Importance of Contract Review

In the course of business, every corporation, including community associations, must enter into dozens of contracts for services and materials, some of which relate only to a single project, and some of which may continue for many years (bulk cable contracts being the most typical example). And, with so many contracts and providers, it’s inevitable that one or more of those relationships will sour. At that point, many associations will contact their attorneys, to determine what can be done to get them out of the agreement, or to recover funds already paid to a non-performing party. Unfortunately, trying to resolve a contract dispute at the time of a breach is far less efficient than paying the necessary funds to have an attorney draft and negotiate an agreement with appropriate protections for the association from the outset. In legal parlance, a contract is an agreement between two parties, where each party has certain obligations to the other, and where some “consideration,” or value, is exchanged. Typically, an association will offer to pay money to a vendor or contractor, in exchange for goods or services. The terms of the contract, which are usually in writing (in Florida, any contract for the sale of goods over $500, or where the services provided are not to be performed within the space of one year, must be in writing), govern the relationship between the parties. This is critical, because contracts are evaluated on their face, according to the plain language used, and external evidence of the parties intent may only be considered if the language is ambiguous or has multiple meanings. Otherwise, whatever a contract says is legally binding. So, for example, as attorneys we are often asked whether a client may terminate a contract because a vendor is performing poorly. The only way to determine the client’s rights to terminate is to look for a written termination provision, and to see, under what conditions, the contract may be voided. Often, contracts are silent as to termination rights, or provide that they may only be terminated “for cause,” and then only after providing notice of a...

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Would Assessment Amendments Benefit Your Association?

Located within most associations’ governing documents are provisions that benefit mortgage holders including, typically, provisions that make association liens inferior to first mortgage liens. Often these provisions state that foreclosure sale purchasers are not responsible for paying assessments that came due before such purchasers obtain title. In contrast, the Florida Statutes affecting both homeowners’ associations and condominium associations contain provisions that can be interpreted to hold foreclosure sale purchasers—including foreclosing lenders that obtain title—responsible for the payment of at least a portion of assessments which were not paid by a home’s previous owner. Ordinarily, when an association’s governing documents conflict with the state statutes, the statutes should be followed. However, an exception to this general rule applies when the governing documents have provided contractual rights which would be impaired if later-enacted statutes are followed. In such cases, the governing documents control and the statutes are not applied. In order to make sure that your association will be able to take advantage of statutory changes making purchasers responsible for the payment of assessments that were not paid by a home’s previous owner, associations are encouraged to review their governing documents with their legal counsel and to, where necessary, amend them to incorporate the assessment collection and lien rights found within Florida Statutes. Doing so is more important for homeowners’ associations than for condominium associations because, while the condominium statute (Chapter 718) has contained purchaser assessment liability provisions for decades, the homeowners’ association statute (Chapter 720) was silent on purchaser assessment liability until July 1, 2007. Accordingly, purchasers at mortgage foreclosure sales arising from mortgages given in homeowners’ associations before this date, including foreclosing lenders, have successfully argued that, in the absence of an amendment incorporating the statute, they are not responsible for paying assessment balances left over from a home’s previous owner. Several recent appellate cases have reviewed foreclosure purchaser liability issues in homeowners’ associations, and, notably, many of these cases have turned on whether or not the homeowners’ association involved had amended its governing documents to incorporate the assessment liability statutes that it was attempting to enforce. In contrast, condominium associations...

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