News reports of bulk buyers acquiring blocks of unsold units at local condo developments have become a weekly fixture in the local business pages, and the underlying financials of these deals point toward a continued healthy future for bulk buyers in the months and years to come. For many South Florida condominium associations that are slowly recovering from the foreclosure crisis, these bulk buyers can represent a major financial boon for troubled properties as these buyers start paying assessments and begin to rebuild the association’s coffers.
The bulk deals have been spurred by depressed values, the foreclosure crisis and several significant changes in Florida law. Last year, the state legislature implemented a change under the Distressed Condominium Relief Act to temporarily suspend for two years many of the most daunting and financially worrisome legal liabilities that bulk buyers normally incur when they acquire more than seven units in a property and resell them to individual buyers. This temporary change in the law essentially shields bulk buyers from any legal liability and responsibility for construction defects, budget issues, turnover obligations and other statutory responsibilities of the original developer. It was intended to encourage bulk buyers to acquire blocks of unsold units from developers and foreclosing lenders, and resell them at a profit to individual buyers without having to reduce their bulk purchase price by having to budget for the prior developer’s obligations under the law. The law has proven to be extremely successful.
The real estate and community association attorneys in South Florida at our firm are working closely with investors that are acquiring large blocks of units as well as with the condominium associations that are now dealing with bulk buyers, which in some cases have acquired the majority of the units in a community. We are also working with many individuals who are acquiring a unit from a bulk buyer. There are a number of required filings and regulatory obligations for the bulk buyers to comply with under the new law, and the structure of the transaction has to be well planned and documented in order to avoid the liabilities that were intended to be abolished by the new law. Failure to document the transaction correctly may create inadvertent liability on the bulk buyer.
In addition, community associations and individual buyers must recognize that they no longer have the same protections under the law in transactions involving bulk buyers, so they must work with experienced attorneys in order to seek and secure these protections. Our condominium association lawyers are working with our clients to use new contractual stipulations in the sales contracts involving bulk buyers to address some of these issues.
There are significant opportunities for bulk buyers as well as lenders and community associations as a result of this new law, but to take advantage of them it is imperative to work with a qualified attorney who is highly experienced in these matters and the recent legislative changes. Our community association lawyers in South Florida will continue to write about important issues affecting residential properties throughout the state. To automatically receive all of our future posts, simply add your e-mail address in the box on the right.