The firm’s latest “Real Estate Counselor” column in the Miami Herald appears in today’s newspaper and is again authored by partner Lindsey Thurswell Lehr. Her column, which is titled “Condo Terminations Require Ample Consideration by Association Directors and Unit Owners,” focuses on the rise in South Florida in condominium terminations involving building-wide purchases of all the units by developers. While such terminations may be inevitable for some buildings, Lindsey writes that they are typically contentious with some owners steadfastly opposed to the forced sale of their property. Her column reads:
. . . Florida’s condominium termination statute is one of the most controversial aspects of the state’s condo laws. The current statute, which has seen several significant changes over the years, enables owners to work together in the bulk sale of their units to a developer hoping to demolish a condominium and build a new one in its place.
Currently, the statute allows for an optional termination with a vote of 80 percent of the unit owners, but it also enables five percent or more of the owners to block a termination from proceeding for a period of 24 months by rejecting it in writing or via a negative vote.
As my fellow firm partner Oscar Rivera wrote in this column in February, condominium developers are now setting their sights on many potential targets for termination bids in South Florida’s red-hot real estate market.
For aging properties that are now uncovering potential structural life-safety issues, the lessons from Surfside cannot be ignored. They must either immediately ratify a plan to fund and execute the necessary repairs and remediation, or they must work to secure the best possible condo termination exit strategy for all the unit owners as expeditiously as possible.
That is not to say the only communities that make for good candidates for termination are those with significant structural deficiencies in need of attention. There are many condominium communities in South Florida with buildings that are doing just fine, but the economic realities of today’s real estate market make termination appealing for their owners.
For such condominium enclaves that could be targets for a termination based purely on owners’ convenience and bulk purchasers’ offers that are generally above market value, the unit owners should work together to conduct all the necessary due diligence with the help of qualified professionals to vet and present any offers to the community at large.
Interested owners and authorized boards of directors would be well advised to meet with attracted developers, retain the services of expert real estate market appraisers to assess offers, solicit competing offers from leading developers, and hold discussions with all the owners during noticed board meetings to share information, gauge the community’s interest and take note of any concerns.
During those meetings, the owners who are against a termination bid should also take the initiative to make their best possible case to their neighbors. When they first receive or learn of termination offers being made, the objecting owners should act quickly to form a coalition with those who are like-minded.
The group of dissenting owners could then consider retaining their own real estate appraisers and brokers to analyze the current property values and perhaps even project what they will be in a few years given the current market conditions.
If they are able to demonstrate to their fellow owners that they could possibly do much better financially by holding off on a termination or soliciting alternative offers, the objecting owners could maximize their potential for reaching the five percent threshold necessary to block a termination.
The question of whether or not to terminate a condo community for purely economic benefits is bound to stir up some emotions. Some owners will probably be against it because the funds will never enable them to replace the lifestyle that they enjoy living in the condominium they call home, while others will view it as the ideal exit ramp to facilitate the next chapter of their lives.
The debate over such a monumental decision could easily get contentious, so boards of directors should see it as their duty to ensure both sides get the same fair hearing and consideration. Bear in mind, if there is no rush to consummate a deal due to potential life-safety issues, then there is no rush to complete a termination deal as quickly as possible.
The key for boards of directors is to let the discussions take place in the fair and open forum of the regular meetings, give both sides equal time and consideration, and ultimately conduct a vote of all the owners to decide the fate of the community. . .
Lindsey concludes by noting that transparency and open discussions are paramount for condominium communities considering termination. Our firm salutes her for sharing her insights on this timely and vital topic with the readers of the Miami Herald. Click here to read the complete article in the newspaper’s website.