Bill Text: FL S0840 | 2010 | Regular Session | Introduced

NOTE: There are more recent revisions of this legislation. Read Latest Draft

---

Bill Title: Community Associations [CPSC]

Spectrum: Partisan Bill (Democrat 3-0)

Status: (Failed) 2010-04-30 - Died in Messages, companion bill(s) passed, see CS/CS/CS/SB 1196 (Ch. 2010-174) [S0840 Detail]

Download: Florida-2010-S0840-Introduced.html

---

 
Florida Senate - 2010                                     SB 840 
 
By Senator Sobel 
31-00775-10                                            2010840__ 
1                        A bill to be entitled 
2         An act relating to community associations; amending s. 
3         718.103, F.S.; revising the definition of the term 
4         “developer” to exclude a bulk assignee or bulk buyer; 
5         creating part VII of ch. 718, F.S., relating to 
6         distressed condominium relief; providing a short 
7         title; providing legislative findings and intent; 
8         defining the terms “bulk assignee” and “bulk buyer”; 
9         providing for the assignment of developer rights to 
10         and the assumption of developer rights by a bulk 
11         assignee; specifying liabilities of bulk assignees and 
12         bulk buyers; providing exceptions; providing 
13         additional responsibilities of bulk assignees and bulk 
14         buyers; authorizing certain entities to assign 
15         developer rights to a bulk assignee; limiting the 
16         number of bulk assignees at any given time; providing 
17         for the transfer of control of a board of 
18         administration; providing effects of such transfer on 
19         parcels acquired by a bulk assignee; providing 
20         obligations of a bulk assignee upon the transfer of 
21         control of a board of administration; requiring that a 
22         bulk assignee certify certain information in writing; 
23         providing for the resolution of a conflict between 
24         specified provisions of state law; providing that the 
25         failure of a bulk assignee or bulk buyer to comply 
26         with specified provisions of state law results in the 
27         loss of certain protections and exemptions; requiring 
28         that a bulk assignee or bulk buyer file certain 
29         information with the Division of Florida Condominiums, 
30         Timeshares, and Mobile Homes of the Department of 
31         Business and Professional Regulation before offering 
32         any units for sale or lease in excess of a specified 
33         term; requiring that a copy of such information be 
34         provided to a prospective purchaser; requiring that 
35         certain contracts and disclosure statements contain 
36         specified statements; requiring that a bulk assignee 
37         or bulk buyer comply with certain disclosure 
38         requirements; prohibiting a bulk assignee from taking 
39         certain actions on behalf of an association while the 
40         bulk assignee is in control of the board of 
41         administration of the association and requiring that 
42         such bulk assignee comply with certain requirements; 
43         requiring that a bulk assignee or bulk buyer comply 
44         with certain requirements regarding certain contracts; 
45         providing unit owners with specified protections 
46         regarding certain contracts; requiring that a bulk 
47         buyer comply with certain requirements regarding the 
48         transfer of a unit; prohibiting a person from being 
49         classified as a bulk assignee or bulk buyer unless 
50         condominium parcels were acquired before a specified 
51         date; providing for the determination of the date of 
52         acquisition of a parcel; providing that the assignment 
53         of developer rights to a bulk assignee or bulk buyer 
54         does not release a developer from certain liabilities; 
55         preserving certain liabilities for certain parties; 
56         providing an effective date. 
57 
58  Be It Enacted by the Legislature of the State of Florida: 
59 
60         Section 1. Subsection (16) of section 718.103, Florida 
61  Statutes, is amended to read: 
62         718.103 Definitions.—As used in this chapter, the term: 
63         (16) “Developer” means a person who creates a condominium 
64  or offers condominium parcels for sale or lease in the ordinary 
65  course of business, but does not include: 
66         (a) An owner or lessee of a condominium or cooperative unit 
67  who has acquired the unit for his or her own occupancy;, nor 
68  does it include 
69         (b) A cooperative association that which creates a 
70  condominium by conversion of an existing residential cooperative 
71  after control of the association has been transferred to the 
72  unit owners if, following the conversion, the unit owners will 
