW - All 50 States - Federal Courts - Try
it for FREE
Ask Your Legal Question Now.
Pennsylvania Lawyer Help Board
Find An Attorney
Created and Developed by
Copyright 1997 - 2010.
A Division of