Florida Community Association Construction Law Blog : Sarasota Construction Lawyer & Attorney : Tannenbaum Scro Law Firm : Florida, Tampa Bay

The Florida Supreme Court on April 20th agreed to hear the case of Maronda Homes, Inc. v. Lakeview Reserve Homeowners Association, Inc., an appeal from an October, 2010 decision of the Fifth District Court of Appeal.  In the decision under appeal (48 So.3d 902), the Fifth District determined that Lakeview Reserve could pursue the project developer, Maronda Homes, under an implied warranty theory for defects and deficiencies in the roads, drainage systems, retention ponds and underground piping of the subdivision.  At issue was the interpretation of the Supreme Court's decision in Conklin v. Hurley, 428 So.2d 654 (1983) in which the Supreme Court determined that implied warranties extended only to the construction of a residence and "improvements immediately supporting the residence" such as water wells and septic tanks.  The Fourth District Court of Appeal, in 1985, interpreted Conklin as precluding recovery by a homeowner's association under an implied warranty theory for defects in subdivision roads and drainage improvements.  Port Seawall Harbor and Tennis Club Owners Ass'n., Inc. v. First Federal Savings and Loan Association of Martin County, 463 So.2d 530.

Acknowledging its disagreement with the Fourth District, the Fifth District determined that when the Supreme Court used the phrase "improvements immediately supporting the residence," it did not intend the definition to be literal.  Consequently, the Fifth District developed a  new test for which improvements qualify as "supportive of the residence."  The new test is whether the improvement is providing a service essential to the habitability of the home.  The Fifth District reasoned that when the Supreme Court utilized water wells and septic tanks as examples, it did not intend these "services" to be the sole ones that would qualify.  The conclusion reached by the Fifth District Court on the applicability of implied warranties to the roads, drainage systems, retention ponds and underground piping of the Lakeview Reserve subdivision:  Since the services provided by these improvements are essential to the habitability of the homes, they do "support the residences" and thus carry implied warranties under Conklin.

The Florida Supreme Court will now decide whether the Fourth District (no implied warranties for site improvements)  or the Fifth District (implied warranties for site improvements) is the law in the State of Florida for homeowner's associations.  The other issue to be decided by the Supreme Court is whether the Association itself has standing to pursue the claim or whether a class action on behalf of the homeowners is necessary.  The Fifth District ruled that the Association had standing to bring the action.

Note to owners of new condominiums: statutory warranties under Florida Statute 718.203 extend to the owners from the developer and contractors for site improvements, so the Maronda decision should not affect condominium warranties.

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In Florida, under the "economic loss rule", a party is precluded from suing a party with whom it has contracted for negligence absent personal injury or property damage.  One exception carved out by the Florida Supreme Court has been for the negligence of "professionals", although the court did not specifically define what a "professional" is.  In the construction context, there has been no doubt that architects and engineers are "professionals."  Claims against them are not subject to the economic loss rule.  But what about land surveyors?

The issue of whether land surveyors are "professionals" excluded from the economic loss rule was decided by the Florida Fourth District Court of Appeal in Estate of Joanne Rocks v. McLaughlin Engineering Company, 49 So. 2d 823 (Fla. 4th DCA 2010).   They are.  In deciding this, the appellate court cited state statutes referring to land surveyors as professionals and relied in addition on the following attributes:

1.    surveyors are engaged by clients to perform a skilled service solely under their control and competence;

2.    the service performed by a surveyor is one requiring special education, training, experience and skill;

3.    the typical client is not competent to perform surveying personally nor direct that it be performed in a particular way; and

4.    the client/surveyor contract gives the client no power of direction and leaves performance up to the skill and expertise of the surveyor.
 

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Florida Statute 489.128 provides that contracts entered into by an unlicensed contractor are not enforceable by the unlicensed contractor. Importantly, this statute was amended in 2009 to clarify that the term "unlicensed" means the failure to secure a state license (as opposed to a local license). Florida Statute 489.532(1)(a) further clarifies that if a state license is not required for a scope of work to be performed under a contract, the individual performing the work is not considered unlicensed.

Three recent appellate decisions addressed the application of F.S. 489.128.

In MGM Construction Services Coro. v. Travelers, 36 Fla. L. Weekly D462a, (3d DCA 2011), the trial court denied relief to a stucco sub-contractor who liened a project for non-payment. The trial court dismissed the sub-contractor's suit on the basis that the sub-contractor could not enforce its contract with the general contractor because it did not possess a specialty contractor's license as required by county ordinance. The appellate court ruled that F.S. 489.128 did not render the contract unenforceable because there was no state licensing requirement for stucco sub-contractors. The appellate court then looked at whether the trial court could nonetheless deny contract enforcement because of the lack of the county license. The county ordinance in question did not render contracts unenforceable if licensing was not secured. Despite this, the appellate court determined that the trial court on remand could still rule the contract unenforceable, but had to weigh public policy concerns against possible inequities in reaching its determination.

