Florida’s legislature has been concerned with condominium regulation for
almost 50 years. Florida’s first Condominium Act was adopted in 1963 and has
been amended almost every year since. The legislature’s original focus was
on developers. Legislation started with efforts to smooth development and
sales and quickly moved to regulation to protect purchasers. Florida’s
Condominium Act now requires filing and approval of a comprehensive sale
prospectus before binding contracts can be entered by developers for sale of
residential condominiums. The Act gives buyers 15 days after they get all
required developer disclosures within which they can terminate their
purchase contract with impunity.
In 1992, it occurred to the legislature that developers had sold a lot of
residential condominiums in Florida and many of those units were being sold
again. No disclosure was required for resale. Expanding its quest to protect
buyers of residential condominiums, the legislature amended the Act to also
require non-developer disclosure.
Section 503 (2) of the Act mandates each residential unit owner who is not a
developer to comply with its non–developer disclosure requirements. This
extension seems a natural addition to the legislature’s effort to maintain
the condominium industry by making buyers feel safe when they buy a
residential condominium. To some, it appears to be too much regulation and
government involvement in the area where a buyer could easily protect
themselves. Others view the disclosure requirement as welcome protection.
Non–developers and even condominium associations must now meet the
disclosure requirements applicable to resale condominiums.
Disclosure required from a non-developer is not as broad as that required
from a developer. The resale purchaser of a residential condominium is
entitled, at the seller’s expense, to a current copy of the declaration of
condominium, articles of incorporation of the association, bylaws and rules
of the association, most recent year-end financial statement for the
association and the document entitled “Frequently Asked Questions and
Answers,” which is often referred to as the Q&A sheet. A buyer is also
entitled to a copy of a governance form. The seller does not have to give
the buyer the documents unless the buyer requests them.
The governance form is prepared by the Florida Division of Condominiums,
Timeshares and Mobile Homes. It summarizes various aspects of condominium
governance in a generic fashion.
The Q&A sheet form promulgated by the Florida Division of Condominiums,
Timeshares and Mobile Homes. The Q&A sheet must be prepared by the
condominium association and include 7 questions. It is a summary of the
issues the State feels are most important to a condominium buyer and is
intended to provide the buyer with an easy to read version of what might
otherwise require a lot of work to dig out of the other condominium
documents. The questions include voting rights, restrictions on right to use
or lease, amount of assessments, whether the owner has to be a member in any
other association or pay rent or use fees for recreational or other
facilities and if the association is involved in court action in which it
could face liability of $100,000.
The Q&A sheet confirms what many thought: the required condominium
disclosure is more than a typical person will read or understand. It
requires an association to summarize 7 important aspects of condominium
ownership for that particular condominium in the hope that a prospective
purchaser will at least read the summary. Most condominium purchasers do not
even read the Q&A sheet let alone the volume of documents required by the
statute. Some argue that requiring the Q&A sheet alone would eliminate the
problem of buyers being overwhelmed by documents and not reading any of
them.
Florida’s legislature did not stop with requiring documents be made
available to buyers. Florida’s Condominium Act also mandates notice be in
all resale contracts in conspicuous type that a buyer has the right to the
documents or that the buyer has been provided all of the required documents
at least 3 days prior to signing the contract. The notice must also advise
that a buyer may terminate the contract within 3 days, excluding Saturdays,
Sundays and legal holidays, after the buyer receives all of the required
documents. If the documents are given to the buyer at least 3 days before
the buyer signs the contract, the buyer has no right to terminate under the
statute. The 3 day right to terminate cannot be waived, except by closing.
Although the seller is to provide a copy of the governance form, failure to
receive the document does not give the buyer a right to terminate.
Some of these documents are recorded in the office of the clerk of courts in
the county where the condominium is located, as part of the Public Records.
Few associations record their rules and virtually none record year-end
financial statement or Frequently Asked Questions and Answers. The latter
documents are only to be found with the association or occasionally with a
seller.
Section 111 of Florida’s Condominium Act requires associations maintain
copies of all the required documents on the condominium property to ensure
their availability to unit owners and prospective purchasers. Most
associations don’t comply with that requirement and the documents must be
obtained through the management company. The association may charge its
actual cost for preparing and furnishing the documents to those requesting
the documents. That means a buyer can end up paying, even though the statute
says the documents are to be provided at the seller’s expense.
Because a buyer has 3 days from receipt of the documents within which to
terminate a contract, most sellers do their best to get the documents to a
buyer quickly. That too can prove a challenge. Some associations do not
provide a complete package. Others include a budget rather than a financial
statement and a few did not even have the Q&A sheet. If the package is
incomplete, buyers 3 days to terminate never starts to run.
Delivery can also be problematic. The Act makes it clear the documents must
be delivered to the buyer and not to the buyer’s agent or Realtor. Even
delivery to the buyer’s attorney is not sufficient. Since most buyers in
this area are out of town, sellers may have trouble proving the buyer
actually received the documents. Many sellers ask the buyer to sign a
receipt. A buyer signed receipt will not be set aside by a court even if the
buyer did not receive all of the documents. A buyer should make sure the
buyer actually received all of the documents before signing a receipt.
The Act mandates disclosure, but only if the buyer requests the condominium
documents in writing. That means it is important for the buyer to make the
request. It is also important a seller provide the buyer with the required
documents, even if the buyer does not request, because the buyer has a 3 day
right to terminate that only starts when the buyer is provided the
documents. Florida’s legislature has crafted a disclosure procedure under
which both parties have an interest in making sure a buyer gets disclosure
documents and, for that reason, the statute works quite well.