Loren Kean Law

Loren Kean Law

Loren Kean Law

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ASSOCIATION APPROVAL IN REAL ESTATE CONTRACTS Bruce Loren and Allen Heffner | Oct 09 2020

We represent residential homeowners who attempted to sell their condominium unit. The sales contract contained a provision that the sale was contingent upon the Association’s approval of Buyer within a certain time period. Pursuant to the contract, in the event the Association did not approve the Buyer, the contract automatically terminated, relieving Buyer and Sellers from their obligations under the contract. Unfortunately, the Association did not approve the Buyer and the sale did not close. The Buyer felt he was wrongfully disapproved and sued the Sellers and the Association to force the sale of the property. As part of the litigation, Buyer recorded a lis pendens on the property, which inhibited the Sellers from selling the property while the litigation was pending. This article focuses on how we were able to dissolve the lis pendens and the contractual language that buyers and sellers should be aware of in their real estate contracts.

Removing the lis pendens

After the Association disapproved the Buyer, our clients wanted to have the right to continue to list the property and sell it to other parties. However, the lis pendens notifies potential buyers of the ongoing lawsuit, which will generally scare away any potential buyer. As such, one of our clients’ main goals was to get the lis pendens removed as quickly as possible. Often, a lis pendens will remain on a property until the end of a lawsuit, which may take years.

To try and expedite this process, we filed a motion to dissolve the lis pendens, arguing that Buyer had no right to record the lis pendens as any interest he had in the property automatically terminated upon the Association’s disapproval. The Buyer argued that the lis pendens should remain in place until the conclusion of the lawsuit and that if it was removed, he would effectively lose the right to have the court order Sellers to sell him the property.

The court held a hearing on the motion to dissolve lis pendens and agreed that the language of the contract was clear and that upon the Association’s disapproval of Buyer, the contract automatically terminated, as did any right Buyer had in the property. As such, the court entered an order dissolving the lis pendens, which allowed Sellers to freely list and sell the property as they wished.

Appeal

Not satisfied with the trial court’s ruling, Buyer appealed the order dissolving the lis pendens to the Fourth District Court of Appeal, arguing that his claims were sufficient to maintain the lis pendens on the property for the duration of the lawsuit. After months of briefing, the appellate court entered an order denying Buyer’s appeal and awarded Sellers entitlement to attorneys’ fees and costs incurred in the appeal. The appellate court did not provide a written decision, but it is likely that the appellate court made the same findings that the trial court did. Namely, that the contract was clear that upon the Association’s disapproval, the contract automatically terminated, and as such, Buyer had no claim to the property.

What to take away from this case

Almost every residential sales contract involving property governed by an association will include a provision requiring the association’s approval of the buyer. However, buyers and sellers need to review the language in their contract to see what happens if the association disapproves the buyer. In our situation, the contract automatically terminated. However, in many contracts, upon the association’s disapproval of a buyer, the disapproval gives the seller only the right to terminate the contract. That is a material distinction because if a seller is granted the right to terminate a contract but does not do so, a court may find that the seller waived its right to terminate the contract. If that language were in our contract, the sellers would have had to affirmatively terminate the contract or it would have been likely that the court would have found that the Sellers waived the right to terminate and the contract was still in place, which would have allowed the Buyer to maintain the lis pendens. If you have any questions about language in your contract, even if it is a standard form contract, have an attorney review the contract beforehand so changes can be made before a contract is signed.

Bruce Loren and Allen Heffner of the Loren & Kean Law Firm are based in Palm Beach Gardens and Fort Lauderdale. For over 30 years, Mr. Loren has focused his practice on construction law, real estate law, and factoring law.Mr. Loren has achieved the title of “Certified in Construction Law” by the Florida Bar. The Firm represents factoring companies in a wide range of industries, including construction, regarding all aspects of litigation and dispute resolution. Mr. Loren and Mr. Heffner can be reached at bloren@lorenkeanlaw.com or aheffner@lorenkeanlaw.com or 561-615-5701.