DAYTONA BEACH, Fla. – The 5th District Court of Appeal recently
decided in favor of a pair of homeowners representing themselves in a
case against their homeowner association at Sullivan Ranch.
According to a report
by the Orlando Sentinel, Sara MacKenzie, who had only practiced law
for a short time after successfully earning her law degree in the
1980s, and her husband, Ralph, hoped for “a declaration that Centex
failed to meet its obligation to make capital contributions to the
HOA’s reserve accounts when it controlled the HOA,” according to
the appellate court’s decision.
Centex had made an initial $32,300 contribution to the reserve
account in 2007 for its developer-owned properties, but did not
continue to make payments, the decision further stated.
Centex did, however, keep a line item for reserve funds in the
budget, and collected the funds for properties not owned by the
developer. In lieu of making reserve contributions, Centex paid the
development’s operating expenses.
It was a complex matter, according to S. David Cooper, an Orlando
lawyer who specializes in HOA conflicts.
“This case involved two conflicting, ambiguous statutes, and the
declaration was even more ambiguous,” Cooper told the Florida
Record in an email interview. “Arguing legislative intent is
difficult because one rarely has a statement from the legislature
saying ‘This is what we mean.’”
The conflicting statutes are Section 720.308(1)(b), which stated
a developer in control of the HOA “may be excused from payment of
its share of the operating expenses and assessments” if it has
“obligated itself to pay any other operating expenses incurred that
exceed the assessments receivable from other members,” and Section
720.303(6), which clarified
that, once established, “the reserve accounts must be funded or
maintained or have their funding waived” by a majority vote of
members of the HOA.
The MacKenzies — and ultimately, the appellate judges — did
not agree with Centex’s interpretation of these statutes.
“Centex interpreted 720.303(6) as not applying to Centex because
of the limitation in 720.308(1)(b). Centex also attempted to argue
that 720.303(6) only applies to ‘budgeting’ the reserve account,
not to ‘funding’ it,” Cooper said. “The court was required to
interpret the two statutes in a manner that removed the conflict;
thus, 720.308(1)(b) was deemed not to limit reserves. In short, the
court said that the ‘assessments’ referenced in 720.308(1)(b) do
not include payments to a reserve account.”
The case had initially been decided in favor of Centex by Lake
Circuit Judge William Law, but the 5th District Court of Appeal
overturned Law’s judgment on Dec. 22 and remanded the case to the
trial court to decide the amount Centex owes, according to the
The MacKenzies argued that Centex owes almost $1.13 million.
Upon hearing the appellate court’s judgment, Centex lawyer
Matthew Brenner — who declined to comment for this article —
filed a request to have the 5th District Court certify an appeal to
the Florida Supreme Court, arguing that the decision would negatively
impact developers financially and cause abandonment of communities
currently under construction. The court denied his request, the
Cooper notes that the decision may have a profound impact, though.
“This is a significant case because if that has been the M.O. of
Centex for all of their developments, they and all other developers
who have created reserves but not funded them may be hit with
enormous payments to HOAs all across Florida,” he said.