My client wants to sell their condominium unit, and I am concerned because many of the units are owned by the same entity, presumably an investor. Are there any laws that may affect how I advise my client in this situation?
Yes, in fact Florida law was recently changed to provide additional protections to condominium owners and to make it more difficult for developers and bulk owners to terminate condominiums. Therefore, whether your client is looking to sell or purchase a condominium unit, these changes should be taken into consideration when deciding whether to move forward with the deal.
In making condominiums more difficult to terminate, the law now states that a plan for termination of a condominium can be blocked if at least 10% of the total voting interests affirmatively reject the plan by voting against it or providing written objections. If the 10% threshold is met, no vote on a plan for termination may take place for the next 18 months. Also, be aware that no voting interest may be suspended for any reason when considering a plan for termination—not even for delinquent assessments.
The additional protections for condominium owners kick in when a “bulk owner,” meaning one who holds at least 80% of the voting interests, exists at the time the plan for termination is recorded. In this situation, owners are now guaranteed at least the fair market value of their unit if a termination occurs. Owners who purchased their unit directly from the developer, rejected the plan for termination, and whose unit has homestead exemption must be paid at least their original purchase price as long as they are current on their assessments and any mortgage on the unit. All other owners must be paid at least the fair market value of their unit, as determined no earlier than 90 days before the recording of the plan for termination. In addition, all owners whose unit has a homestead exemption must also receive a relocation payment equal to 1% of the termination proceeds allocated to their unit.
Owners will now also have their first mortgage satisfied in the event of a bulk owner termination if they are current on all assessments and obligations to the association and all mortgages on their unit. The plan for termination must include satisfying first mortgages on units, though the amount paid to satisfy a first mortgage must not exceed the amount of proceeds allocated to that unit under the plan. However, even if the proceeds from the termination are not sufficient to satisfy the first mortgage, the mortgage will be deemed satisfied when the mortgagee receives either the proceeds allocated to the unit under the plan or the outstanding balance of the mortgage.
Another protection is that owners who occupy their unit may choose to lease back their unit for up to 12 months following the effective date of a termination involving a bulk owner. However, owners must request to lease their unit within 90 days after the plan for termination is recorded and sign a lease within 15 days of being presented with one. Otherwise, they will be required to vacate the unit.
Due to these changes, it is very important to know the fair market value of a unit and if a bulk owner does or could soon exist when determining whether to buy or sell a condominium unit.
– Contributed by Jonathan Northington. Jonathan is a member of the Bay Area Real Estate Council (www.barec.com) and is a real estate and business law attorney at Davis Basta Law Firm, P.A.