Bernhard Law Firm won summary judgment in a Brickell penthouse dispute with a luxury condo association, winning the lawsuit on claims for breach of estoppel certificate, breach of declaration of condominium, promissory estoppel, and declaratory relief. (Florida Bar disclaimer: results may not be typical. You may not have as beneficial a result). Bernhard Law Firm won on all counts. If you have any questions on property disputes, enforcement against associations, or contract breaches, please contact Bernhard Law Firm at 786-871-3349, abernhard@bernhardlawfirm.com, www.bernhardlawfirm.com.

The background to the case is provided here from the pleadings and filings. In 2012 the Client and the condominium’s Association entered an agreement through a signed estoppel certificate. In exchange for the Client’s purchase of a rooftop penthouse unit in the Association’s building and payment of the Association’s assessments, the Association agreed to not hold the Client responsible for any existing violations of the governing documents or any other matters relating to the building and the unit. To confirm the propriety of this arrangement, both the Declaration of Condominium and the Condominium Act § 718.116(8)(a) provided that the Client “shall be protected” by the estoppel certificate after purchasing the penthouse. Under these terms, the Client accepted, closed on the penthouse and paid the Association’s assessments.

However, a year after closing, the Association breached its agreement. The Association spontaneously demanded total removal of the penthouse’s third bedroom, calling it an encroachment on the Association’s rooftop terrace in violation of the governing documents. The Association did so even though (i) the room had existed before the Client’s purchase and the Association’s estoppel, and (ii) the rooftop terrace was reserved for the Client’s exclusive entry and use. The Association then took every step to force the Client to remove the room at the Client’s own expense.

Bernhard Law Firm sued the Association, arguing that the Association was estopped from such activity and that these acts breached its agreements. Bernhard Law Firm argued that even if the Association had not issued the estoppel certificate promising to forego these enforcement acts, the Client would still be entitled to keep the room under the Declaration of Condominium, the master contract that governs all of the Association’s activities. The Declaration § 8 provided an easement to unit encroachments on Association property when not caused by the current unit owner. Thus the Association’s acts breached their own Declaration of Condominium in addition to the estoppel. These breaches entitled the Client to actual damages for losses and fees relating to the room and the Association’s acts, and a declaratory judgment of the room’s propriety under the estoppel certificate and Declaration § 8. Today, the Court agreed with Bernhard Law Firm, granted summary judgment on all counts in the Client’s favor.

See the Motion for Summary Judgment here: mot-summ-jud-w-exhibs-6-12-16

See the order here: ord-grant-summ-jud-for-lund-hansens-9-26-16

See further details on the case and Florida law argued here below:

The Client was entitled to a declaration on the status and title of the room

This case was hotly litigated and involved multiple claims. Bernhard Law Firm first requested a declaratory judgment that the room belonged to the Client. Under Florida law and May v. Holley, 59 So. 2d 636 (Fla. 1952), the Florida Supreme Court established six elements to entry of a declaratory judgment: (1) there is need for the declaration; (2) there is a present and ascertainable state of facts; (3) some right of the complainant is dependent on these facts or application of law to them; (4) there is some person with a present adverse interest in the subject matter; (5) the adverse party is before the Court; and (6) the relief is not sought merely for satisfying curiosity (i.e. an advisory opinion). 59 So. 2d at 639. Declaratory relief is the appropriate means of resolving the issue of the boundaries of property lines, easements, and encroachments on neighboring property. Toombs v. Gil, 353 So. 2d 934, 935 (Fla. 3d DCA 1978) (holding where a prior builder has made an error causing a home to be encroaching on the adjoining owner’s property, a suit seeking declaratory judgment is the proper course of action to determine boundary lines); see also Collier v. Parker, 794 So. 2d 616, 618 (Fla. 1st DCA 2001) (holding declaratory relief is an appropriate means of resolving the issue of the boundaries of an easement); Calvert v. Morgan, 436 So. 2d 314, 315 (Fla. 1st DCA 1983) (holding declaratory judgment is proper and within the Court’s jurisdiction to clear up doubt as to disposition of boundary lines in abutting property).

