On June 16, 2015, Governor Rick Scott signed HB 643 into law, making sweeping changes to Section 718.117 of the Florida Condominium Act relating to terminations of condominiums. The changes, which are effective immediately, make optional terminations of a condominium more difficult. The number of optional condominium terminations rose during the recent downturn in the real estate market when developers that owned a majority of units in a condominium development wanted to convert the condominiums to rental apartments or sell the property for conversion to rentals. Condominium terminations also occur in older condominiums where the unit owners receive an offer to sell an entire condominium to a developer.
In reaction to unit owners who complained that terminations of their condominiums forced them out of their units for less than they paid for their units, the new legislation provides, among other things, as follows:
- At least 80% of unit owners must vote in favor of termination, no more than 10% of unit owner can vote against a plan of termination, and all unit owners, including those who are not current in payment of assessments, are entitled to vote on a plan of termination.
- In the case of a “bulk owner” who owns at least 80% of the units in the condominium, all unit owners other than a bulk owner must be compensated at least 100% of the fair market value of their units which, for owners who are original purchasers from the developer and are current in all assessments and mortgage payment, must be at least the original purchase price paid for the unit regardless of the current value of the unit.
- In the case of a bulk owner, a plan of termination is not effective unless the outstanding first mortgages of all unit owners are satisfied in full before or simultaneously with the termination regardless of the value of the unit.
- In the case of a unit owner whose unit was granted homestead exemption, the bulk owner must pay such unit owner an additional relocation payment in an amount equal to one percent (1%) of the termination proceeds allocated to the owner’s unit.
- If a condominium with a bulk owner is terminated and the former condominium units are offered for lease after termination, each unit owner in occupancy immediately prior to the termination must be offered the right to lease his or her former unit and remain in possession for 12 months on the same terms as similar unit types being offered to the public.
- If a plan of termination is not approved by unit owners, a new plan of termination cannot be proposed or considered for 18 months.
Although the new legislation was intended to help unit owners in a distressed condominium facing termination, the legislation may have the unintended consequence of hurting unit owners by making terminations more difficult and economically unfeasible, making it more expensive to terminate distressed condominiums.
A copy of HB 643 can be found at http://www.myfloridahouse.com/Sections/Documents/loaddoc.aspx?FileName=_h0643er.docx&DocumentType=Bill&BillNumber=0643&Session=2015.