|
Article
Courtesy of The South Florida Business Journal
Published
May 8, 2015
The Florida legislature approved sweeping changes to
condominium association rules that could make it more difficult for a
developer to terminate a condo.
Dozens of bills plus the state budget were left out to dry when the
Florida House adjoined three days early, but Senate Bill 1172 and House
Bill 643 were easily approved. Greenberg Traurig shareholder Gary Saul,
the co-chair of its Miami real estate department, said all indications
are Governor Rick Scott will sign the bill.
“It has been a hotbed issue for months and has attracted a ton of
attention,” Saul said. “That was mostly because of the negative side of
terminations, although most of them were responsible for putting South
Florida back on its feet as the market recovered.
A condo termination often occurs when a developer that owns the majority
of the units wants to sell the property for conversion to rentals, often
after a previous condo conversion failed to sell enough units. 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. Under the current law, some unit owners
complained that it forced them from their condos without the ability to
let the value of their property fully recover or to repay their mortgage
in full.
Among the changes to condo termination law in the bill:
-
In the case of a bulk owner (one who controls at
least 80 percent of the units), each resident’s first mortgage must be
satisfied no matter the value of the unit.
-
If an original unit owner in a homestead property
votes against termination, the bulk owner must pay them at least the
same amount they purchased the unit for, even if it’s considerably less
than the current value.
-
Homestead unit owners would receive an additional 1
percent of their unit value as moving expenses.
-
At least 80 percent of unit owners must vote in favor
of termination.
-
No more than 10 percent of unit owners can vote
against termination.
-
Unit owners can vote on a termination even if they
aren’t current on association fees.
-
If a vote for termination is rejected, it can’t be
brought up for 18 months.
A conflict concerning a termination should head to
non-binding termination before resulting in litigation.
Jennifer Drake, a shareholder and real estate practice chair at Becker &
Poliakoff, said there will be a constitutional question raised about whether
this bill should apply retroactively to existing condo association
agreements that contain different provisions, such as a higher or lower
voting percentage and various terms of compensation. Bulk owners could argue
that they never would have purchased units in the buildings under the
termination rules of the new law, she said.
“By putting a standard that you have to pay a homestead owner the original
price, it could impact the market significantly,” Drake said. “That is a
huge burden that many developers can’t afford.”
Saul said the bill would make it more expensive to take fractured condos
with underwater units back on the rental market, and that is what is often
best for those properties because they failed as condos. Another consequence
of the law is that original unit owners will get a larger piece of the
building sales proceeds when the sum is divided up than other owners, who
could lose out on their values, he said.
“The bill is an overreaction to something that wasn’t a problem in the first
place,” Saul said.
My view: It seems that
all the quotes come from attorneys who were making a living by kicking good
families out of their homes! Florida should be ashamed that the "Condo
Termination Bill" (also called the "Eminent Domain Bill for Condos") passed
the Florida legislature in 2007 in the first place. No bill should allow
greedy investors to kick families out of their homes for peanuts! This bill
repeals a nasty bill sponsored by Senator Geller and Representative Schwartz
in 2007.
Thanks to the Florida legislators
for standing up for the rights of condo-owners!
|