Articles Posted in Real Estate Law

Michael Hyman srhl-law.jpgThe firm’s Michael Hyman provided some insight into a recent decision by the Fifth District Court of Appeal in an article in today’s edition of the Daily Business Review. The appellate ruling, which was also the subject of the preceding blog article by firm partner Nicholas Siegfried, affirms that subsequent mortgage assignees of the original first mortgage of a property are entitled to the “safe harbor” limitation for unpaid association dues of the lesser of twelve months of assessments or one percent of the original mortgage debt.

The article reads:

“It’s really a better decision for the lending industry than it is for the community association industry,” said Michael Hyman, who is not involved in the Beltway case but knows the issue.

“It certainly doesn’t help the associations in trying to capture as much of their delinquencies as they can,” he said.

Hyman’s firm, Coral Gables-based Siegfried, Rivera, Hyman, Lerner, De La Torre, Mars & Sobel, has hundreds of condo association clients; he got his first one in 1970.

Over the years Hyman has watched the push-pull of the two industries in the courts and the Legislature.

“Safe harbor was a result of the banking industry years ago going to the Legislature and convincing them that lending would be in peril if a first mortgagee didn’t have priority over a condo assessment,” he said. “It was instituted so that a lender could always be in a position of priority over an association lien.”

Before the condo statutes were amended to add safe harbor, many of the older associations had governing documents that failed to address the liability or assessments post-bank foreclosure. Or they had provisions that would entirely extinguish the liability for assessments incurred before a bank received title through foreclosure.

Condo associations having a pretty strong lobby of their own, the point was taken that they were losing barrels of money. The resulting compromise added the 12 months or 1 percent provision for first mortgagees.

“It was sort of a bone that was thrown to the condo associations by the banking industry to prevent a catastrophe,” Hyman said.

Since the mortgage meltdown, however, the bone has lost meat. There were so many foreclosures and they took so long that associations found themselves “upside down” and suffering, he said.

“We had associations that had a large portion of their units in foreclosure and the associations had to change their operational motifs and pass special assessments because they didn’t have enough money to pay their bills,” Hyman said.

Most recently, the Legislature changed the safe harbor rules effective July 1 to help aggressive associations that beat out lenders in the competition to foreclose.

The banks argued that by foreclosing, an association would put itself in the position of the prior owner who isn’t entitled to collect any past-due fees. An amendment provided clarity, Hyman said.

“Now if the association takes title, the bank coming behind them on the bank’s foreclosure still has to pay the 12 months or 1 percent,” he said.

. . . Hyman has his own take on how Beltway came to be a case of first impression.

“The issue has never been brought up because nobody would have thought to argue it was even controversial,” he said. “It was never teed up for determination.”

Lawyers for the condo association used a creative defense against application of the safe harbor law that swayed the trial judge.

“Then the appellate court kind of straightened it out,” Hyman said. “The court basically said, ‘Hold on, you’re not looking at this in the appropriate way.’ “

Our firm congratulates Michael for providing his expert analysis of this ruling for 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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Helio De La Torre 2013.jpgFirm partner Helio De La Torre wrote a guest column that appeared in the Daily Business Review last Friday, September 26, calling for the Florida legislature to consider significant changes to the state’s condominium termination law.

Helio’s column reads:

“In light of the importance of property rights in our society, it has come as a shock to many that the condominium termination law, which was amended by the Florida Legislature in 2007, is now being used successfully throughout the state by real estate developers to take over communities and force unwilling homeowners to sell their residences at prices that are often well below their original purchase price, and in many instances, below their remaining mortgage debt.

The new changes to the condominium termination law were enacted in response to the hurricanes of 2004 and 2005, which ravaged many condominiums throughout Florida. Scores of these condominiums could not afford the repairs, so they were abandoned and languished. As a result, in 2007 the legislature amended the state’s condominium laws in order to lower the thresholds for terminating condominiums so that they could be sold to developers with the option of converting the entire community to rentals.”

Helio concludes by discussing the outlook for changes to this controversial law:

“State Rep. Carl Zimmermann, D-Palm Harbor, filed a bill in this year’s legislative session that was aimed at giving those owners an opportunity to recover their investment, but the bill died in committee.

It now appears that such a bill would have the support of Florida’s next governor, regardless of who prevails in the November gubernatorial election. Gov. Rick Scott has asked state regulators to determine what could be done to stop the abuses of this law, and a spokesman for Charlie Crist has indicated that the former governor now believes the law needs to be changed.

Zimmermann’s proposal was to require developers to pay at least 110 percent of the original purchase price, or 110 percent of the fair market value, whichever is greater. Another option was proposed by former Gov. Jeb Bush, who vetoed the condominium termination amendment in 2006. He suggested only allowing for a single vote per person/entity, regardless of the number of units owned. A third option would be to change the law so that it applies only to properties with significant hurricane damage as opposed to allowing it to be applied for undamaged complexes.

