By Deborah Goonan
If you’ve been following the news in Florida for the past few years, you know that investors have been buying unsold and distressed condos in bulk at bargain prices. Then they’re taking control of condo boards and terminating the association in order to either revert condominiums back to rental apartments or to demolish older buildings and redevelop.
Over 20,000 condo owners have had to sell as a result of forced terminations, many of them at a substantial loss. This article, FL condo owners forced to sell at a loss in hostile investor takeovers, gives an overview of the wave of condo takeovers in Florida, although similar activity has also occurred in other states.
Proponents of the 2007 FL statute, allowing for an 80% vote to approve terminating a condo association, claim that unanimous consent is too difficult to attain. It prevents condo owners who want to sell their units in older or storm-damaged buildings, now that the building needs extensive repairs. There are developers who may covet the prime land underneath some of these pre-1990 era condos, and the 80% who want to cash in and move on should not be deterred by a few holdouts.
But it has not worked out that way.
Those who wrote and supported the condo termination amendment in 2007 now claim there were “unintended consequences,” even though a similar version of the bill was vetoed by Jeb Bush in 2006, citing the inherent flaw allowing opportunistic developers to terminate associations against the will of owner occupants.
A small compromise was made in 2007, adding a provision that owners representing 10% of the voting interest can block a termination by written dissent. The statute was signed by Governor Charlie Christ that same year.
What happened? A new group of investors swooped in and practically stole condos back from owners who paid top dollar for their units prior to the crash of the real estate market.
Fast forward to 2015, Sunny Isles Beach, FL.
Fortune International, Chateau win ruling against Sunny Isles Beach condo association
Tropicana Condominium, built in the 1980s, with 48 units in 9 stories. Next door, a brand new Ritz-Carlton Residences, a 52-story tower of luxury with sweeping views of the Atlantic Ocean and the Intracoastal Waterway.
Tropicana’s governing documents originally required unanimous consent for a termination (100% agreement among all owners). In 2012, the Association amended their documents to agree with current statute. The owners then decided to entertain offers for a buy out, believing they had sufficient votes for a termination. They got a handsome offer, but were unable to follow through when owners of 5 units – 10% of the condo association – did not agree to the sale.
And who were the owners of those 5 units? Fortune International Group and Chateau Group, developers of the new Ritz-Carlton condominium, had purchased those 5 units to prevent Tropicana from selling to another developer. Why? Because the next developer would undoubtedly build another tall condo tower, blocking views for owners at the Ritz-Carlton! A lawsuit followed, initiated by Tropicana Condominium Association.
But in August, Miami-Dade Circuit Court Judge Rosa I. Rodriguez ruled that the 2007 FL statute cannot apply retroactively. Tropicana must adhere to their original requirement of 100% condo membership approval for a termination.
At the moment, that means Tropicana owners will not be able to sell for redevelopment. There could be an appeal in the works.
Ironic, isn’t it?
When developers want to take advantage of the 80% vote for condo termination, they win. When developers want to take advantage of older condo declarations that require 100% approval for termination, they win.
Condominium owner-occupants almost always lose.