Articles Posted in Condominium Development

Senate Bill 1520 was signed by Governor Rick Scott on June 16, 2017. The following is a summary of the bill, which will take effect on July 1, 2017:

SB 1520 amends 718.117, Florida Statutes, regarding the optional termination of condominiums, making it more difficult for a Plan of Termination to be passed without full consent of the unit owners.  The changes to the law reduce the amount of unit owners required to reject a plan, postpone the time until another plan can be voted on, and requires that the plan be approved by the Division of Florida Condominiums, Timeshares, and Mobile Homes of the Department of Business and Professional Regulation (“Division”) based on factual and public policy reasons. Further, it guarantees that an optional termination will not result in a unit owner receiving less than his or her purchase price of the unit.

Changes to 718.117(1), (3) and addition of (21):

Applicability

  • The statute contains language indicating it is controlling over language in a condominium’s declaration and applies to all condominiums in the state in existence on or after July 1, 2007. The phrase: “Unless the declaration provides for a lower percentage” has been stricken indicating that the threshold established in the statute is the minimum vote required for optional termination.

Optional Termination

  • Prior to the effective date of the amendment, in order to approve a plan of termination, 80% of unit owners must approve the plan, and no more than 10% of unit owners can object. The changes to the statute now require an 80% unit owner vote approving a plan of termination; with less than 5% objecting. Additionally, the changes to the statute now provide that once the plan of termination passes a unit owner vote, it would then need to be approved by the Division.
  • The Division will have 45 days to review the Plan of Termination and notify the association of any deficiencies, or if it is rejected. If the Division does not respond within 45 days, the plan is deemed accepted.  Under the new law, plans of termination will now need to include factual circumstances that show that the plan complies with Section 718.117, Florida Statutes, and supports the public policies of the section, which are listed below.
  • If a plan of termination is rejected by 5% or more of the total voting interests of the condominium, then a new plan may not be considered for 24 months, as opposed to the current period of 18 months.
  • Under the current law, a condominium owner who purchased a unit from the developer must be made “whole” upon termination. In other words, the plan of termination could not provide for paying the unit owner less than the original purchase price. SB 1520 removes the language that restricts this requirement only to the original unit owner, meaning that an owner who purchased a resale condominium would also be entitled to receive a minimum of the purchase price upon optional termination. The bill applies this section to all unit owners, not just the ones who object to the plan.

Public Policy Reasons the DBPR Evaluates During Review for Optional Termination

  • Ensure continued maintenance, management, and repair of stormwater management systems, conservation areas, and conservation easements; or avoiding the costs and responsibilities of maintenance, management, and repair from falling on the shoulders of the taxpayers.
  • Prevent covenants from impairing the continued productive use of the property.
  • Protect state residents from health and safety hazards.
  • Provide fair treatment and just compensation for individuals, and preserve property values.
  • Protect homestead property and homestead property rights.

For a complete reading of the adopted legislation, please refer to the text of the bills available on the websites for the Florida Senate (www.flsenate.gov) and Florida House of Representatives (www.myfloridahouse.gov).

OscarRivera2014.jpgThe firm’s Oscar R. Rivera wrote an article that appeared today in the Daily Business Review, South Florida’s exclusive business daily and official court newspaper. The article, which was titled “Best Practices for Buyouts of Unit Owners at Older Condos,” discusses recent changes in the Florida condominium termination law and important considerations for developers in these property acquisitions. Oscar’s article reads:

In the last several weeks we learned of a building in Surfside where the developer successfully bought out all of the units from their owners and another in the Brickell area where the developer purchased 60 of the 61 residences from their owners and is now using the statutory condo termination process to acquire the remaining unit and commence its development plans.

During last year’s legislative session, Florida lawmakers made changes to the condominium termination statute that made the process considerably fairer for unit owners. Now owners who are current on their mortgages and association fees must get fair market value, and their entire first-mortgage debt must be satisfied even if it exceeds the current fair market value.

In addition, for the original owners who maintain it as their homestead property, they must be offered their original purchase price regardless of whether it exceeds the current fair market value. The changes also enable some owners to rent their units for a year before moving out and receive a 1 percent relocation fee.

In light of these changes and in an effort to avoid any delays and additional costs due to holdout owners and related litigation, it greatly behooves developers in these buyouts to carefully assess and determine the valuation of the property in order to make very fair and enticing offers to the unit owners.