There was a need for declaratory judgment given the awaiting City settlement and the Association’s refusal to allow work in the room

Bernhard Law Firm argued that, as Florida courts have repeatedly held, a dispute over property boundary lines and easement lines creates the requisite need for a declaratory judgment (elements 1 and 6). Toombs at 935; Collier at 618; Calvert at 315. The need for a declaration is punctuated here because the City of Miami has determined that the room shall remain but that the Client must make certain improvements to its exterior. The Association was prohibiting the Client from doing so and instead demanding that the Client remove the room, which contravened the City’s requirements and the Association’s Estoppel Certificate. The Association claimed a present adverse interest in the room area (elements 4 and 5) and was before the Court. Thus, the Client was not seeking relief merely to satisfy curiosity and the Court could enter a declaratory judgment as to their right to use and improve the room. The Court agreed with Bernhard Law Firm.

 

By application of Declaration §§ 3 and 8 and Estoppel § 11 to the facts, the room should stay where it is

Bernhard Law Firm argued that the Clients’ right to keep the room at its present boundary was dependent on application of Estoppel Certificate § 11 and Declaration §§ 3 and 8 to the known facts, namely that the room existed in its present boundaries and state before 2012 (elements 2 and 3). The controlling legal provisions were as follows:

 PRIVATE DWELLINGS . . . shall mean and comprise the 80 separate numerically identified Dwelling Units which are designated in Exhibit ‘A’ . . . excluding, however, all spaces and improvements lying beneath the undecorated and/or unfinished inner surfaces of the perimeter walls and floors, and above the undecorated and/or unfinished inner surfaces of the ceilings of each Dwelling Unit . . . and including connecting balconies to inside edge of perimeter walls thereof . . . however, the outdoor terrace areas immediately adjacent to Private Dwelling Units PH 3 and PH 4 shall be considered limited common elements for the exclusive use of the Private Dwelling Unit to which each terrace area is abutting.

(Declaration § 3)

EASEMENT FOR UNINTENTIONAL AND NON-NEGLIGENT ENCROACHMENTS

In the event that any PRIVATE DWELLING shall encroach upon any COMMON PROPERTY for any reason not caused by the purposeful or negligent act of the PRIVATE DWELLING owner or owners or agents of such owner or owners, then an easement appurtenant to such PRIVATE DWELLING shall exist for the continuance of such encroachment onto the COMMON PROPERTY for so long as such encroachment shall naturally exist.

(Declaration § 8)

11. Are there any present violations of the Homeowners/Condominium Documents or other matters relating to the said Condominium/Property which a proposed purchaser would be held responsible for correcting subsequent to the closing? Yes _ No X

(Estoppel Certificate § 11)

Bernhard Law Firm proved that the parties did not dispute that the room existed before 2012, before the Association issued the Estoppel Certificate, and before the Client purchased the penthouse. Thus, the room was not caused by the purposeful or negligent act of the Client or its agents. The room was within the undecorated and/or unfinished inner surfaces of the present perimeter walls and floors, and above the undecorated and/or unfinished inner surfaces of the ceilings of the penthouse. Even if it weren’t, the Association agreed to not hold the Client responsible for the room encroaching on the Association’s property or otherwise violating the Association’s condominium documents.

Bernhard Law Firm argued, and the Court agreed, that applying Estoppel Certificate § 11 and Declaration §§ 3 and 8 to these undisputed present facts, the Court should enter a declaratory judgment that the room was within the boundaries of private dwelling PH3 under Declaration § 3 and thus owned by the Clients; and the Association waived any claim against the room’s boundary lines and ownership in Estoppel Certificate § 11. Thus, the Court entered declaratory judgment in favor of Bernhard Law Firm’s Client.

