Article
Courtesy of The South Florida Business Journal
By Brian
Bandell
Published
May 4, 2015
Matching bills in the Florida Legislature would make
it more difficult for developers to terminate condominium associations,
a practice that can force some residents to lose title to their units
against their will.
A condo termination often occurs when a developer that owns the majority
of the units wants to sell the property for convergence to rentals. It
has also happened in older, beachfront buildings where the unit owners
get an offer to sell their entire building to a developer and split the
proceeds between them.
The compensation paid to those who lose title to their condos has proven
to be a contentious point in much litigation, especially when that
compensation is less than their first mortgage, said Jason Kellogg, an
attorney with Levine Kellogg in Miami. For instance, someone who secured
a $250,000 mortgage on a condo during the last real estate boom and the
condo termination payment values their unit at $200,000 would be unable
to satisfy their loan. Sometimes they are in a complex where a bulk
owner controls the majority of units.
“On the one hand you want to protect the investors who have helped the
condo market through this recession and rehabbed old buildings, but you
have to balance that with the consumer who is getting the shaft in some
cases,” Kellogg said. “This addresses the consumer problem with the law,
and that is folks are begin forced to sell their condos at a big loss."
Under Senate Bill 1172 and companion House Bill 643, a bulk owner (one
controlling at least 80 percent of the units), must ensure that each
first mortgage is fully satisfied when a condo association is
terminated. In addition, if an original unit owner votes against the
termination plan, the bulk owner must promise to pay them no less than
the same amount they purchased their unit from, no matter the current
appraised value.
Kellogg said the latter part of the bill has been criticized by many
developers because it provides a financial incentive for some unit
owners to vote against the termination.
The bills say that at least 80 percent of unit owners must approve of
the condo termination. However, if at least 10 percent of the owners
reject it, then the proposal fails and another vote can’t be taken for
18 months.
“If this bill passes, the only terminations will be in the really old
dilapidated condos that the owners want to leave because the condo fees
can’t keep up with the maintenance of the building,” Kellogg said.
Currently, many condo associations have different percentages of
approval required for termination under their individual bylaws, said
Coral Gables attorney Helio De La Torre, of Siegfried, Rivera, Hyman,
Lerner, De La Torre, Mars and Sobel. He said the bills are written in a
way that seems to apply to all condo associations, but some litigants
could argue in court that it shouldn’t apply to their associations.
Another key provision would ensure that unit owners can vote on a
termination even if they aren’t current on their condo fees, De La Torre
said. In some cases, bulk owners have ramped up condo fees to drive up
delinquency in order to tip the termination vote in their favor.
The bills would have disputes regarding condo termination head to
non-binding arbitration before litigation, which De La Torre said should
reduce legal expenses.
While homestead property owners could still be forced to move, the bills
would require that bulk owners pay them an extra 1 percent of their unit
value for moving expenses at least 90 days before the termination.
“We needed more consumer protection in this area,” De La Torre said.
“It’s a step in the right direction."
The Senate Bill is sponsored by Clearwater Republican Jack Latvala and
the House Bill is sponsored by Clearwater Republican Chris Sprowls. Both
of them have been approved by several committee votes and are pending.
THE ENGROSSED VERSION OF THE BILL PASSED HOUSE AND SENATE
AND IS HEADED TO THE DESK OF THE GOVERNOR!
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