Daily Development for
Friday, December 17, 1999
By: Patrick A. Randolph,
Jr.
Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
randolphp@umkc.edu
RESTRAINTS ON ALIENATION;
REPURCHASE AGREEMENTS: Deed restrictions in PUD requiring vendors to accept
price determined at time of their purchase and permitting sale only to certain
group of people do not constitute an unenforceable restriction on alienation of
the property.
Indian River Colony Club
v. Bagg, 727 So.2d 1143 (Fla.App. 5 Dist. 1999).
The issues involved the
Indian River Club, an organization designed to "provide benefits to
retired and current military officers similar to those enjoyed while in the
military." There are 900 Club members, who apparently enjoy certain
amenities in Club facilities. In addition, the has a planned unit development
single family subdivision with approximately 700 residences. The Club requires
that one be a member of the Club to acquire these residences.
The Club provides
relatively extensive maintenance for the residences, including not only
exterior maintenance, landscaping and repairs, but also appliances, air conditions
and mechanical systems within the residences. The rub, however, comes upon
resale. The Club will refurbish the residence for resale and handle all title
transfer, but owners agree in their original purchase agreements to a set
purchase price upon resale. (Apparently the formula for setting the price compensated
the owners specially for improvements.) The owner must transfer the property to
a Club member designated by the Club from a waiting list, and if there is no
such person willing or able to purchase, the Club must purchase the property
for the set price within 60 days of the owner's announced intention to sell.
Owners of a home in Indian
River, who purchased subject to these resale restrictions, brought suit arguing
that they unreasonably restrained the alienation of the property.
Established Florida
authority has held that a fixed price right of first refusal for an indefinite
term is unenforceable as an unreasonable restraint on alienation.
The court, however, on a
split decision, differentiated that case because here the Club did not have an
option to purchase it was *required* to purchase the property. The court noted
that this obligation would obtain regardless of the value of the house, and
that circumstances could arise where the Club would pay considerably more than
the market value of the property.
The court saw the intent
to restrict ownership of Indian River properties to present or retired military
to be a valid and reasonable purpose which the repurchase restraint clearly
furthered.
A dissenter argued that
the situation was indistinguishable from prior authority, since, option or obligation,
the repurchase right restrained the alienability of the owner's property.
Comment 1: It is true that
from the standpoint of the property owner, the restraint is the same whether or
not the holder of the repurchase option is required to purchase. But from the
standpoint of whether the scheme is a justifiable means of carrying out a
development purpose, the two situations are quite different. Here, in exchange
for the right to control resale, the Club gives "price protection." Although
this may not have been the motivating factor for the decision for these
purchasers to buy, it clearly is a potentially valuable right and tends to
support the overall objective of encouraging military people to buy in this development.
Comment 2: The editor is
familiar with devices of this character appearing in university faculty housing
schemes. Are DIRTers aware of other applications?
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