 

The Association breached the Estoppel Certificate contract § 11

Bernhard Law Firm also sued the Association for breach of its contracts with the Client. To establish a breach of contract, Bernhard Law Firm had to show the existence of a contract, a breach thereof, and damages. AIB Mortg. Co. v. Sweeney, 687 So. 2d 68, 69 (Fla. 3d DCA 1997) (holding plaintiff stated prima facie breach case where it pled these elements). Under Florida law, damages for breach of contracts relating to real property include loss of use and the amount required to reconstruct to conform to plans and specifications. Kritikos v. Andersen, 125 So. 3d 885 (Fla. 4th DCA 2013); Edgar v. Hosea, 210 So. 2d 233 (Fla. 3d DCA 1968). Florida law also provides that a homeowner that loses the use of a structure because of delay in its completion is entitled to damages for that lost use. Gonzalez v. Barrenechea, 170 So. 3d 13, 15 (Fla. 3d DCA 2015) (citing Russo v. Heil Constr., Inc., 549 So. 2d 676, 677 (Fla. 5th DCA 1989)).

 

The Estoppel Certificate was a contract

Bernhard Law Firm argued that estoppel certificates are enforceable contracts under Florida law, and the Court agreed. See, e.g., PNC Bank, N.A. v. Progressive Employer Servs. II, 55 So. 3d 655, 659 (Fla. 4th DCA 2011) (“In essence, [appellant’s] Estoppel Letter was its unilateral offer to the [appellees] whereby it agreed to immediately release the collateral without the required ninety day early termination notice. The [appellees] were not obligated to accept . . .”); Drane v. Sun Bank, Nat’l Ass’n, 596 So. 2d 1122, 1125 (Fla. 5th DCA 1992) (treating and interpreting an estoppel certificate as a contract); Atlantic Blvd., Ltd. v. Beach House Food Serv., Inc., 559 So. 2d 1168, 1170 (Fla. 4th DCA 1990) (enforcing estoppel letter as an additional agreement that rent being paid on a lease would be based on original square footage only, not additional footage upon occupancy); see also Robert T. Miner, M.D., Inc. v. Tustin Ave. Investors, LLC, 116 Cal. App. 4th 264 (2004) (“We conclude . . . Estoppel Certificate constitute the contract to be interpreted”).

Bernhard Law Firm argued that the Court could treat the Estoppel Certificate as either a unilateral or executory contract. A unilateral contract involves a unilateral statement by one party to do or not do some act under certain terms and conditions, which may be enforced by the other party through performance of those conditions. See Mark Realty, Inc. v. Rogness, 418 So. 2d 373, 376 (Fla. 5th DCA 1982). A unilateral contract is not based on mutual promises and lacks mutuality at the outset—it becomes binding on the promissor after performance by the promisee. Wright & Seaton, Inc. v. Prescott, 420 So. 2d 623, 627 (Fla. 4th DCA 1982). Similarly, in an executory contract the second party accepts an offer or promise made by the first party by doing an act that the second party did not have a contractual obligation to do, so that if and when this act by the second party is performed, the first party has received consideration and is then obligated to perform on its promise. See Rohlfing v. Tomorrow Realty & Auction Co., Inc., 528 So. 2d 463, 466–67 (Fla. 5th DCA 1988). Where an agreement is executory in nature, one party’s substantial performance according to the terms creates a binding and enforceable contract as to the other party. See Flagship Resort Dev. Corp. v. Interval Intern., Inc., 28 So. 3d 915, 922 (Fla. 3d DCA 2010). The Court agreed with Bernhard Law Firm.

Bernhard Law Firm noted that the Association and the Client had an enforceable contract through the Estoppel Certificate, wherein the Association promised that if the Clients purchased the penthouse, the Association would not hold the Client responsible for any present violations of the condominium documents or any other matters relating to PH3 or the building. The Association signed the Estoppel Certificate and addressed it specifically to the Client. The Association admitted that it authorized its agent to execute the Estoppel Certificate. The Client accepted these terms when they closed and purchased the Property, invested in the Association’s building, and paid the Association’s assessments. Thus, the Client performed the necessary acts of acceptance and provided the necessary consideration to create an enforceable contract in the Estoppel Certificate. PNC Bank v. Progressive at 659; Drane at 1125; Atlantic Blvd. v. Beach House at 1170; Robert T. Miner at 265. The Court agreed.

