Jan Bergemann has given me permission to re-publish one of his columns on the ongoing HOA debacle in Florida. It’s fascinating reading and makes me wonder how much of this goes on elsewhere in the country.
THE BANKRUPT GOLF COURSE OWNER RELIEF ACT
An Opinion By Jan Bergemann
President, Cyber Citizens For Justice, Inc.
Published September 10, 2010
Let’s take a closer look at the RELIEF ACT FOR BANKRUPT GOLF COURSE OWNERS. Remember there is something good for everybody in S 1196 — except for associations and owners.
The Florida legislature made sure that the owners of more or less bankrupt golf courses have a way to dump their mess on unsuspecting naive homeowners, making their homes collateral for all unpaid bills created by a golf course, where the cost of maintenance is a lot higher than the income.
Over the years many court battles have been fought over this issue. Golf courses were a great attraction — many years back. Potential buyers — retirees from up North — were thrilled with the idea of living next to a golf course and they paid extra for that “privilege.”
But times are changing and golf is no longer the favorite of the few people who still find their way South to Florida. Actually, golf courses have turned into serious financial liabilities. [See: Lonely Greens: Golf industry feeling economic pinch]
Communities which own golf courses suddenly faced the fact that fewer owners played golf and fewer owners paid for golf club memberships, which made the associations’ ownership of a golf course a losing proposition. That caused legal wars between the golf players and the non-golf players in these communities. The golf players realized that it would be too expensive for them to pay for the upkeep of the golf course alone. So they looked for others to pay for their entertainment — and making golf club membership mandatory was the name of the newest game. But it didn’t work out too well for golf enthusiasts, because the courts plainly turned them down. Courts held — rightfully so — that these owners were lured into these communities with the written promises that membership in the golf club is voluntary!
In other communities the developers didn’t make the golf club part of the association, hoping that the golf course would turn into a very profitable business for them. When the market turned sour, developers realized that they had miscalculated the market – as usual – and were looking for ways to dump this money pit on gullible homeowners, often with false promises and/or threats of loss of property values. Or they were misleading the owners with false information about purchase financing, failing to disclose that they were desperate enough to finance the purchase themselves.
That didn’t sit well with The Powers That Be in Tallahassee. Meetings were held in the members-only Governor’s Club, headquarters of Florida’s developer lobbyists. How can we change the law to prevent “overeager” judges from spoiling the deal? Nothing is impossible in Tallahassee when it comes to payback for the favors owed to special interests! With the help of Peter Dunbar from the law firm Pennington, Moore, Wilkinson, Bell & Dunbar (see article above) and House Representative Maria Sachs, wife of Peter Sachs of Sachs Sax Caplan, the law firm that made lots of money by enticing boards to fight mandatory golf course membership battles, THE BANKRUPT GOLF COURSE OWNER RELIEF ACT was born.
Who cares if more gullible elderly homeowners are driven into bankruptcy or are losing their homes, as long as the Tallahassee power players are protected? Tallahassee sees homeowners and condo owners living in community associations as nothing but cash cows for their profits! And that’s exactly what caused the downfall of the real estate market in Florida. Retirees who are reading these horror stories – or those who talk to former neighbors that moved to Florida only to get fleeced – will do everything except move to Florida. Who wants to be the next victim of unscrupulous power-players who are always in the market for new retirees they can relieve of their life savings?
(text of bill is below)
720.31 Recreational leaseholds; right to acquire; escalation clauses.–
(1) Any lease of recreational or other commonly used facilities serving a community, which lease is entered into by the association or its members before control of the homeowners’ association is turned over to the members other than the developer, must provide as follows:
(a) That the facilities may not be offered for sale unless the homeowners’ association has the option to purchase the facilities, provided the homeowners’ association meets the price and terms and conditions of the facility owner by executing a contract with the facility owner within 90 days, unless agreed to otherwise, from the date of mailing of the notice by the facility owner to the homeowners’ association. If the facility owner offers the facilities for sale, he or she shall notify the homeowners’ association in writing stating the price and the terms and conditions of sale.
(b) If a contract between the facility owner and the association is not executed within such 90-day period, unless extended by mutual agreement, then, unless the facility owner thereafter elects to offer the facilities at a price lower than the price specified in his or her notice to the homeowners’ association, he or she has no further obligations under this subsection, and his or her only obligation shall be as set forth in subsection (2).
