guest blog by Deborah Goonan
In a previous blog, I explained CAI’s conflicted stance on private property rights of condo owners. In this blog, I provide the back-story.
Prior to 2007, if owners wanted to terminate the condominium regime, Florida law stated that 100% of owners – and lien holders – had to agree to the termination and a specific plan for liquidation of all assets. (Governing documents could specify a lower threshold, but few did.) The main problem with unanimous consent was that, following some of Florida’s hurricanes which damaged a significant number of condo buildings beyond repair, it was difficult or nearly impossible to locate and obtain consent from every unit owner, thus delaying termination and redevelopment.
In 2006, the Florida Legislature passed a remedy to this problem by amending Statute 718: allow dissolution of condominium with 80% member vote of approval OR less than 20% disapproval, in the aftermath of a disaster that destroys a building beyond repair, as well as in the event of optional or voluntary termination. Governor Jeb Bush vetoed that bill, citing concerns about less than unanimous approval, and the likelihood of unintended consequences in the event of optional terminations.
In a letter from the former Governor dated Jun 7, 2006, Jeb Bush (R) states:
“Among the potential unintended consequences is that the bill would permit one owner (such as a developer) to purchase 80 percent of the units in a condominium and seek termination, with the ultimate goal of redevelopment, in the absence of economic waste or impossibility. A possible remedy to this situation would be to require one vote per person, regardless of the number of units owned.”
The following year, in 2007, the Legislature was presented with a slightly modified version of the bill, written with the assistance of West Palm Beach attorney and CAI member, Michael Gelfand. Senator Steven A. Geller (D) presented the Senate version of the bill. Public records indicate that Geller was selected as CAI FL’s Legislator of the year in 2002. The former Senator is now a shareholder at Greenspoon Marder Law, a firm that specializes in Land Use, Zoning, Lobbying and Gaming. Representative Elaine Schwartz (D) presented the House version. Schwartz’s husband, Marty is a prominent real estate attorney and partner in the law firm of Bilzin Sumberg Baena Price and Axelrod, LLP. The 2007 version allowed for optional termination by 80% vote of approval, as long as less than 10% objected to termination. The bill also diluted rights of lien holders to approve the termination plan, based upon appraisals presented by the majority voting for termination.
Despite continued objections from parties who continued to be opposed to optional termination by less than unanimous consent, the bill was not modified to remove the possibility of optional termination under these terms. Nor did the Legislature allow for allocation of votes per person rather than per unit. The bill passed the Legislature with near unanimous approval (just one vote against), and with the “strong support of the Real Property Section of the Florida Bar.”
Prior to the bill being signed into law by then-Governor Charlie Crist (at the time, a Republican), Sarasota attorney Dan Lobeck, also a CAI member attorney, expressed concerns in a May 2007 article in the Herald-Tribune, stating that the Voluntary (optional) Termination portion of the approved bill:
“…is simply a property grab by developers with assistance of the state.”
In the same report, Jack McCabe, CEO of McCabe Research & Consulting LLC, stated:
“If this [bill] goes through, we are going to see developers go in and be much more successful in acquiring existing condominium properties, especially on the waterfront,” and “some of those properties that are now more affordable will be leveled and very expensive multimillion-dollar units will be built on those sites. It will effectively render it impossible to find affordable condominium units in waterfront locations in Florida in the future.”
Of course, Developers and investors began to take advantage of the new Statute almost immediately.
It’s not as though the CAI and Real Estate industry proponents of this flawed statute provision, and the Legislature that overwhelmingly voted in favor of the bill, could not have foreseen such “unintended consequences.” The curious observation is that CAI’s member attorney firms are clearly divided on the issue of consent for Optional Termination of condominiums in Florida – and have been from the start -representing developers and investor-controlled Associations on one side, and individual owners on the other.