Condominium Statutes Allow HOAs to Terminate Some Cable Access Agreements

Most (if not all) States have provisions in their condominium statutes that allow the owners’ association, after control over the condominium’s governing body is transferred from the developer to a voting majority of condominium owners other than the developer, to cancel service agreements entered into by the developer prior to such transfer of control. These provisions were enacted to protect unit owners and condominium associations from contracts made by the developer that are: (a) not on market terms, (b) with an affiliate of the developer (self-dealing), (c) of extraordinarily long duration, or (d) difficult to terminate based on poor service on the part of the service provider.

A cable or satellite service agreement is within the class of contracts that may be cancelled under this kind of statute. Therefore, a provider that has entered into an agreement with a condominium developer is at risk of having the agreement cancelled without recourse once a majority of units have been sold. If that happens, the provider may not even have a legal claim for reimbursement of money invested at the property. It is therefore critical that before signing a service agreement with a condominium developer, providers investigate any applicable condominium statute and its possible implications.

The risks associated with condominium statutes are demonstrated by a Florida court’s recent decision in Comcast of Florida, L.P. v. L’Ambiance Beach Condominium Association, Inc., 17 So.3d 839 (Fla. 4^th DCA, Aug. 26, 2009). In that case, the court ruled that Comcast’s service agreement with the condominium developer fell squarely into the category of contracts that may be nullified by majority vote of unit owners under the State’s condominium act (Florida Statutes, 718.302). The court’s opinion may be found at http://caselaw.findlaw.com/fl-district-court-of-appeal/1192750.html.