All of these options should be considered by the Florida lawmakers during the next legislative session, as a remedied version of this law continues to make sense for condominium communities that are badly damaged by hurricanes and need to be renovated or converted. However, as it now stands, the law is allowing for unintended consequences that have effectively wiped away the property rights of some Florida homeowners.”

Our firm congratulates Helio for shining a spotlight on the significant problems with this law and calling for Florida’s lawmakers to address these issues during the next legislative session.

Click here to read the complete article.

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Stuart Sobel 2013.jpgPartner Stuart Sobel has authored a number of guest columns that have appeared in the Daily Business Review and the National Law Journal during the last several years, and his latest article published in the July 3 edition of the Daily Business Review is drawing considerable attention by the South Florida legal community.

Stuart’s column echoed the newspaper’s main article for its Litigation Special Report about the decline in trials, especially jury trials, and its impact in our judicial system. He wrote:

About 99.7 percent of cases are resolved without a jury trial. While this may be a testament to other means of resolution, it drastically shrinks the universe of opportunity for trial experience.

Now as a generation of lawyers matures without the cauldron of the courtroom within which to galvanize their skills, many of today’s attorneys seek desperately to avoid trial — exacerbating the loss of experience.

And since our judges are most often selected from our bar of attorneys, those lawyers without trial experience become judges without trial experience. Trials conducted by these judges will become less dependable as an effective means for dispute resolution.

Ultimately, this will intensify the public’s negative perception of our justice system in general, and it will undermine the public’s confidence in the reliability of a trial as the ultimate means of dispute resolution in particular. Scary.

Stuart concludes:

Can we control the out-of-control discovery and over-lawyering of cases before trial so that budgets are not exhausted and litigants can actually afford the risk of trial?

Hourly lawyers and lawyers wary of malpractice tend to over-lawyer cases until they get close to trial. Then they hedge their bet and begin to persuade clients that trials are just too risky.

Perhaps, if we look to our own practices, we can instead do only what is really necessary to prepare to present a case in trial — and then present it.

In the process, we save clients money, gain trial experience and restore faith in the system. Just a thought.

Stuart is receiving a great deal of positive feedback and comments from South Florida attorneys and judges on his article, and we hope that the sentiments that he expressed help to bring some added perspective and insight on this critical issue.

Click here to read Stuart’s complete article.

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Recently, short sales in South Florida have become a popular foreclosure alternative. In a short sale, the sales price is less than the amounts owed to creditors. Accordingly, the owner is required to negotiate a settlement with all creditors in order to sell the property free and clear of any liens. Commonly, the offer submitted to the association in connection with a short sale is less than the full amount owed to the association. Should the association accept less that the full amount owed? Should the association negotiate the amount it will accept? Can the association demand payment in full? In the video below, I discuss in detail what associations should look for when considering a settlement offer submitted in connection with a short sale.

 

 

Several municipalities in South Florida now appear to be starting a new trend that is likely to gain momentum in the months and years to come. These municipalities, which include West Palm Beach, Palm Beach County, Hallandale Beach and Sunrise, have changed the manner in which they bill homeowners for code enforcement repairs in an effort to force the owner to pay or face the possibility of losing their property. With so many abandoned properties winding their way through the slow pace of the foreclosure process, this change is likely to receive significant consideration and approval by many municipalities in the months to come.

It is no secret that many homes located throughout communities in South Florida, including those in homeowners associations, have been abandoned in the aftermath of the foreclosure-fueled housing meltdown. These abandoned homes take a huge toll on neighborhood property values. Many of these properties have become eyesores with broken windows, doors and fences, making them a safety and security hazard for the community at large. When this happens, HOAs and homeowners in communities without associations should contact the code enforcement department of the local municipality to request that the necessary inspection and repairs be made.

iStock_000007544792Medium.jpgTypically, municipalities place liens on the property for the cost of the repairs. But with abandoned homes it often takes years to collect. Now, the municipalities mentioned above have approved new measures to add the costs of the repairs to the property owner’s tax bill, which must be paid annually or the owner risks losing the property.

Other South Florida municipalities, many of which presumably face significant sums in property maintenance liens on abandoned homes, are bound to carefully consider this measure, as it is likely to be met with widespread approval by local taxpayers and property owners who have been footing the bill for the repairs to abandoned homes. The change should make it much easier for municipalities to continue to maintain and repair abandoned properties without the fear of taking on additional expenditures that may not be recouped for years.

Our attorneys will continue to monitor and write about important issues for South Florida communities and homeowners in this blog, and we encourage community association members, directors and managers to add their e-mail address in the subscription box on the right in order to automatically receive all of our future articles.

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.