Florida Statute § 718.106(2)(b) states that limited common elements pass automatically upon sale or transfer with the unit, but allows for the transfer of limited common elements use rights as long as it is done in conformity with procedure set forth in a condominium’s declaration. Therefore, a unit owner with multiple parking spaces may be allowed to assign a parking space for consideration to another unit owner. A problem can arise when a unit owner sells the unit. Typically, a standard form contract of sale states that the unit comes together with all appurtenances. Numerous lawsuits have arisen when one unit owner assigns a parking space to another unit, and then sells their unit after the assignment. The new purchaser sees that the unit originally came with multiple spaces and naturally wants them all. The unit owner that purchased the parking space assignment says "no way, it’s mine, you should have done your homework". The next step is usually a lawsuit.
The Association’s Board of Directors and their insurers may be thinking, “So what? Sounds like a dispute between two unit owners, leave us out of it!” But that is not actually the case. Most condominiums have a dispute resolution procedure in their declaration that requires them to resolve a dispute between two unit owners as to which unit a limited common element is appurtenant to. Thus, one of the unit owners claiming use rights to the parking space will typically demand that the Board of Directors resolve the dispute. If the Association refuses to act or makes a decision which one of the unit owners disagree with, the Association may find itself in the middle of a lawsuit. Strategically, this makes sense for the unit owner because a “deep pocket” (i.e. the Association or its insurer) will be in the lawsuit and if the unit owner prevails he or she will be allowed to recover a portion of their reasonable attorney’s fees and costs.
So what can an Association do to protect itself? Keep good parking space logs and make a decision as to which unit owner has exclusive use rights! Sounds easy, right? Unfortunately, it is not.
Associations undergo elections wherein the Board of Directors can differ from year to year. Most associations have several different property managers or property management companies throughout their lifespan. Records come and go with these changes. Further complicating record keeping efforts is that, unlike deeds, assignments of limited common elements are not required to be recorded in the county’s public records and associations rely upon their members to update them when an assignment occurs, which does not always happen.
So what can be done?
When a unit is sold the Association should require that the new purchase contract contain an addendum specifying which limited common elements are being transferred with the unit. That way the Association can keep an accurate log documenting which limited common elements are appurtenant to specific units. Associations should also review their logs periodically to check for potential inconsistencies.
Also, associations should not ignore a demand to render a decision regarding which unit a limited common element is appurtenant to. The leading case in Florida on the enforceability of an association’s decision pursuant to its governing documents is Hollywood Towers Condo. Ass'n, Inc. v. Hampton, 40 So.3d 784 (Fla. 4th DCA 2010). Hollywood Towers holds that Courts must give deference to a condominium association's decision if that decision is within the scope of the Association's authority and is reasonable, that is, not arbitrary, capricious, or in bad faith. Therefore, as long as the Association makes a decision based on reasonable factors (i.e. its parking log records, an investigation or testimony, etc.) it is better insulated from liability.
What can an insurance carrier do to protect itself?
Insurers should note in the underwriting process certain red flags such as high turnover in the property management of the Association and Board of Directors. Oftentimes this can lead to poor record keeping which can, and usually does, get an Association in trouble.
For now, it seems like the recent wave of parking space litigation will continue. Finding a place to park is not going to get any easier!