An appeals court ruling this week
upending a condo termination in Miami is causing shockwaves
among developers, as it will likely put buyouts in legal
limbo.
The court’s opinion regarding Biscayne 21 in Miami’s
Edgewater marks a major win for the condo owners who fought
to block the termination of their association. Furthermore,
it has huge implications for developers, lenders, condo
associations, investors and unit owners, attorneys say. The
developer has vowed to take the case to the Florida Supreme
Court if it is not successful in a rehearing.
Florida’s Third District Court of Appeal on Wednesday
reversed a lower court decision that had denied the
plaintiffs, unit owners at the waterfront Edgewater condo
building, a temporary injunction in the lawsuit they filed
against Two Roads Development, the developer that completed
a bulk buyout of the property.
The litigation centers around the termination of the
Biscayne 21 condominium, a 13-story, 192-unit building at
2121 North Bayshore Drive. A group of 10 owners that include
Angelica Avila sued the developer last year, alleging Two
Roads illegally amended the association’s condominium
documents to lower the threshold for termination to 80
percent of owners versus the original 100 percent.
Current state law, amended in 2007, allows associations to
move forward with terminations with 80 percent of their
owners approval, though 5 percent can vote to block the
termination. In the case of Biscayne 21, the original condo
declaration governing the association was created prior to
that law and required 100 percent approval. Biscayne 21 was
built in 1964 on a 3.5-acre site.
In its ruling, the higher court determined that the original
declaration gave every unit owner an effective veto over any
termination, which would be lost if the amendments passed by
the developer-controlled association were enforced.
The decision halts the planned demolition of the property
and puts the future of Two Roads’ planned project, a
multi-tower Edition-branded luxury condo development, into
question. Two Roads paid $150 million for the majority of
units in 2022 and launched sales of Edition Residences later
that year. Edition is a Marriott International brand.
Developers are increasingly eyeing bulk purchases of older
condo buildings, especially those along the waterfront,
after the deadly Surfside collapse of the 40-year-old
Champlain Towers South. But many will likely be scrambling
to determine how this order will change the landscape,
attorneys said.
Any developer in the market for financing such a deal will
also face more challenges.
TRD Biscayne, the Two Roads Development affiliate that
bought out Biscayne 21, said in a statement that the ruling
“undermines the laws put in place to protect residents who
are living in old, deteriorating buildings which are in need
of significant maintenance and repair.”
The condo termination statute is “written in a manner
designed to prevent a small group of holdouts from thwarting
a termination that is supported by an overwhelming majority
of residents,” the statement continued. “Any interpretation
to the contrary threatens the very premise of condo
terminations serving as a viable exit strategy for
cost-burdened residents eager to realize the value of their
home, thus setting a dangerous precedent for aging
properties across the state.”
Glen Waldman of Miami-based Armstrong Teasdale, who
represents the plaintiffs, said the biggest implications are
for associations where the condo declaration mandates 100
percent approval to terminate, because it means a developer
can’t go in and vote to amend the threshold without full
approval.
“These guys are in a heap of a lot of trouble,” Waldman
said, referring to the developers. “The damage is in the
hundreds of millions of dollars.”
The Third DCA would next issue a mandate later this month
that will codify the ruling into law, Waldman said.
The language in Biscayne 21’s condo declaration is “pretty
common” for buildings that are 30 years and older, said
attorney Joseph Hernandez, who represented the
developer-controlled association at the property.
He said the whole market is now in limbo.
“That could hold up financings. It could hold up
transactions. It could hold up individual condo sales,”
Hernandez said.
The Pérez family’s Related Group, David Martin’s Terra,
Edgardo Defortuna’s Fortune International Group, 13th Floor
Investments and Camilo Miguel Jr.’s Mast Capital are among
the developers actively involved in potential buyouts in
South Florida.
“Financing bulk transactions like the one at Biscayne 21 has
increasingly become much more difficult in the last two
years,” Hernandez added. “This obstacle makes it even
tougher because now it’s introduced another significant
legal risk that creates a problem.”