73  be the same persons who were unit owners of the cooperative and 
74  no units are offered for sale or lease to the public as part of 
75  the plan of conversion;. 
76         (c) A bulk assignee or bulk buyer as defined in s. 718.703; 
77  or 
78         (d) A state, county, or municipal entity is not a developer 
79  for any purposes under this act when it is acting as a lessor 
80  and not otherwise named as a developer in the declaration of 
81  condominium association. 
82         Section 2. Part VII of chapter 718, Florida Statutes, 
83  consisting of sections 718.701, 718.702, 718.703, 718.704, 
84  718.705, 718.706, 718.707, and 718.708, is created to read: 
85                              PART VII 
86                    DISTRESSED CONDOMINIUM RELIEF 
87         718.701 Short title.—This part may be cited as the 
88  “Distressed Condominium Relief Act.” 
89         718.702 Legislative intent.— 
90         (1) The Legislature acknowledges the massive downturn in 
91  the condominium market which has transpired throughout the state 
92  and the impact of such downturn on developers, lenders, unit 
93  owners, and condominium associations. Numerous condominium 
94  projects have either failed or are in the process of failing, 
95  whereby the condominium has a small percentage of third-party 
96  unit owners as compared to the unsold inventory of units. As a 
97  result of the inability to find purchasers for this inventory of 
98  units, which results in part from the devaluing of real estate 
99  in this state, developers are unable to satisfy the requirements 
100  of their lenders, leading to defaults on mortgages. 
101  Consequently, lenders are faced with the task of finding a 
102  solution to the problem in order to be paid for their 
103  investments. 
104         (2) The Legislature recognizes that all of the factors 
105  listed in this section lead to condominiums becoming distressed, 
106  resulting in detriment to the unit owners and the condominium 
107  association on account of the resulting shortage of assessment 
108  moneys available to support the financial requirements for 
109  proper maintenance of the condominium. Such shortage and the 
110  resulting lack of proper maintenance further erode property 
111  values. The Legislature finds that individuals and entities 
112  within Florida and in other states have expressed interest in 
113  purchasing unsold inventory in one or more condominium projects, 
114  but are reticent to do so because of the potential of 
115  accompanying liabilities inherited from the original developer, 
116  which are potentially by definition imputed to the successor 
117  purchaser, including a foreclosing mortgagee. This results in 
118  the potential purchaser having unknown and unquantifiable risks, 
119  and potential successor purchasers are unwilling to accept such 
120  risks. The result is that condominium projects stagnate, leaving 
121  all parties involved at an impasse without the ability to find a 
122  solution. 
123         (3) The Legislature finds and declares that it is the 
124  public policy of this state to protect the interests of 
125  developers, lenders, unit owners, and condominium associations 
126  with regard to distressed condominiums, and that there is a need 
127  for relief from certain provisions of the Florida Condominium 
128  Act geared toward enabling economic opportunities within these 
129  condominiums for successor purchasers, including foreclosing 
130  mortgagees, while at the same time clarifying the ambiguity in 
131  the law. Such relief would benefit existing unit owners and 
132  condominium associations. The Legislature further finds and 
133  declares that this situation cannot be open-ended without 
134  potentially prejudicing the rights of unit owners and 
135  condominium associations, and thereby declares that the 
136  provisions of this part shall be used by purchasers of 
137  condominium inventory for a specific and defined period. 
138         718.703 Definitions.—As used in this part, the term: 
139         (1) “Bulk assignee” means a person who: 
140         (a) Acquires more than seven condominium parcels in a 
141  single condominium as set forth in s. 718.707; and 
142         (b) Receives an assignment of all or substantially all of 
143  the rights of the developer as are set forth in the declaration 
144  of condominium or in this chapter by a written instrument 
145  recorded as an exhibit to the deed or as a separate instrument 
146  in the public records of the county in which the condominium is 
147  located. 
148         (2) “Bulk buyer” means a person who acquires more than 
149  seven condominium parcels in a single condominium as set forth 
150  in s. 718.707 but who does not receive an assignment of any 
151  developer rights other than, at the bulk buyer’s option, the 
