Editorial: Pitfalls In Fla.'s Revised Condo Termination Statute

by Bilzin Sumberg Baena Price & Axelrod LLP
Contact

In 2007, the condominium termination statute (Section 718.117 of Florida Statutes) was completely rewritten to address problems with an aging condominium inventory and declarations that typically required 100 percent of unit owners to consent to any termination. This 100 percent requirement typically made any termination almost impossible to achieve.

The revised statute expanded a two-page, 1,159-word provision to 11 pages and 4,360 words. The expansion covered a variety of issues that might necessitate a termination and set forth an elaborate and detailed process for termination. It applied both to existing condominiums and to those to be created in the future.

The application to existing condominiums, the Florida Senate sponsor of the revised termination statute believed, was necessary to allow for termination of an aging stock of condominiums approaching the end of their useful lives and afford owners in such condominiums the ability to realize on the value of the buildings' underlying land.

While the revised statute has provided substantial assistance in effecting a termination, unanticipated issues have arisen that can occasionally create substantial problems for those seeking to terminate the condominium. The steps to termination are clearly described in the statute.

1. The association adopts a plan of termination. The plan can require an automatic termination upon its recording or can be conditional upon the occurrence of some future event. A conditional plan does not effect a termination until the occurrence of some specified event.

2. The plan is recorded in the public records of the county in which the property is located.

3. Notice of the recording of the plan is sent to all owners and lienholders.

4. The owners and lienholders not intended to receive the full value of their liens have 90 days following recording to challenge the plan.

5. Title to the condominium property vests in a termination trustee described in the plan and all liens are discharged from the property but attach to proceeds generated by the sale of the property by the termination trustee.

6. At the expiration of the 90-day period following plan recording, the termination trustee sells the property and distributes the proceeds in accordance with the plan. This relatively straightforward road map, however, has encountered a number of road hazards.

Lienholders. Lienholders such as mortgage holders are entitled to be paid the value of their liens. But how does the termination trustee determine the value of the liens?

Typically, and in accordance with Florida law, if a property is being sold or refinanced, a lender provides an estoppel letter to its borrower indicating the amount necessary to satisfy the loan in full. But termination is not a sale or refinance of a particular unit, and the termination trustee may not be aware of the appropriate party at the lender to obtain information on the unpaid amount and may not have access to the lender's account number to identify the loan.

Furthermore, since this type of request is not typical, experience to date is that lienholders do not readily respond to such a request for information.

Another problem relates to satisfying the lien of record. Florida law requires a lender to provide a satisfaction that its lien is paid in full. This requirement is sometimes not readily recognized by lenders when the payment comes through a termination.

Furthermore, if the plan provides for payment to lenders based on the value of the property, which frequently is substantially less than the amount of their loan, such payment does not require the delivery of a satisfaction. Yet, in both cases, a satisfaction might be required to clear title.

Title Issues. Some title companies are unwilling to insure the acquisition of title from a termination trustee by reason of the fact that they cannot establish that all owners and lienholders were given proper notice of the termination. The termination statute permits both owners and lienholders to challenge a termination following their obtaining a copy of the recorded plan.

However, it may be difficult for a termination trustee or the purchaser from a termination trustee to establish that the appropriate notice was given and received by the parties to be notified. The purchaser in such cases would then be required to bring a quiet title action naming all owners and possibly all lenders.

Even when it is possible to establish notice, there have been instances where a lender has commenced a foreclosure prior to the recording of the plan and acquired title subsequent to the plan. In such cases, a quiet title action may also be required to eliminate the lender's interest in its nonexistent unit.

Change in Circumstances. A problem may be faced with unconditional terminations effective upon recording the plan. The plan is recorded in anticipation of a sale 90 days thereafter. The proposed purchaser either defaults under its purchase contract or uses the failure of a condition precedent to the sale to terminate the purchase contract.

How does one regenerate the condominium? This is not covered by the statute and would appear to at least require 100 percent of the owners to consent to the reinstatement.The status of the mortgages on the individual units is more problematic since they were discharged from the units. Once discharged, there is no provision for reinstatement.

Typically, experience with new laws reveals glitches not otherwise apparent at the outset. The termination statute should be revisited to address issues practitioners have experienced in attempting to operate under the current law.

This article is reprinted with permission from Law360.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Bilzin Sumberg Baena Price & Axelrod LLP | Attorney Advertising

Written by:

Bilzin Sumberg Baena Price & Axelrod LLP
Contact
more
less

Bilzin Sumberg Baena Price & Axelrod LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.