Monday, July 19, 2010

Are your HOA governing documents set to expire soon?

Last week I met with a Broward County homeowners’ association that had a variety of issues they wanted to discuss. That list unfortunately did not include the fact that their Declaration of Covenants and Restrictions might have already expired by application of a 1963 law known as MRTA or the Marketable Record Title Act. The community had been represented by legal counsel for the last several years but the board related that they had never been advised about the existence of this law or its eventual impact on their ability to enforce their governing documents if the proper steps were not taken.

MRTA was originally passed at the behest of Florida’s title agents years ago to make the issuance of title policies a little less cumbersome. Rather than having to search back to Spanish land grants to ensure clear title, the law was intended to extinguish certain claims at least 30 years old or older. We’ve talked a lot about unintended consequences from legislation and the impact of MRTA on the private covenants and restrictions relied upon by HOA’s is one such example.

In the most basic terms, any covenant which is 30 or more years old from the root of title must be preserved or it will be extinguished. Condominiums are not impacted by MRTA since the transfer of condominium units via deed references the underlying Declaration of Condominium, thereby breathing new life into the Declaration in each such instance. Most HOA lots are conveyed by deeds that reference the underlying Plat for the community and NOT the underlying Declaration of Covenants and Restrictions.

Preserving documents that are still within the thirty-year time period is a relatively inexpensive and simple process requiring a board vote alone. If your governing documents have already been extinguished by application of law, the process becomes much more protracted and expensive, requires membership approval as well as approval from the Department of Community Affairs (DCA).

MRTA’s impact will be felt most keenly by HOA’s with recreational leases on their common areas, numerous recreational facilities that must be maintained, repaired, replaced and insured as well as age and other restrictions that the vast majority of the owners wish to see upheld. If the governing documents have been extinguished, the association’s ability to enforce the governing documents and collect maintenance to provide essential community services is severely jeopardized and, in some cases, eliminated entirely. I realize for some readers, this will come as welcome news as they say “Adios” to these restrictions. Others, however, might be distressed to learn that they bought into a community with certain expectations only to discover that the ability to deliver on those expectations is in jeopardy. If your HOA is more than 10 years old, it is not too soon to discuss with legal counsel what must be done to preserve your governing documents now. If your community is nearing your 30-year anniversary or is even older, you should discuss what must be done to reinstate those documents.

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