In Earth Trade, Inc. v. T & G Corporation, 42 So.3d 929 (Fla. 5th DCA 2010), a site contractor without the required state license performed site work for a parking garage. The work was defective and the general contractor sued the site contractor for breach of contract. The general contractor prevailed at trial. On appeal, the site contractor and its surety contended that the general contractor could not enforce the contract because it knew that the site contractor was unlicensed. The appellate court rejected this argument citing the clear language of F.S. 489.128 rendering a contract by an unlicensed contractor unenforceable only where the unlicensed contractor is attempting to enforce the contract.

Finally, in MMII, Inc. v. Silvester, 42 So.2d 876 (Fla. 4th DCA 2010), the trial court rejected a breach of contract claim by a seller/installer of audio entertainment systems on the basis that the seller/installer did not have a state general contractor nor state electrical sub-contractor license. The appellate court reversed, finding that electrical work was only incidental to the installation of audio entertainment systems and thus the installation of such systems did not require a state license.

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by Alan E. Tannenbaum and Salvatore Scro as co-authors with Felix Martin, PE

In the marketplace today there are many people who call themselves "construction experts." Some of them are highly experienced and knowledgeable, while some are little more than talking heads with little substantive expertise. How is one to know who truly is an expert and who is not?

First consideration should be given to the matter of qualifications. What is the expert's education and experience? Does the expert have a resume available for review? How long has he/she been an expert? Does the expert have repeat clients, recommendations? Does the expert have demonstrable experience in the area he/she will be retained to investigate?

1.      Could the expert have a conflict of interest? If an expert's firm performs a substantial percentage of work for a type of clients, it's possible that their views may be influenced to the benefit of that group of clients. A firm who works mostly for large developers should be carefully considered if your potential claim will be against large developers.

2.      Is your expert able to explain complex issues in a succinct and readily understandable manner? There is nothing worse than an expert so enamored of his/her expertise that no one else can understand what he/she is saying. Or one so lacking in expertise that he/she cannot explain the issues in an easy-to-understand manner. If you have a hard time understanding an expert, so will a jury of your peers.

3.      Does the expert follow an objective analysis, with replicable results, verifiable by others? Experts who make claims based solely on non-standard, non-replicable test methods are not following a scientific method and any results thus obtained will always be subject to question. Beware of the expert who is loath to share his/her methodology or data.

4.      Are all the claims made by you're the expert supported by building code sections, product specifications or published standards? An "expert" who cannot present claims backed by published regulations is only an expert in his/her own mind.

5.      Finally, is the expert capable of acting impartially, and not as an advocate of your emotions? This is always a tough one, because we want the expert to be our advocate, to fight our battles. But an expert who is not independent, who fails to act impartially and who acts solely as an advocate for the client's emotionally charged opinions will only do his/her client a disservice, because he/she will not be able to approach the problems objectively. The client needs to know that there is always a possibility that not all of an expert's findings may be beneficial to the client, and the client must be ready to support the expert and his/her objectivity. Clients should not retain an expert as a mouthpiece for one's own grievances, clients should retain an expert to provide an honest and unbiased opinion.

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The United States Supreme Court just published its opinion in Stolt-Nielson S.A., et al v. Animalfeeds International Corp., 22 Fla. L. Weekly Fed. S269A.  In its holding, the Supreme Court determined that absent the express agreement of the parties or a state or federal law mandating it, a defending party cannot be forced to arbitrate separate contract disputes on a class basis.  The plaintiffs in the case had attempted to file a class action in federal court.  The class action was rejected on the basis that the individual contracts required arbitration.  The plaintiffs sought to pursue their claims in arbitration on a class basis.  The arbitrator approved the class action and the Federal Second Circuit Court of Appeals affirmed.

In Florida, there are rules of procedure allowing class actions in the condominium and homeowner association settings.  Consequently, this holding by the Supreme Court is not likely to affect the ability of residents of condominium and homeowner associations to proceed on a class basis even where individual contracts call for arbitration.  Who the decision will affect are home buyers whose homes are not part of a community association.

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HIRING TWO LAW FIRMS

Every condominium association should have a general counsel under retainer to advise on day-to-day operations and ongoing legal issues.  During the transition period, general counsel can be of great assistance to a new Board in getting acclimated to the varied requirements:

‚    Documents

‚    State Statutes

‚    State Administrative Rules & Regulations

‚    Common Law (court-created law) Governing Condominium Operations

The transition period is also the time for the construction quality of the building and improvements to be evaluated and for Association financial operation during the period of developer control to be scrutinized.  The type of law firm best suited to assist in the evaluation and to negotiate a resolution of possible claims is a trial firm experienced in negotiating and litigating condominium construction and accounting claims.

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