Keep in mind that the price that is offered to every owner will be based on the same exact price per square foot for every residence in the building, so the square-foot price must be high enough to entice even the owners of the most lavish units with the best views.

His article concludes:

The most effective approach is for the developer to work very closely with the association’s board of directors in order to get all of the pertinent information into the hands of every owner at the property. Meetings with the owners to answer all of their questions and allay any of their concerns are also a priority.

The contracts that are presented to all of the owners will be identical, except of course for their corresponding unit number, owner’s name and purchase price based on the square footage. There are no financing contingencies or property inspections required, but they do include contingency clauses indicating the required critical mass of units that must accept in order for the offers to be valid. They also include extension clauses to enable the developer to extend the deadline in case of litigation or other delays due to some of the logistics of the condo termination process.

In many cases, the only negotiations that take place with some of the individual owners involve their requests to remain in their residences and pay rent to the developer for a number of months after the closing. Developers should remain flexible in accommodating these requests, as typically they will not be able to begin the teardown of the property for months after the closings while other aspects of the condo termination and development processes are underway.

Our firm congratulates Oscar for sharing his insights into this important and timely topic for real estate developers with the readers of the Daily Business Review. Click here to read the complete article in the newspaper’s website (registration required).

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A report earlier this week in the Tampa Bay Times about the brisk pace of sales at the new One St. Petersburg luxury condominium illustrated the changes that are taking place in the city’s downtown area. The article reported that buyers at the new development, which at 41 stories will be the tallest building in the city, have reserved 104 of the 253 units since they were introduced a few months ago, totaling more than $106 million in sales.

Located at First Street and First Avenue N., the new tower is attracting residents with its prime location near the downtown waterfront and its many restaurants and shops. Other nearby offerings, including the Salvador and Bliss condo towers, are also enjoying strong presales.

As this article shows, condominium development in areas outside of South Florida has joined the pace of what we’ve seen in the South Florida market. Below is an artist rendering of the new towers flanked by two neighboring buildings, and the complete article can be found by clicking here.

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New condominium developments often face significant challenges from municipalities and neighboring property owners. As the wave of condo development in Florida appears to have no end in sight, developers should be cognizant of potential complaints that may be raised against their proposed towers, and they should be prepared to negotiate to win all of the necessary approvals and overcome the challenges that are presented.

The struggles facing the new Bliss 18-story luxury condo tower planned for downtown St. Petersburg are emblematic of the types of hurdles that some new projects must overcome. An article earlier this week in the Tampa Bay Times chronicles the difficult road that the development has been forced to navigate. The challenges include allegations by a nearby property owner that the project violates the city’s comprehensive land-use plan as well as a lawsuit by the association of a neighboring condominium claiming that cars waiting to use the project’s planned elevator to transport vehicles to their parking spaces would clog the access alley also used by the condominium and create a safety hazard.

Click here to read the newspaper article and learn about the developer’s concessions to address and overcome these obstacles. Below is an artist rendering of the proposed tower.

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Oscar Rivera 2014.jpgThe firm’s Oscar Rivera contributed a guest column that appeared in today’s edition of the Daily Business Review about the instability in the real estate and insurance industries that will be caused by the failure of the U.S. Senate to reinstate the Terrorism Risk Insurance Act. Our firm congratulates Oscar for drawing attention to this vital legislation and calling on the Congress to make it a priority when it reconvenes in January.

Oscar’s article reads:

In a move that caught many of those in the real estate and insurance industries by surprise, the U.S. Senate adjourned Dec. 16 without a vote on a bill to extend the Terrorism Risk Insurance Act for six years. The program will now expire Dec. 31, and the negative repercussions for the real estate industry are expected to be significant.

The TRIA program has served as the backstop for insurance companies’ losses from acts of terrorism ever since it was ratified with widespread bipartisan support after the 9/11 terrorist attacks, which caused the private market for terrorism insurance to collapse.

Once the program is allowed to lapse at the end of the year for the first time since its inception, insurers will have the right to cancel terrorism policies. Insurance industry analysts believe that is exactly what many of the carriers will do, as they would be at risk of insolvency without the government backup if a massive terrorist attack were to take place.

Under the TRIA law, the federal government covers 85 percent of all losses after the first $100 million in damages from a terrorist attack. Thankfully, the government has never had to pay out to the insurers under the law, but unfortunately the need for this type of insurance is as strong today as it was when the program was enacted in 2002.