(c) If the facility owner thereafter elects to offer the facilities at a price lower than the price specified in his or her notice to the homeowners’ association, the homeowners’ association will have an additional 10 days to meet the price and terms and condition of the facility owner by executing a contract.
(2) If a facility owner receives a bona fide offer to purchase the facilities that he or she intends to consider or make a counteroffer to, his or her only obligations shall be to notify the homeowners’ association that he or she has received an offer, to disclose the price and material terms and conditions upon which he or she would consider selling the facilities, and to consider any offer made by the homeowners’ association. The facility owner shall be under no obligation to sell to the homeowners’ association or to interrupt or delay other negotiations, and he or she shall be free at any time to execute a contract for the sale of the facilities to a party or parties other than the homeowners’ association.
(3)(a) As used in subsections (1) and (2), the term “notify” means the placing of a notice in the United States mail addressed to the president of the homeowners’ association. Each such notice shall be deemed to have been given upon the deposit of the notice in the United States mail.
(b) As used in subsection (1), the term “offer” means any solicitation by the facility owner directed to the general public.
(4) This section does not apply to:
(a) Any sale or transfer to a person who would be included within the table of descent and distribution if the facility owner were to die intestate.
(b) Any transfer by gift, devise, or operation of law.
(c) Any transfer by a corporation to an affiliate. As used herein, the term “affiliate” means any shareholder of the transferring corporation; any corporation or entity owned or controlled, directly or indirectly, by the transferring corporation; or any other corporation or entity owned or controlled, directly or indirectly, by any shareholder of the transferring corporation.
(d) Any transfer to a governmental or quasi-governmental entity.
(e) Any conveyance of an interest in the facilities incidental to the financing of such facilities.
(f) Any conveyance resulting from the foreclosure of a mortgage, deed of trust, or other instrument encumbering the facilities or any deed given in lieu of such foreclosure.
(g) Any sale or transfer between or among joint tenants in common owning the facilities.
(h) The purchase of the facilities by a governmental entity under its powers of eminent domain.
(5)(a) The Legislature declares that the public policy of this state prohibits the inclusion or enforcement of escalation clauses in land leases or other leases for recreational facilities, land, or other commonly used facilities that serve residential communities, and such clauses are hereby declared void. For purposes of this section, an escalation clause is any clause in a lease which provides that the rental rate under the lease or agreement is to increase at the same percentage rate as any nationally recognized and conveniently available commodity or consumer price index.
(b) This public policy prohibits the inclusion of such escalation clauses in leases entered into after the effective date of this amendment.
(c) This section is inapplicable:
1. If the lessor is the Federal Government, this state, any political subdivision of this state, or any agency of a political subdivision of this state; or
2. To a homeowners’ association that is in existence on the effective date of this act, or to an association, no matter when created, if the association is created in a community that is included in an effective development-of-regional-impact development order as of the effective date of this act, together with any approved modifications thereto.
(6) An association may enter into agreements to acquire leaseholds, memberships, and other possessory or use interests in lands or facilities, including, but not limited to, country clubs, golf courses, marinas, submerged land, parking areas, conservation areas, and other recreational facilities. An association may enter into such agreements regardless of whether the lands or facilities are contiguous to the lands of the community or whether such lands or facilities are intended to provide enjoyment, recreation, or other use or benefit to the owners. All leaseholds, memberships, and other possessory or use interests existing or created at the time of recording the declaration must be stated and fully described in the declaration. Subsequent to recording the declaration, agreements acquiring leaseholds, memberships, or other possessory or use interests not entered into within 12 months after recording the declaration may be entered into only if authorized by the declaration as a material alteration or substantial addition to the common areas or association property. If the declaration is silent, any such transaction requires the approval of 75 percent of the total voting interests of the association. The declaration may provide that the rental, membership fees, operations, replacements, or other expenses are common expenses; impose covenants and restrictions concerning their use; and contain other provisions not inconsistent with this subsection. An association exercising its rights under this subsection may join with other associations that are part of the same development or with a master association responsible for the enforcement of shared covenants, conditions, and restrictions in carrying out the intent of this subsection. This subsection is intended to clarify law in existence before July 1, 2010.