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09/13/12 It's The Law: Material Alteration Might Not Be Material Alteration

Question:

I am on the Board of Directors of a condominium association. The Board wants to upgrade part of our building to a higher quality product that will have a longer life expectancy and far lower maintenance expense. We have had a lot of talk about material alteration. Will this require an owner vote?

Answer:

The first place to look for required approval in a condominium setting is the Declaration of Condominium. If the Declaration specifies the procedure for approval, the Declaration is controlling. In some cases, the Declaration delegates authority for approval to the Board of Directors, most are silent or require approval of the unit owners.

If the Declaration does not provide a procedure, Florida Statutes require 75% of the total voting interests approve any material alteration or addition to the common elements or real property which is association property.

The courts have defined material alteration or addition in the condominium setting to mean “to palpably or perceptively vary or change the form, shape, elements or specifications of a building from its original design or plan or existing condition in such a manner as to appreciatively affect or influence its function, use or appearance.” That is “legalese” for the change affects performance or the way it looks.

Associations often make repairs or improvements that change the way property looks or functions. Many of those changes are done without unit owner vote, in some cases because getting 75% of all the unit owners to vote in favor of something would be extremely difficult.

One example of a case where the court found that a board had to get unit owner approval for a change was when the board decided to change from cedar shingles to terracotta roof tiles. In that case, the sole rationale presented for the change was that terracotta tiles were half the cost of cedar shingles. Because the tile would significantly change the appearance of the condominium, unit owner approval was required. Similarly, replacement of screen enclosures with glass jalousie windows was held as a material alteration requiring unit owner vote as does change in paint color. But, just when you think you understand changing the appearance or function is a material alteration, the courts start finding reasons that you are wrong. Florida Courts and the Division of Condominiums, Timeshares and Mobile Homes (“Division”) have determined numerous changes or additions to condominium property are merely maintenance or repair when the change provides some additional benefit.

In Tiffany Plaza Condominium Association, the Association built a rock revetment to stop erosion. No unit owner vote was obtained but the court approved the improvement. Although there is some debate as to the real meaning of the case, (since it actually addressed whether all owners had to pay for the improvement) it has been cited by many later decisions as standing for the proposition that an alteration or improvement which is necessary or beneficial for maintenance reasons does not require unit owner vote.

In one case, canals at the condominium were filling in due to erosion, excess weed growth and pollution. The erosion caused slippage of soil into the canals. The swimming pool was on unstable soil, floated up and was beginning to sink. The roads had large, severe potholes. Testimony confirmed that the canals needed to be drained, scraped, de-mucked, and lined with sea bags and other significant alterations had to be done in order to repair and protect the property. The court held that merely because the work was expensive did not convert it into a material alteration and, although some of the work would change either function or appearance, it was necessary maintenance and repair that did not require a unit owner vote.

Arbitration decisions of the Division seem to follow a similar line of reasoning. In one case, the arbitrator ruled that replacement of a chattahoochee pool deck with paver bricks was a board maintenance decision and did not require a unit owner vote. In another, the arbitrator ruled that installation of a chain-link security fence was not a material alteration as it was necessary to protect the unit owners in light of a history of criminal activity in the area. Other arbitration cases have ruled that where an ordinance or statute mandates a change, the change does not require approval by the unit owners.

Many of the decisions give deference to the business judgment of the Board of Directors. In one arbitration case, the Board replaced common element acoustical ceiling tile with drywall because the acoustical ceiling tile needed to be replaced. Drywall was chosen because it was more durable and cost effective. The same Board replaced ceramic floor tile with marble because ceramic floor tile was more difficult to clean. The arbitrator ruled that the Board could replace poorly performing material with a better alternative without unit owner vote.

Over time, it appears that deference has evolved in both courts and the Division in favor of a Board’s authority to make management decisions to protect and preserve association property and/or reduce association expense. But, this deference has not completely swallowed the requirement for approval of material alterations. That makes good legal advice on this issue imperative.

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