The reauthorization bill would have renewed the program for six years and decreased the government’s exposure by gradually increasing the threshold to $200 million in losses before the federal funds are allocated. In addition, the government’s share of the catastrophic losses would have been gradually lowered to 80 percent.

U.S. Sen. Charles Schumer, D-N.Y., who negotiated the current reauthorization bill in the Senate and helped to get the original law ratified in 2002, has said that billions of dollars in new real estate developments and hundreds of thousands of jobs are at risk due to the expiration of TRIA.

Insurance and real estate industry analysts tend to agree, as terrorism insurance coverage is required for practically all of types of loans and financing options that are available for major real estate developments such as shopping centers, office towers, residential towers, stadiums, arenas and public sector infrastructure projects. Indeed, once the program lapses and insurers begin to cancel these policies, the loans for these projects that lose their terrorism coverage will be in technical default.

The instability that the loss of the TRIA coverage is going to cause in the insurance and real estate industries will be significant. When the U.S. Congress reconvenes Jan. 6, it should make the reinstatement of this insurance program one of its foremost priorities.

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Steve Siegfried 2013 srhl-law.jpgSteven M. Siegfried, our firm’s founding partner, was quoted in an article in the September 24 edition of the Daily Business Review about the impact of a new federal law to eliminate registration requirements for new condominium and timeshare developments under the Interstate Land Sales Full Disclosure Act.

The article reads:

A bill headed to President Barack Obama’s desk could be a “major victory” for condominium developers and save them millions of dollars in rescinded deposits from clients with buyer’s remorse.

The proposed S.2101 would amend the Interstate Land Sales Full Disclosure Act, which was used by some depositors as a tool to escape regrettable real estate contracts after the market crashed.

Developers and their attorneys are applauding the legislation, saying the [ILSA] law’s stringent technical requirements give buyers a green light to spot reporting loopholes and recoup deposits on condo contracts.

. . . Florida developers have been prime targets under ILSA. State regulations allow them to launch condo sales well before projects break ground, which means developers rely on renderings and forward-looking statements when marketing pre-construction projects.

But that practice cost them in court when judges interpreted the law in favor of “definitive” descriptions in sales and prospectus documents.

“The word ‘anticipate’ was not definitive enough, so there were lots of cases,” said Steve Siegfried, shareholder at Siegfried, Rivera, Hyman, Lerner, De La Torre, Mars & Sobel. “The courts were interpreting the basic requirements very, very strictly in a manner that almost gave the buyers an opportunity to find some technical reason why there was a noncompliance.”

“The statute is so extensive that attorneys were looking for very questionable errors, and basically arguing that any minor error in the property report allows them to rescind the contract,” added Siegfried, adjunct construction law professor at the University of Miami School of Law. “It was so technical, it became almost abusive and really caused a lot of problems for developers.”

Click here to read the complete article in the Daily Business Review’s website (registration required).

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The latest reports from the federal government illustrate that the housing market is back on the rise after two months of decline. The U.S. Commerce Department logged a 15.7 percent increase in July in home construction nationwide, following declines of 4 percent in June and 7.4 percent in May. A summary of all of the findings and statistics in a report from the Associated Press can be found by clicking here, and some of the highlights include:

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“The July rebound reflected strength in single-family home construction, which rose 8.3 percent, and in apartment construction, which was up 33 percent.

“. . . Housing construction was up 29 percent in the South, recovering from a 26.8 percent plunge the month before that was blamed in part on heavy rains

“. . . Economists noted that the July performance was much better than expected. Sal Guatieri, senior economist at BMO Capital Markets, said solid job growth and a recent decline in mortgage rates were helping boost construction.

“. . . A report Monday indicated home builders are feeling more confident about their sales prospects, a hopeful sign that home construction and sales of newly built homes could pick up after stalling. Builders’ views of current sales conditions for single-family homes, their outlook for sales over the next six months and traffic by prospective buyers all increased in August.”

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These figures and findings reinforce what our firm’s real estate attorneys and clients have been seeing throughout Florida: The housing market is solidifying its rebound from the foreclosure crisis in the state, and here as well as in other states the surfeit distressed properties are being brought back into the marketplace.

Our other real estate attorneys and I monitor and write about important business and legal issues affecting the industry in this blog, and we encourage industry followers to enter their email address in the subscription box at the top right of the blog in order to automatically receive all of our future articles.

