Article Courtesy of The Orlando
Sentinel
By Mary
Shanklin
Published
November 1, 2011
Condo
owners in the Element at MetroWest say they now face one of their worst
fears: Their west Orlando condominium is reverting to apartments, and they
may be forced to sell their units to the property's new owner for far less
than what they paid for them several years ago.
Orlando
real-estate agent Yadira Bello paid $178,900 for her
one-bedroom condo in the gated, manicured community at
the peak of the market in 2007 — shortly after
developers converted it from an apartment complex into
a condominium with the goal of reselling units to
buyers like her. But the home market slumped, few
units sold and, this past April, a group of
California-based investors paid about $11 million for
the common areas and more than 200 units in the
328-unit complex.
Two months after it bought the bulk of the Element,
Karlin Real Estate moved to dissolve the condominium
association. It has also purchased dozens of remaining
units, each for a fraction of the price that Bello and
others paid for theirs. |
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Yadira
Bello sits with her dog "Yeyo" at her condo in The
Element in Metrowest.
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"I have a mortgage on it," Bello said. "It's
going to be impossible for them to offer me the money I owe on it."
Condo-to-apartment
conversions are a rare but emerging phenomenon in the Orlando area, which in
2005 led the country in the number of apartment-to-condominium conversions.
In the six years since then, the median condo price in the four-county
metropolitan area has plummeted from $171,100 to $50,400, according to
Florida Realtors.
The plunge in prices and stalled sales spurred state lawmakers to make it
easier for majority owners of condo communities to convert them into
apartment complexes, which are increasingly popular and recording their
highest occupancy rates in years.
"What the Legislature has done over last four or five years, they built
into the statutes to make it easier to terminate the condominium than it was
previously, in part because many were damaged in the hurricanes, and then
[because of] the issues with the decline of the real-estate market,"
said Maitland lawyer Scott Newsom, who worked on a condo-termination case in
Seminole County several years ago.
The big question swirling among residents of the Element and condominiums
elsewhere is whether owners such as Bello can be forced to sell their units
and move.
Under Florida law, the majority ownership of a condominium — such as
Karlin Real Estate in the Element's case — can dissolve the condo
association and do one of two things: give owners of the remaining units a
percentage share of the newly converted apartment complex in exchange for
their condos or buy the remaining units from those owners for fair-market
value.
So the Element's new owners could, for instance, give Bello a small interest
in the apartment project in exchange for her unit or could, based on an
appraisal, pay her $70,000 for the unit.
Either way, she would no longer own her condo and would have to move.
"Yes, they would be forced out," said Newsom, of the law firm
Katzman, Garfinkel & Berger, which represents homeowner associations.
At the Element, Bello said that, even if the new complex owners could pay
her enough to cover her outstanding mortgage, she doesn't want to leave.
"I bought this to live here, and I don't want to move. It's a unique
unit," Bello said. "When you buy something, you buy it because you
like the space; you like the area; you like the view. I don't want to change
it. I don't want to live in another property."
Unit owners can derail a condo-to-apartment takeover if owners of 10 percent
of the units object. So far, 29 owners of Element units have filed a protest
— about five short of the 10 percent required by state law. The matter is
expected to be decided by the courts.
Minnesota resident Jon Brandt is organizing Element owners to oppose what he
calls a "corporate takeover" of the remaining units.
"They could eventually force us out and, in the meantime, they could
restrict access to common areas and continue to impose fees for association
dues," Brandt said. "There's no end to the leverage they have. A
corporate takeover is so abusive to minority rights."
The company in charge of property management at the Element, Michigan-based
McKinley Inc., is working with unit owners and their lenders to pay
fair-market value for the units and resolve outstanding mortgages. The
company is also helping relocate former unit owners to similar properties
nearby, said Albert M. Berriz, McKinley's chief executive officer. He said
his company was able to help complete a similar condo-to-apartment
conversion at Waldengreen Apartments in south Orlando.
"The fair-market value is less than they paid at the time, but they
will get to buy at lower values, too," Berriz said. "We spend a
lot of time hand-holding each case. You have to deal with their bank, too.
We'll sit there till we make people comfortable and put them in an equal
spot."
Most of the remaining owners at the Element, he added, are investors; very
few owner-occupants would have to leave their homes. Berriz said his company
is also working with condo renters at the Element to ensure they can remain
in units being sold and converted back to apartments.
CB Richard Ellis multifamily specialist Shelton Granade, who worked on the
sale of the Element earlier this year, said he expects to see the
dissolution of more condominiums as buyers of fractured condo deals try to
sort out what to do with the properties.
Condo terminations can be a somewhat risky process, he said, but ultimately
they put the property back into the hands of a single company responsible
for maintaining it.
"Generally speaking, condo associations are so upside down, or in such
disarray, that it ends up being financially better if someone can bring
stability to the deal and bring them back into good condition," he
said.
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