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New Appellate Case Raises Issues For Mixed Use Developments in Florida

Publication
October 30, 2020

A recent decision by the Third District Court of Appeals has engendered uncertainty about the manner of creating mixed used developments containing a residential condominium component in Florida.
The case of IconBrickell Condominium No. Three Association v. New Media Consulting, LLC, decided October 7, 2020 involved an appeal from summary judgment granted to an owner of a residential unit in the third tower of the Icon Brickell project on Brickell Avenue in downtown Miami, ordering reformation of the declaration of condominium.

The condominium contains 509 units composed of 501 residential units, 7 commercial units and one "hotel unit." The declaration of condominium invested the hotel unit with ownership of portions of the building classified as "shared facilities." The "shared facilities" as part of the hotel unit were areas of the building that might generally be characterized as the common elements. The owner of the hotel unit was given the authority to control such areas and assess the residential owners for the cost of maintenance, repair and restoration.

Following an assessment against the residential owners in the amount of $727,216.01 in 2017 in connection with the restoration of a swimming pool shared by all three buildings, the plaintiff brought suit in 2018 alleging that the condominium declaration violated Florida's Condominium Act.

The trial court granted the plaintiff's motion for summary judgment, holding that the condominium declaration violated the Condominium Act in seven respects: (1) allocated expenses in a manner other that on each owner's percentage interest in the condominium; (2) recharacterized common elements as "shared facilities;" (3) failed to assign ownership in the common elements in accordance with size of the units or equally; (4) assigned control of the common elements to a minority condominium owner; (5) granted the hotel unit owner, rather than the condominium association, control of the maintenance repair and improvement of the common elements; (6) shifted the burden for condominium and master association assessments from the hotel unit owner to the residential owners; and (7) allowed the hotel unit owner to employ third party service providers in its sole discretion and without competitive bids. The trial court order required that the declaration of condominium be reformed to correct the violations.

On appeal, the Third District affirmed the holding of the trial court in a somewhat ambiguous opinion. While the appellate court appears to attempt to affirm the lower court judgment on the narrowest terms possible, quoting in a footnote that, "[I]f it is not necessary to decide more, it is necessary not to decide more. . ."], the court's ultimate analysis is far from clear. The Third District placed its reliance on Section 718.108(1) of the Condominium Act which contained a definition of common elements:

  1. “Common elements” includes within its meaning the following:

a. The condominium property which is not included within the units.

b. Easements through units for conduits, ducts, plumbing, wiring, and other facilities for the furnishing of utility services to units and the common elements.

c. An easement of support in every portion of a unit which contributes to the support of a building.

d. The property and installations required for the furnishing of utilities and other services to more than one unit or to the common elements.

The opinion held that the common elements described in this statutory provision could not be recharacterized as non-common elements. But the court stated, "We decline to embrace the broader proposition that the transfer of ownership and control of any amenities traditionally designated as common elements violates the spirit, if not the letter of the law."

Many have read the above analysis to mean that the appellate court addressed only those provisions of the declaration of condominium relating to utility lines that were part of the shared facilities. Their conclusion is that the Third District merely indicated that the utility lines controlled by the hotel unit owner serving the residential units were, in fact, common elements of the residential portion of the condominium and could not be divested.

However, others have read the opinion more broadly. The Third District's affirmance did note that "this threshold misnomer [of the shared facilities] engendered the litany of additional statutory violations comprehensively delineated in the order below." And the Court's affirmance of the district court was a general one, not limited to the utility lines.

It is appears clear from the appellate court's opinion that one cannot recharacterize statutorily described common elements as something else. What is not clear as a result of this particular decision is how the declaration of condominium involved in this case can be reformed (as the plaintiff requested and the trial court ordered), since it should be noted that the hotel unit owner, which owned the shared facilities, was not made a party to the case.

Unfortunately, the appellate court gives us limited guidance on what a drafter can do to avoid a claim for reformation when dealing with commonly used portions of a mixed use project that are not specifically covered by the statute. This is especially important in mixed use projects, like mixed use projects containing hotels, which are required to meet certain "brand standards." Owners of projects with existing "shared components" or "shared facilities" should consider reviewing with counsel the underlying condominium documents in light of potential claims by residential owners of mixed use projects. Treatment of such common areas in new mixed use projects with a residential condominium component should be carefully considered.

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