Michael Hyman srhl-law.jpgFirm shareholder Michael L. Hyman was quoted in an article that appeared on Thursday, June 12, 2014, in The Real Deal (www.therealdeal.com) about the latest court decision in the dispute between two homeowners associations and developer of the Privé condominium towers in Aventura. The decision in Miami-Dade Circuit Court granted a request by the homeowners associations to abate the case until issues raised by the City of Aventura are resolved, effectively delaying for 90 days the hearing that will decide whether the lawsuits filed by the associations to block the development can move forward.

Hyman represents the Williams Island Property Owners Association, and he successfully demonstrated to the court that the case should not proceed as the City of Aventura had not yet approved a building permit for a sidewalk on an adjacent south island – which is a requirement for the issuance of a building permit pursuant to a variance issued by the city when the first island was developed with single family homes. Judge Jerald Bagley granted Hyman’s motion and ordered the case stay for 90 days, after which both sides must report back to the court on the status of the sidewalk permit.

Hyman explains in the article that the association’s motion “was based upon the fact that if the city would not issue the sidewalk permit, the matter could be resolved without the necessity of Williams Island proceeding forward with its lawsuit.” He noted that the stay would be lifted if the city issues the permit within the 90-day period.

The Williams Island association and the Island Estates Homeowners Association separately filed lawsuits in 2013 challenging the development rights for Privé, which is planned as a pair of 16-story condominium towers with 160 units by developer BH3 and Gary Cohen, the developer of the Island Estates enclave in the south island of the two-island property.

Click here to read the complete article from The Real Deal.
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Jeffrey Respler srhl-law.jpgThe firm’s lawsuits alleging major construction defects against the developer, general contractor, architect and engineers behind Miami’s Quantum on the Bay condominium towers were the subject of an article by the Daily Business Review that appeared in the June 16, 2014, edition of the newspaper. The lawsuits allege that the defendants’ work resulted in hundreds of defects, including stucco and HVAC problems as well as inadequate drainage that has led to severe flooding in the community’s fitness center and loading dock.

Firm Partner Jeffrey S. Respler is quoted in the article indicating that “[t]he unit owners want to have the property that should have been delivered to them. At the end of the day, we’re not looking for a windfall. We’re only looking to be made whole.”

The lawsuit names as defendants developer Terra ADI-International Bayshore LLC, builder Facchina-McGaughan LLC, architect Nichols Brosch Wurst Wolfe & Associates Inc., contractor Fred McGilvray Inc., and engineers Florida Engineering Services Inc., VSN Engineering Inc., Gopman Consulting Engineers Inc. and John J. Kirlin LLC, a Maryland-based firm that specializes in plumbing, heating, ventilation and air conditioning.

“The biggest problem is whenever there’s even a minor rain event, there’s flooding,” explains Respler in the report. “Every single day, the association people have to go out and pump the drainage wells in this luxury development. If not, there’s flooding – even when there’s no rain.”

The article describes how sandbags are being used at the property to keep water out of a service area during storms, and residents have been forced to have repairs made to swamped elevators.

Respler concludes: “The parties who we know are responsible are pointing fingers at each other. We are just the end users. We weren’t there when it was being built. The bottom-line fix is we’re probably going to have to move the drains to the front of the property. The speculation is the building was built too low.”

Click here to read the complete article in the DBR’s website (registration required).

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Miami may have been the poster child for the foreclosure crisis and the collapse of the housing market five years ago, but now the area is making international headlines for the robust recovery of the local condominium market. The April 5 print edition of The Economist featured a major article titled “Erectile Resumption: Could the Miami Skyline One Day Resemble Manhattan’s?” that details how condominium development in Miami and the beaches is undergoing a resurgence that is surpassing even the most optimistic predictions.

The article focuses on how the recovery in new condominium development is being fueled by private equity investors as well as by foreign buyers from Venezuela, Argentina and other Latin American countries. It also reads:

“These [new condominium] projects build on progress made over the past decade towards becoming a world-class city, from the opening of dozens of top-notch restaurants to Art Basel picking Miami as one of the three venues for its shows (“the Super Bowl of the Art World”, as Tom Wolfe called it in his Miami novel, “Back to Blood”). Tourism is at record levels. Miami is the only American city besides New York in the top ten of Knight Frank’s 2014 global-cities index, which ranks cities by their attractiveness to the ultra-wealthy. (It comes seventh, ahead of Paris.) Property is still far cheaper than in most other cities on the list.”

Click here to read the complete article.

With more than 4 million readers in almost every country and a reputation for insightful analysis and opinion on every aspect of world events, The Economist is one of the most widely recognized and well-read news and business publications in the world.

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