152  right to conduct sales, leasing, and marketing activities within 
153  the condominium; the right to be exempt from the payment of 
154  working capital contributions to the condominium association 
155  arising out of or in connection with the bulk buyer’s 
156  acquisition of a bulk number of units; and the right to be 
157  exempt from any rights of first refusal which may be held by the 
158  condominium association and would otherwise be applicable to 
159  subsequent transfers of title from the bulk buyer to any third 
160  party purchaser concerning one or more units. 
161         718.704 Assignment of developer rights to and assumption of 
162  developer rights by bulk assignee; bulk buyer.— 
163         (1) A bulk assignee shall be deemed to have assumed and is 
164  liable for all duties and responsibilities of a developer under 
165  the declaration and this chapter, except: 
166         (a) Warranties of a developer under s. 718.203(1) or s. 
167  718.618, except for design, construction, development, or repair 
168  work performed by or on behalf of such bulk assignee. 
169         (b) The obligation to: 
170         1. Fund converter reserves under s. 718.618 for a unit that 
171  was not acquired by the bulk assignee; or 
172         2. Provide converter warranties on any portion of the 
173  condominium property except as may be expressly provided by the 
174  bulk assignee in the contract for purchase and sale executed 
175  with a purchaser and pertaining to any design, construction, 
176  development, or repair work performed by or on behalf of the 
177  bulk assignee. 
178         (c) The requirement to provide the association with a 
179  cumulative audit of the association’s finances from the date of 
180  formation of the condominium association as required by s. 
181  718.301. However, the bulk assignee shall provide an audit for 
182  the period for which the bulk assignee elects a majority of the 
183  members of the board of administration. 
184         (d) Any liability arising out of or in connection with 
185  actions taken by the board of administration or the developer 
186  appointed directors before the bulk assignee elects a majority 
187  of the members of the board of administration. 
188         (e) Any liability for or arising out of the developer’s 
189  failure to fund previous assessments or to resolve budgetary 
190  deficits in relation to a developer’s right to guarantee 
191  assessments, except as otherwise provided in subsection (2). 
192 
193  Further, the bulk assignee is responsible for delivering 
194  documents and materials in accordance with s. 718.705(3). A bulk 
195  assignee may expressly assume some or all of the obligations of 
196  the developer described in paragraphs (a)-(e). 
197         (2) A bulk assignee receiving the assignment of the rights 
198  of the developer to guarantee the level of assessments and fund 
199  budgetary deficits pursuant to s. 718.116 shall be deemed to 
200  have assumed and is liable for all obligations of the developer 
201  with respect to such guarantee, including any applicable funding 
202  of reserves to the extent required by law, for as long as the 
203  guarantee remains in effect. A bulk assignee not receiving an 
204  assignment of the right of the developer to guarantee the level 
205  of assessments and fund budgetary deficits pursuant to s. 
206  718.116 or a bulk buyer is not deemed to have assumed and is not 
207  liable for the obligations of the developer with respect to such 
208  guarantee, but is responsible for payment of assessments in the 
209  same manner as all other owners of condominium parcels. 
210         (3) A bulk buyer is liable for the duties and 
211  responsibilities of the developer under the declaration and this 
212  chapter only to the extent provided in this part, together with 
213  any other duties or responsibilities of the developer expressly 
214  assumed in writing by the bulk buyer. 
215         (4) An acquirer of condominium parcels is not considered a 
216  bulk assignee or a bulk buyer if the transfer to such acquirer 
217  was made prior to the effective date of this Distressed 
218  Condominium Relief Act or was made with the intent to hinder, 
219  delay, or defraud any purchaser, unit owner, or the association, 
220  or if the acquirer is a person who would constitute an insider 
221  under s. 726.102(7). 
222         (5) An assignment of developer rights to a bulk assignee 
223  may be made by the developer, a previous bulk assignee, or a 
224  court of competent jurisdiction acting on behalf of the 
225  developer or the previous bulk assignee. At any particular time, 
226  there may be no more than one bulk assignee within a 
227  condominium, but there may be more than one bulk buyer. If more 
228  than one acquirer of condominium parcels in the same condominium 
