To say there is an over-supply of South Florida condominiums would be an understatement. According to Barrons.com, there are currently more condominiums being listed above $1 million than ever before, with over 55 months of supply. Even more jarring is that about 10,000 new condominium units will be hitting the market within the next two years. However, this does not mean that all opportunity is lost amongst condominium developers, just that developers must be quick to seize opportunity when opportunity presents itself. Whether it is development from the ground-up or conversion of existing improvements to condominium form of ownership, developers need to know how to act fast. Timing in real estate is paramount. The lengthy course of developing a condominium and offering it for sale can be shortened if the developer has a good understanding of filing requirements for condominium documents. Florida law requires that condominium documents be filed with and approved by the Division of Florida Condominiums, Timeshares and Mobile Homes (the “Division”). There are some key points which can make the condominium filing process less burdensome.
First, know whether or not you are deemed a developer for purposes of needing to file condominium documents with the Division[i]. Chapter 718 of the Florida Statutes (the “Condominium Act”) and Chapter 61B-17 of the Florida Administrative Code (the “Code”) govern condominium filings. Pursuant to the Condominium Act and the Code, a developer for purposes of filing condominium documents with the Division is one who is offering condominium units for sale or lease for more than 5 years in the ordinary course of business. The Code provides guidance on when one is “offering condominium units in the ordinary course of business,” and, thus, considered a developer for purposes of filing with the Division. For example, one is offering condominium units for sale in the ordinary course of business and, therefore, considered a developer, if more than 7 units, or for condominiums containing less than 70 units, 5 units are offered within a period of 1 year. However, one is not offering condominium units for sale in the ordinary course of business, and thereby not deemed a developer, if all of the units are sold as a single transaction to a single purchaser.
Once it is determined whether condominium documents must be filed with the Division, the next consideration is determining what to file. The Condominium Act and the Code lay out what documents are required to be filed with the Division. Such documents include, among other things, a filing statement, prospectus text, declaration of condominium, articles of incorporation and by-laws of the condominium association, condominium association budget, survey, plot plan and floor plans, evidence of ownership, form sales documents, receipt for condominium documents, and an escrow agreement. Other documents that may need to be filed include agreements with the condominium association and/or developer, master association documents, and club documents, as applicable. Detailed information regarding the condominium are required to be included in the condominium documents including, but not limited to, estimated dates of completion; type, size and number of units; type, size and number of facilities and common elements; assessment amounts; voting rights; reserved rights of the developer; lien rights; utilities; financing; and architectural control, among many others.
After drafting and organizing all of the documents, the documents must then be submitted electronically as a CD-ROM and filed with the Division, along with the applicable filing fee of $20.00 per residential unit. There are specific requirements relating to the CD-ROM and electronic filing which must be followed or the filing will be rejected by the Division. Once submitted to the Division, the Division has 45 days to review the filing. It is not unusual for the Division to issue a Notice of Deficiency upon completion of its review indicating items in the condominium documents that the Division believes are not consistent with the Condominium Act and/or the Code. Thereafter, the developer has 45 days to submit revised condominium documents. If the Condominium documents are approved by the Division but are thereafter revised or amended, the developer must submit the revised or amended documents to the Division in the form of an amendment filing.
Prior to the first closing on a unit in the condominium, the condominium must be created, i.e. the declaration of condominium must be recorded in the county where the condominium is located within 24 months of the Division’s initial approval of the condominium documents, unless the developer requests and receives an extension of the 24 month period. Upon recordation, a notice of recording, accompanied by a $4 dollar fee per unit, must be submitted to the Division.
Although the process of developing a condominium and filing the necessary documents with the Division is a formidable task, having a good understanding of the timing, process and steps involved can provide a developer with an advantage to capitalize on a good opportunity. In a tough market, any advantage can make a difference in the result.