Article Courtesy of The Daily Business Review
By Samantha Joseph
Published December 3 , 2016
A ruling from the Third District Court of Appeal found
that Florida's law governing terminations, or sale of entire condominium
projects, does not apply to older properties.
That's bad news for thousands of associations with declarations, or
governing documents, predating Florida's 2007 amendment to its condominium
statute. It's especially jolting for The Tropicana Condominium Association
Inc., a Sunny Isles Beach group battling minority owners over a blocked sale
in one of Miami-Dade's most expensive submarkets.
The Tropicana association wants its members to approve a sale as developers
swarm the neighborhood scooping up modest buildings at top dollar to replace
them with glitzy high-rises. But a small group of owners, accused of being
straw buyers, moved to prevent potential sales.
The Third DCA sided with the minority owners, who argued that the property's
bylaws required unanimous approval for a sale, despite the 80 percent
threshold in the amended legislation. It agreed that the holdouts' refusal
to sell was enough to block the deal, because Tropicana's 1983 governing
documents predate the legislative amendment and require all unit owners to
approve termination.
The appellate court made the decision in a case pitting unit owners at the
Sunny Isles midrise against developers planning the neighboring 52-story
Ritz-Carlton Residences.
The Tropicana condominium association claimed its future neighbor resorted
to covert measures to gain control of the modest property as developers
swoop in to create luxury projects. They accused Ritz-Carlton developers
Edgardo Defortuna and Manuel Grosskopf of using straw buyers to secretly
scoop up five of Tropicana's 48 units— just enough to meet the 10 percent
threshold for blocking future sales. They alleged the developers sought to
prevent rival investors from acquiring the Tropicana, then demolishing the
midrise to create a grander building that would obstruct views at the
Ritz-Carlton.
Public documents link the Ritz-Carlton developers to the companies used to
acquire the five Tropicana units. Defortuna, for instance, is title manager
for one of the corporations, Tropical Condominium LLC, and Eduardo Klinger,
a Grosskopf business associate involved in the suit, also invested in
Tropicana.
The case turned on the court's interpretation of a portion of the Florida
law covering terminations. The amendment allows the sale of an entire
property if 80 percent of unit owners agree and not more than 10 percent
object. It "applies to all condominiums in this state in existence on or
after July 1, 2007." Tropicana argued the law applied to all condos,
beginning in 2007, but the appellate court's reading was that it only
applied to condos created after July 1, 2007.
The Third DCA ruled the statute is not retroactive, so did not govern
Tropicana. It found the property needed to amend its bylaws to match the
legislation or use so-called "Kaufman language" to specifically state that
the property's rules automatically update to reflect legislative changes.
"We're very disappointed with that interpretation," said Tropicana
Condominium Association lawyer Glen Waldman of Heller Waldman in Miami. "The
impacts are huge."
The ruling will affect attorneys like Lindsey Thurswell Lehr of Siegfried
Rivera Hyman Lerner De La Torre Mars & Sobel in Coral Gables.
Although the minority owners triumphed in the Tropicana appeal, Thurswell
Lehr said the ruling eliminates a key strategy for others that rely on the
law's prohibition of sales in cases where 10 percent of owners object. In
the past, these attorneys pointed to the wording of the legislation to argue
it covered all properties in the state.
"The argument we like to make is the termination statute offers this
protection," Thurswell Lehr said. "But now you have an appellate court
basically saying that the amended termination statute does not apply
retroactively. You are bound by what's in your declaration."
Tropicana Condominium
Association, Inc. vs. Tropical Condominium, LLC (3.DCA) |