229  receives an assignment of developer rights from the same person, 
230  the bulk assignee is the acquirer whose instrument of assignment 
231  is recorded first in applicable public records. 
232         718.705 Board of administration; transfer of control.— 
233         (1) For purposes of determining the timing for transfer of 
234  control of the board of administration of the association to 
235  unit owners other than the developer under s. 718.301(1)(a) and 
236  (b), if a bulk assignee is entitled to elect a majority of the 
237  members of the board, any condominium parcel acquired by the 
238  bulk assignee shall not be deemed to be conveyed to a purchaser, 
239  or to be owned by an owner other than the developer, until such 
240  condominium parcel is conveyed to an owner who is not a bulk 
241  assignee. 
242         (2) Unless control of the board of administration of the 
243  association has already been relinquished pursuant to s. 
244  718.301(1), the bulk assignee is obligated to relinquish control 
245  of the association in accordance with s. 718.301(1) or (2) and 
246  this part as if the bulk assignee were the developer. 
247         (3) When a bulk assignee relinquishes control of the board 
248  of administration, the bulk assignee shall deliver all of those 
249  items required by s. 718.301(4). However, the bulk assignee is 
250  not required to deliver items and documents not in the 
251  possession of the bulk assignee during the period during which 
252  the bulk assignee was entitled to elect not less than a majority 
253  of the members of the board of administration. In conjunction 
254  with the acquisition of condominium parcels, a bulk assignee 
255  shall undertake a good faith effort to obtain the documents and 
256  materials required to be provided to the association pursuant to 
257  s. 718.301(4). To the extent the bulk assignee is not able to 
258  obtain all of such documents and materials, the bulk assignee 
259  shall certify in writing to the association the names or 
260  descriptions of the documents and materials that were not 
261  obtainable by the bulk assignee. Delivery of the certificate 
262  relieves the bulk assignee of responsibility for the delivery of 
263  the documents and materials referenced in the certificate as 
264  otherwise required under ss. 718.112 and 718.301 and this part. 
265  The responsibility of the bulk assignee for the audit required 
266  by s. 718.301(4) shall commence as of the date on which the bulk 
267  assignee elected a majority of the members of the board of 
268  administration. 
269         (4) If a conflict arises between the provisions or 
270  application of this section and s. 718.301, this section shall 
271  prevail. 
272         (5) Failure of a bulk assignee or bulk buyer to 
273  substantially comply with all the requirements contained in this 
274  part shall result in the loss of all protections or exemptions 
275  provided under this part. 
276         718.706 Specific provisions pertaining to offering of units 
277  by a bulk assignee or bulk buyer.— 
278         (1) Before offering any units for sale or for lease for a 
279  term exceeding 5 years, a bulk assignee or a bulk buyer shall 
280  file the following documents with the division and provide such 
281  documents to a prospective purchaser or tenant: 
282         (a) An updated prospectus or offering circular, or a 
283  supplement to the prospectus or offering circular, filed by the 
284  creating developer prepared in accordance with s. 718.504, which 
285  shall include the form of contract for purchase and sale in 
286  compliance with s. 718.503(1)(a); 
287         (b) An updated Frequently Asked Questions and Answers 
288  sheet; 
289         (c) The executed escrow agreement if required under s. 
290  718.202; and 
291         (d) The financial information required by s. 718.111(13). 
292  However, if a financial information report does not exist for 
293  the fiscal year before acquisition of title by the bulk assignee 
294  or bulk buyer, or accounting records cannot be obtained in good 
295  faith by the bulk assignee or the bulk buyer which would permit 
296  preparation of the required financial information report, the 
297  bulk assignee or bulk buyer is excused from the requirement of 
298  this paragraph. However, the bulk assignee or bulk buyer must 
299  include in the purchase contract the following statement in 
300  conspicuous type: 
301 
302  THE FINANCIAL INFORMATION REPORT REQUIRED UNDER SECTION 
303  718.111(13), FLORIDA STATUTES, FOR THE IMMEDIATELY PRECEDING 
304  FISCAL YEAR OF THE ASSOCIATION IS NOT AVAILABLE OR CANNOT BE 
305  CREATED BY THE SELLER AS A RESULT OF INSUFFICIENT ACCOUNTING 
306  RECORDS OF THE ASSOCIATION. 
307 
308         (2) Before offering any units for sale or for lease for a 