 

The Association failed in arguing that the Estoppel Certificate was superseded

The Association argued that the Estoppel Certificate was superseded by subsequent amended accountings of money owed on the penthouse. The Court disagreed. Bernhard Law Firm argued that the dispositive representations under Section 11 of the Estoppel Certificate were not affected by the collateral accounting incorporated-by-reference under Section 6 (“Currently, the total of $ ‘See estoppel’ is due . . .”). It did not matter whether the Association later revised its collateral accounting incorporated under Section 6, because these revisions made no reference whatsoever to Section 11 or any other representation in the June 21, 2016 Estoppel Certificate. See, e.g., Morse Operations, Inc., v. Sonar Radio Corp., 449 So. 2d 1002, 1003 (Fla. 4th DCA 1984) (holding where defendant signed order with arbitration provision and order contemplated collateral documents when signed, subsequently executed collateral document which contained no arbitration provision did not supersede order, and arbitration clause remained in effect); Seawell v. Hargarten, 28 So. 3d 152, 155 (Fla. 1st DCA 2010) (holding no novation occurred to property agreement where the original obligation was not clearly extinguished). The Court agreed with Bernhard Law Firm.

 

The Association breached by holding the Client responsible for issues with the room

Bernhard Law Firm argued that under the Estoppel Certificate § 11, the Association expressly promised that after closing it would not hold the Clients responsible for correcting any violations of the Condominium Documents or any other matters relating to the building or PH3. Nevertheless, the Association did the opposite, holding the room is in violation of the Association’s governing documents and forcing the Clients to great lengths to correct it, including: (i) adopting its own motion to disapprove the balcony enclosure; (ii) approving legal action to force the Client to remove the balcony enclosure; (iii) repeatedly notifying the Client and their counsels that it considers the enclosure as improper; (iv) demanding that the Client remove the enclosure; (v) expressly declaring that the enclosure is improper and must be removed; and (vi) advising the City of Miami that the enclosure is improper. The Court agreed, and held that all of these acts were breaches of the Estoppel Certificate.

 

The Association’s breaches caused the Client costs in architecture, consultation, and City fees and lost use

Bernhard Law Firm argued that these breaches deprived the Client of the benefits of the Estoppel Certificate and their full use of the enclosure. By demanding that the Client remove and correct the enclosure, the Association caused the Client to hire Fortislamas, Compress, SLS Consulting and Michael Sheehan, P.E., and D&P Contractors for professional work in architectural, engineering, construction, and fire. By requiring the Client to remove the enclosure, the Association caused the Client to expend approximately significant construction costs. Damages were near $250K.

Bernhard Law Firm also argued that by notified the City and fervently attacking the Client at City hearings, the Association has caused the Client exorbitant fees and costs; both to defend the Association’s efforts and settle with the City despite the Association’s efforts. The Association caused the City to issue citations and required the Client to engage professional consultations from Greenberg Traurig and Jeremy Koss on HOA and city compliance matters, costing nearly $100K. The Client also lost full and enjoyable use of the room, which sits in mid-renovation awaiting the Association to allow completion of the project.

The Court agreed, entering judgment against the Association on liability for property damages, payments made to professionals and the City, cost for final construction, lost use, expenses and interest, and attorney’s fees and costs.

 

Engineering, architecture, and professional fees were recoverable as damages

The Association argued that the Client’s professional fees were not proper recoverable damages as they did not flow from the Association’s breaches. The Court disagreed. Bernhard Law Firm argued that the Client was properly claiming their engineering, architect, and other professional fees as wrongful act damages; the Association involved the Client in a dispute with the City and the prior owner, making it necessary to incur professional expenses to protect their interests, recoverable under the wrongful act doctrine. See Schwartz v. Bloch, 88 So. 3d 1068, 1071 (Fla. 4th DCA 2012) (holding court erred in vacating wrongful act damages for architect, engineering, and other professional fees); Martha A. Gottfried, Inc. v. Amster, 511 So. 2d 595, 598 (Fla. 4th DCA 1987) (holding broker could be liable for seller’s costs and fees in action arising after agreement to sell condo fell through, where broker’s breach of contract caused sellers to be involved in litigation with condo’s potential buyers). The Court agreed with Bernhard Law Firm.

