In part one of this blog post, we covered the basics of condo terminations, dived into how they work, and promised that in part two we’d cover recent legal changes for terminations, which include restrictions on terminations, stricter voting requirements, and other changes.
In 2007, the Florida legislature authorized an amendment to Florida Statute §718.117 allowing terminations of condos by 80% of the owners if more than 10% of the owners did not object. After the real estate recession, legislators faced increased pressure from their constituents to address negative issues surrounding condo terminations—especially from owners who were essentially forced to sell their condos for, in some instances, less than the outstanding balance of their mortgage. Fast forward to the most recent legislative changes that took place from 2015 to 2017. These recent changes have made it more challenging and risky for developers to execute an optional condo termination. Here are the key points:
- Approvals: Generally, plans for optional termination (as opposed to termination because of economic waste or impossibility) must now be approved by at least 80% of the total voting interests of the condominium and must include detailed facts stating how the plan complies with the requirements of the condo termination statute (F.S. 718.117). Additionally, the plan must be filed for review and approval by the Division of Florida Condominiums, Timeshares and Mobile Homes.
- Veto Power: Previously, to stop a plan of termination, the voting interest against the termination had to be at least 10%. Now, it has been lowered to 5% and members’ voting rights (ordinarily subject to suspension if delinquent in assessment payments, etc.) cannot be suspended for any reason (generally making it easier to block the termination plan with a vote of the owners).
- Additional Rights for Homesteaders: Owners that have homestead status on their condo unit will now receive 1% of the purchase price for relocation expenses (in addition to 100% of the “fair market value” of the condo unit).
As the supply of prime devolvement sites—especially waterfront—continues to decrease, condo terminations are not likely to fade away any time soon. And as a result of the changes in the law the last few years, contested condo terminations have become an increasingly complicated, risky, and expensive process. We recommend you consult an experienced Florida condo attorney if you are facing a proposed termination situation or if you are planning a new transaction that requires a condo termination.
David Podein is a partner with Haber Law. He concentrates his practice in the areas of real estate and construction law, condominium and community association representation, commercial leasing, secured financing, and business and commercial litigation. A substantial portion of Mr. Podein’s practice involves representation of community associations in the financing, approvals, and contract negotiation for multi-million dollar capital improvement, repair, and/or building upgrade projects.