Owners continue to lose money following forced condo terminations

By Deborah Goonan, Independent American Communities

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Back in October, the Bradenton Herald reported that Minnesota-based firm Riley Family Corp. had acquired more than 90% of units at Palm Cove Condominiums, and voted to terminate the condominium association. The company apparently intends to convert Palm Cove into a rental apartment complex.

How did this happen?

According to the Bradenton Herald, in January of 2016, Riley Family Corp. purchased 302 of 348 condo units, then immediately began leasing many of them to tenants. Over the course of several months, Riley Family allegedly used manipulative tactics to purchase an additional 28 units. The investors now own 330 units, and 17 remaining titleholders own just 18 units.

Of course, because the condominium association is incorporated, and its bylaws assign voting interests to the number of units/square footage owned, it’s quite obvious that Riley Family has essentially purchased control of the association: they now control the condo board and more than 90% of votes on any given issue.

In other words, Riley Family has staged a hostile corporate takeover of Palm Cove Condo Association. It is now in the process of restructuring through termination. That involves buying out the remaining owners.

One month later, Palm Cove residents still unsure of future

BY JANELLE O’DEA
jodea@bradenton.com

BRADENTON
More than a month after the Palm Cove of Bradenton Condominium Association was terminated, residents who bought what they thought would be their forever retirement homes are still uncertain of where they will end up.

“We don’t know when we have to be out,” said Robert Blakesly, 65, who owns a condo at Palm Cove, 4550 47th St. W., with his wife, Brenda, 53. “That’s one of those unknown things that’s really eating at us.”

Read more here: http://www.bradenton.com/news/business/article117774983.html#storylink=cpy

The Bradenton Herald also reported in October that Riley Family intends to extend low-ball offers for remaining condos – tens of thousands of dollars below prices that owners paid going back as far as 2004. Condo owners and their attorney say that’s against Florida law.

 

Florida Statute regarding condo terminations

If you’re a regular reader of IAC, you’ll recall that in 2015, the Florida Legislature enacted a law meant to offer protections for condominium owners. That law was supposed to make each condo owner “whole” in the event of a forced condo termination, reimbursing an owner the condo’s original purchase price.

However, the revised 2015 statute has more holes than Swiss cheese, as I explained in detail last November. For example, the “make whole” provision does not apply to a condo owner who purchased a resale property – it only applies to a condo owner who has purchased a unit directly from the developer. The law will also not help owners of condos as second or third homes, vacation, or rental properties. It only applies to owner-occupants who use the condo as a primary residence. There are several more conditions and exceptions, which you can read about here.

And apparently I overlooked yet another loophole, pointed out by FL Attorney Eric Glazer. According to Florida law:

The Florida Constitution contains the contracts clause, which establishes that “the legislature is prohibited from enacting any law that impairs vested rights under a declaration,” according to an entry in the Florida Bar Journal by Eric Glazer and Louis Goetz.

It reads: “While the contracts clause creates a general rule against new statutes impairing existing declarations, there are, of course, exceptions to the rule. First, if the declaration at issue actually incorporates future legislative enactments, new laws become part of the declaration and, therefore, do not impair it. Again, to accomplish this, the declaration must contain language in substantially the following form: ‘This declaration (or association) shall be governed by the Condominium Act, as amended from time-to-time.’ ”

Read more here: http://www.bradenton.com/news/business/article117774983.html#storylink=cpy

 

The “declaration” is also known as Declaration of Condominium, a fundamental part of the governing documents for the association. What Glazer is saying, simply put, is this: Your Condo Association’s governing documents must specifically state that all new statutes and amendments of the Condominium Act will automatically apply. If the documents don’t say so, then any new laws offering consumer protections or benefits to homeowners will not apply to your condo association.

Riley Family is exploiting this apparent loophole in the Condominium Act. Their attorney says that since Palm Cove’s association was created several years prior to 2015, the laws in effect at the time still apply. No purchase price reimbursements for dissenting condo owners in Palm Cove.

Of course, the Attorney for the owners will attempt to argue otherwise. Stay tuned for updates as they become available.

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Proof positive that low owner-occupancy rates in condominium associations put owners at risk

The current situation at Palm Cove is just one example of hostile condo termination. The practice goes on all over the U.S. and is starting to rear its ugly head in Canada. But Palm Cove should serve as a reminder that a condo buyer takes on considerable risk buying into a complex with a substantial number of vacant units, or a high percentage of  tenant-occupied units, especially if one or two owners or corporate investors happen to own multiple units.

Now hopefully you can see the true nature of common interest Association Governed Housing. It’s a cruel and callous type of community, where your house is not your home, and your private property rights are thrown out the window by a voting majority. To the moneyed minority of real estate investors and developers, your property is a commodity, there for taking.

There’s a substantial financial risk involved when you are forced to sell your property, your home, against your will. Damages often include a reduction in your quality of life, not to mention a great deal of emotional stress.

Hostile condo association terminations were no doubt a primary reason for HUD (Dept. Of Housing and Urban Development) to avoid reducing FHA loan qualification standards (lower acceptable owner-occupancy rates) for condominiums. You can read about that issue here and here.


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