When the foreclosure crisis was at its peak, developers were complaining that they were in effect stuck with numerous condominium projects that simply weren’t selling. They wanted the ability to at least try and save the project by converting it into a rental community instead of being forced to maintain it as a condominium. The problem was what to do about those pesky people who actually did buy a unit in the condominium and were now demanding that the condominium remain as a condominium and the developer fulfill all of the developer’s obligations.
I know this is hard to believe, but The Florida Legislature helped out the developers in a big way. Despite the fact that the law always required a condominium to be terminated with a 100% vote of the owners, The Florida Legislature passed a new law that now allowed for termination with an 80% vote. Since the developer was normally stuck with at least 80% of the units, termination was now easy. In effect, the statute allowed the developer to now repurchase the units they sold to the initial few and kick the owners to the curb. So, you would think they get all their money back right? No. Under the new termination provisions, the developer was only required to repurchase the units for as little as what the county now appraised them for. So, these people paid full price, paid their mortgage each month, paid their assessments and were getting kicked out anyway and forced to sell at tremendous discounts.
It gets worse.
People like Jan Bergemann warned that this new law would allow any other investors to gobble up units in even successful condominiums, and once they own 80% of the units, terminate them as well. While the statute was certainly meant to get developers out of a condo project doomed for failure, the new law could also be used by investors seeking to turn a successful condo into a more profitable rental community. The Florida Legislature didn’t heed these words. Until now.
After much publicity in the media, effective July 1st the “termination” law has finally changed. A developer can still terminate with an 80% vote, but not if ten percent of the owners vote in opposition to the developer’s termination plan. In addition, developers must pay the owners fair market value for their unit as determined by an independent appraisal and a relocation fee. The termination plan must also provide that the first mortgage is paid in full.for all units being purchased under the termination plan.
It only took a couple of years to stop the damage to Florida condominium owners. Developers literally get relief overnight however time and time and time again.