Article
Courtesy of The Tampa Bay Times
By Susan
Taylor Martin
Published September 11, 2015
If someone forces you to sell your property, shouldn't
they be required to give you at least as much as you paid for it?
That's what Nadia and Tyson Le Monte thought when they
learned they would have to sell their St. Petersburg condo — bought in 2006
for $254,900 — because the complex is being converted to rentals.
The couple were stunned, therefore, when told they would get just $127,000.
That is $70,000 less than what it would take to pay off the mortgage.
Now Le Monte, a former Marine and
government contractor in Iraq and Afghanistan, fears he may
have to drop out of college and go back to work even though
he is under treatment for post-traumatic stress disorder.
Says his wife, a pharmacist at the Bay Pines VA Medical
Center: "This is such an awful situation to be in.
The Le Montes are among the hundreds of Florida condo owners
discovering that a new law designed to increase their rights
in condo-to-apartment conversions won't help them nearly as
much as they hoped.
Signed by Gov. Rick Scott in July, the
law as first envisioned would have guaranteed that all
owners who bought from the original developer would be
compensated for the full purchase price if the complex
turned rental.
But shortly before the Florida House
voted on the measure, it was amended to provide full
compensation only for owners with homestead exemptions. That
was a blow for people who bought their condos as second
homes or those like the Le Montes, who rented out their
two-bedroom unit after moving to a bigger place when their
family began to grow. |
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Nadia Le Monte, left, and her husband, Tyson, with
their daughters Maica, 14 months, and Divya, 3, were told they would
get just $127,000 for their condo at Bay Isle Key Apartments in St.
Petersburg, $70,000 less than they owe.
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Tallahassee lawyer Peter Dunbar, an expert on condo law, said the compromise
was necessary to save the measure from defeat.
"Our (state) Constitution says that homesteads are special and the
Legislature can treat them specially," Dunbar said. "You can't make that
same argument for a second-home owner or a flipper or a renter. You probably
couldn't have solved 100 percent of the problems, so faced with the dilemma
of losing it all, this was the best choice. Otherwise even the homestead
folks would have lost (protection).''
The Le Montes' condo is in Bay Isle Key, a 370-unit complex in north St.
Petersburg near 1-275. It is one of hundreds of Florida condo developments
that investors began eyeing for conversion to apartments as the foreclosure
crisis created a soaring demand for rentals.
But that was years after Nadia bought her condo, never realizing she could
one day be forced to sell it at a huge loss.
In 2006, then single, she moved from Miami to St. Petersburg to complete her
residency in pharmacology. At the time condos were in demand, and Bay Isle
Key, built as a rental complex in 1998, was being converted into
condominiums.
"I knew the market was high, but Bay Isle probably was the prettiest place
I'd seen in that area,'' Le Monte said. "It had a lot of upgrades and was
really pretty with all the flowers and trees and lots of great amenities.''
In 2011, she married Tyson, who had been stationed as a Marine in the Horn
of Africa when he badly injured his foot in a training exercise. He received
a medical discharge and, after partially recovering, did three tours in the
Middle East as a defense contractor for commands headquartered at Tampa's
MacDill Air Force Base.
"We started talking about having a baby and said, 'This is not going to work
anymore,' '' Nadia Le Monte said of their small condo. "We couldn't sell
because the market had gone down so much around 2011.''
Instead, they found a house they could afford in Ellenton and rented out the
condo, losing the homestead exemption. The rental income and a loan
modification saved them from foreclosure; many other owners in Bay Isle Key
were not so fortunate.
With prices at rock bottom, a Chicago real estate investment company bought
hundreds of Bay Isle Key condos and began renting them out. The same thing
was happening in many other parts of Florida as investors took advantage of
a 2007 change in Florida law.
Before then, major repairs or termination of a condo association required
the approval of 100 percent of the unit owners. But as foreclosures and two
busy hurricane seasons left many units damaged and vacant, the Florida
Legislature in 2007 lowered the threshold to 80 percent.