309  term exceeding 5 years, a bulk assignee shall file with the 
310  division and provide to a prospective purchaser a disclosure 
311  statement that must include, but is not limited to: 
312         (a) A description of any rights of the developer which have 
313  been assigned to the bulk assignee; 
314         (b) The following statement in conspicuous type: 
315 
316  THE SELLER IS NOT OBLIGATED FOR ANY WARRANTIES OF THE DEVELOPER 
317  UNDER SECTION 718.203(1) OR SECTION 718.618, FLORIDA STATUTES, 
318  AS APPLICABLE, EXCEPT FOR DESIGN, CONSTRUCTION, DEVELOPMENT, OR 
319  REPAIR WORK PERFORMED BY OR ON BEHALF OF SELLER. 
320 
321         (c) If the condominium is a conversion subject to part VI, 
322  the following statement in conspicuous type: 
323 
324  THE SELLER HAS NO OBLIGATION TO FUND CONVERTER RESERVES OR TO 
325  PROVIDE CONVERTER WARRANTIES UNDER SECTION 718.618, FLORIDA 
326  STATUTES, ON ANY PORTION OF THE CONDOMINIUM PROPERTY EXCEPT AS 
327  MAY BE EXPRESSLY REQUIRED OF THE SELLER IN THE CONTRACT FOR 
328  PURCHASE AND SALE EXECUTED BY THE SELLER AND THE DEVELOPER AND 
329  PERTAINING TO ANY DESIGN, CONSTRUCTION, DEVELOPMENT, OR REPAIR 
330  WORK PERFORMED BY OR ON BEHALF OF THE SELLER. 
331 
332         (3) In addition to the requirements set forth in subsection 
333  (1), a bulk assignee or bulk buyer must comply with the 
334  nondeveloper disclosure requirements set forth in s. 718.503(2) 
335  before offering any units for sale or for lease for a term 
336  exceeding 5 years. 
337         (4) While in control of the board of administration of the 
338  association, a bulk assignee may not authorize, on behalf of the 
339  association: 
340         (a) The waiver of reserves or the reduction of funding of 
341  the reserves in accordance with s. 718.112(2)(f)2., unless 
342  approved by a majority of the voting interests not controlled by 
343  the developer, bulk assignee, and bulk buyer; or 
344         (b) The use of reserve expenditures for other purposes in 
345  accordance with s. 718.112(2)(f)3., unless approved by a 
346  majority of the voting interests not controlled by the 
347  developer, bulk assignee, and bulk buyer. 
348         (5) A bulk assignee or bulk buyer shall comply with all the 
349  requirements of s. 718.302 regarding any contracts entered into 
350  by the association during the period the bulk assignee or bulk 
351  buyer maintains control of the board of administration. Unit 
352  owners shall be afforded all the protections contained in s. 
353  718.302 regarding agreements entered into by the association 
354  before unit owners other than the developer, bulk assignee, or 
355  bulk buyer elected a majority of the board of administration. 
356         (6) A bulk buyer shall comply with the requirements 
357  contained in the declaration regarding any transfer of a unit, 
358  including sales, leases, and subleases. A bulk buyer is not 
359  entitled to any exemptions afforded a developer or successor 
360  developer under this chapter regarding any transfer of a unit, 
361  including sales, leases, or subleases. 
362         718.707 Time limitation for classification as bulk assignee 
363  or bulk buyer.—A person acquiring condominium parcels may not be 
364  classified as a bulk assignee or bulk buyer unless the 
365  condominium parcels were acquired before July 1, 2012. The date 
366  of such acquisition shall be determined by the date of recording 
367  of a deed or other instrument of conveyance for such parcels in 
368  the public records of the county in which the condominium is 
369  located or by the date of issuance of a certificate of title in 
370  a foreclosure proceeding with respect to such condominium 
371  parcels. 
372         718.708 Liability of developers and others.—An assignment 
373  of developer rights to a bulk assignee or bulk buyer does not 
374  release the creating developer from any liabilities under the 
375  declaration or this chapter. This part does not limit the 
376  liability of the creating developer for claims brought by unit 
377  owners, bulk assignees, or bulk buyers for violations of this 
378  chapter by the creating developer, unless specifically excluded 
379  in this part. Nothing contained within this part waives, 
380  releases, compromises, or limits the liability of contractors, 
381  subcontractors, materialmen, manufacturers, architects, 
382  engineers, or any participant in the design or construction of a 
383  condominium for any claim brought by an association, unit 
384  owners, bulk assignees, or bulk buyers arising from the design 
385  of the condominium, construction defects, misrepresentations 
386  associated with condominium property, or violations of this 
387  chapter, unless specifically excluded in this part. 
388         Section 3. This act shall take effect upon becoming a law.