 

Lost use of the room was recoverable as damages

The Association argued that the Client’s lost use of the room was not recoverable as damages as they did not flow from the Association’s breaches. The Court disagreed. Bernhard Law Firm argued that the Client was also properly claiming for lost use of the room, as the Association prohibited them from correcting the room within a reasonable time after the City acquiesced to the repairs, along with costs necessary to conform to the Association’s specifications. See, e.g., Travelers Indem. Co. v. Parkman, 300 So. 2d 284, 285 (Fla. 4th DCA 1974) (holding car owners were entitled to recover for loss of use after breach, where defendant failed to allow repairs within a reasonable time after disputing parties acquiesced to the making of such repairs); Gonzalez v. Barrenechea, 170 So. 3d 13, 15 (Fla. 3d DCA 2015) (homeowner that loses the use of a structure because of delay in its completion is entitled to damages for that lost use); Kritikos v. Andersen, 125 So. 3d 885, 889 (Fla. 4th DCA 2013) (homeowner entitled to damages for lost use during construction delays caused by defendant); Edgar v. Hosea, 210 So. 2d 233, 234 (Fla. 3d DCA 1968) (proper damages is amount to reconstruct according to plans and specifications). The Court agreed with Bernhard Law Firm.

 

The Association was not excused by not knowing

The Association defended by arguing that it did not know about the issues with the penthouse, and thus could not be held to its Estoppel Certificate Section 11. The Court disagreed. Bernhard Law Firm argued that the Association did not limit its Section 11 representation to “known” violations, the Association did not use Section 11’s space provided to add caveats, the Association has admitted the room was visible from the parking lot, and a defendant’s full investigation before making representations was not an element of promissory estoppel—the Association knew the scope of its own information and voluntarily made its representations, which is dispositive. JN Auto Collection, Corp. v. U.S. Sec. Ins. Co., 59 So. 3d 256, 258 (Fla. 3d DCA 2011) (holding even silence may suffice for estoppel). The Court agreed with Bernhard Law Firm.

 

The Association was also liable by promissory estoppel

Bernhard Law Firm also sued for promissory estoppel to recover damages for the Association’s breaches. To establish a claim for promissory estoppel, a party must show (1) the promisor made a representation as to a material fact that is contrary to a later-asserted position; (2) the promise reasonably relied on the representation; and (3) the promise changed his or her position to his or her detriment based on the representation. JN Auto Collection, Corp. v. U.S. Sec. Ins. Co., 59 So. 3d 256, 258 (Fla. 3d DCA 2011) (holding insurer estopped from enforcing new terms in renewed policy to deny dealership’s claim). Thus, a party to an estoppel letter is estopped from making claims on property that are inconsistent with its own estoppel letters. Rissman on Behalf of Rissman Inv. Co. v. Kilbourne, 643 So. 2d 1136, 1139 (Fla. 1st DCA 1994) (holding mortgagee was estopped from claiming balance due which was inconsistent with its estoppel letters of ten years earlier). The doctrine of promissory estoppel comes into play where the requisites of contract are not met, yet the promise should be enforced to avoid injustice. Doe v. Univision Television Group, Inc., 717 So. 2d 63, 64 (Fla. 3d DCA 1998).

Here, Bernhard Law Firm argued that the Association represented that it would not hold the Client responsible for any violations of the condominium documents or for any other matters relating to the building or penthouse, if the Client purchased the penthouse. The Client was entitled to rely on this representation under Florida Statute § 718.116(8)(a), and reasonably did so given that the Association had total control of its own enforcement acts. After the Client purchased the penthouse, the Association changed position and had since held the Client responsible for the pre-existing room encroachment. The Association’s enforcement acts had been detrimental to the Client, causing the above-discussed damages and lost enjoyment of their home. Allowing the Association to do so without consequence would create a great injustice. The Court agreed with Bernhard Law Firm and entered judgment against the Association on liability for damages, and attorney’s fees and costs.

Contact Bernhard Law Firm on property disputes

In sum, Bernhard Law Firm won summary judgment in this penthouse dispute on all breach, estoppel, and declaratory claims against the condominium. (Florida Bar disclaimer: results may not be typical. You may not have as beneficial a result). If you have any questions on property disputes, enforcement against associations, or contract breaches, please contact Bernhard Law Firm at 786-871-3349, abernhard@bernhardlawfirm.com, www.bernhardlawfirm.com.