"All these dilapidated old condos were harmful for the economy, but then you
had one or two people holding out and saying, 'Let's not terminate my condo
association,' " said Tampa lawyer Robert Stern, who specializes in real
estate law. "But now the economy improves and some talented developers
figured out this loophole (in the law) and came in and started buying up
units.''
When bulk buyers acquired 80 percent of the units, they could terminate the
condo association, convert the complex to lucrative rentals and force
individual owners to sell and get out. Since the 2007 change in law, 272
Florida condo developments with a total of almost 20,000 units have
terminated their associations. Among them were 30 in the Tampa Bay area with
a total of 4,000 units.
State records do not show how many of those complexes turned rental.
Lawmakers, however, had heard enough complaints by this year to consider a
bill providing more rights for owners opposed to conversion.
Rep. Chris Sprowls, a Palm Harbor Republican who introduced the bill, wanted
all owners — homesteaded or not — who bought from the original developer to
be paid the full amount of their purchase price.
"There was some push-back from people that it would basically halt
development so that was one concession we had to make," Sprowls said.
As a result, the new law says owners without a homestead exemption will be
paid the current fair market value, not what the unit cost when they bought
it from the developer. In many cases, today's market value is far less than
what a condo originally cost at the peak of the boom.
On Aug. 27, the bulk buyers of Bay Isle Key won a vote to terminate the
condo association and force the remaining owners to sell by Dec. 1. The
$127,000 offer to the Le Montes is half of what the unit cost and would
leave them owing $70,000 for a property they no longer had.
The couple, parents of two little girls, say that would upend their lives.
Tyson Le Monte, 39, recently began treatment for PTSD caused by his years in
Iraq and Afghanistan, where he was shot at and nearly hit by a mortar. Using
his VA benefits, he has been studying for a degree in natural medicine at a
Sarasota college.
Now, the Le Montes fear, he will have to end his treatment, drop out of
school and find a job so they can try to pay the $70,000 they still owe on
the condo mortgage.
"If we're not able to pay that off or get what was paid for (the condo), we
ultimately are going to have to sell our house," he said. "I don't see any
positive outcome."
Forcing condo owners to sell against their will — especially if not for a
public purpose, like getting land for a new road — raises a host of legal
issues. Does it breach the contract between the owner and the original
developer or the owner and the bank? Can a law enacted in 2015 be applied
retroactively to a condo bought in 2006? Does taking someone's home violate
the Florida Constitution's ban on the forced sale of a homestead?
Dissenting owners in other Florida condo communities have challenged
apartment conversions, but most of those cases have been settled
confidentially.
"There was not a clear case that gives us clear direction from a high court
of authority," said Stern, the Tampa lawyer. "There are several pending
cases but none that answer all of the questions and give us guidance."
Dunbar, who advised on the drafting of the new law, said it contains
provisions that might help people like the Le Montes, who paid top dollar
but aren't eligible for full compensation because they don't have a
homestead exemption.
Dissenting condo owners can request a hearing before a neutral arbitrator if
they think mistakes were made in the vote to terminate a condo association
or in the valuation of property.
"We thought that rather than force these people to court when they're maybe
dealing with a bulk owner with plenty of money, let's make a forum available
where an average group of owners can fight," Dunbar said.
The new law also requires that all first mortgages be satisfied before a
condo association can be terminated and dissenting owners forced to sell.
Dunbar acknowledges that the law is not clear on what happens if the
individual owners are unable to pay off their loans.
"Does the bank take the hit? Is the bulk owner going to have to get
everybody's mortgages paid off? That's the kind of thing you would take to
arbitration."
In addition to the nearly 300 Florida condo associations that have been
terminated since 2007, other complexes are on the verge of full conversion
to rentals, including Tampa's 1,000-unit Grand Oasis at Carrollwood. But
Dunbar expects condo-to-apartment conversions to slow as prices begin to
rise.
That's no consolation for the Le Montes and others in their predicament.
"It's not fair, it's wrong in every way," Tyson Le Monte said. "We're
counting pennies, we're more in debt every month. My wife was trying to do
everything right, she was always on time with her mortgage payments. But
these big corporations, they don't care about the little guy, though it's
peanuts out of their pocket."
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