Tag Archives: Realtor

Story Behind Florida’s Epidemic of Hostile Condo Takeovers

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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.

References:

http://www.becker-poliakoff.com/Files/7525_cu_2007_archive.pdf

http://www.ccfj.net/PB06SB1556veto.pdf

http://www.heraldtribune.com/article/20070511/BUSINESS/705110303

http://www.becker-poliakoff.com/Files/8934_cu_2014_v06.pdf

Where Does CAI Stand On Florida Condo Terminations?

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guest blog by Deborah Goonan

Unless you’ve been hiding under a rock for the past decade, you have probably heard about Florida’s boom and bust real estate market for condominiums. The big news right now is the fact that hundreds of condo owners are being forced to sell their homes at a loss to developers and investors, in a series of so-called voluntary condo terminations.

In a recently published article in the Wall Street Journal,  Jack McCabe, CEO of McCabe Research & Consulting LLC, was quoted as saying close to 400 uncompleted complexes remain as part condo and part rental in the state of Florida.

A Bloomberg Businessweek report published last month estimates that 235 condominiums have been terminated statewide since 2007.

West Palm Beach attorney and CAI member, Michael Gelfand, was also quoted in the WSJ article,“It is a classic case of unintended consequences” of the 2007 amendment, which, according to the article, he helped to draft.

Hundreds, perhaps thousands of condo owners have been caught in the middle of a battle to keep their homes or at least receive just compensation. Owners from 13 condo complexes have joined together to fight against developers, and have created their own Facebook page: Floridians ACT.

Attorney Michael Mayer, of Peyton Bolin PL, which operates five offices in Florida, has taken up the fight for owners of Via Lugano condominium in Boynton Beach. According to Mayer, the legal suit contends that the 2007 statute amendment allowing for optional termination by less than unanimous consent does not apply to condominiums created prior to its enactment. The suit also challenges the takeover on Constitutional grounds, at both state and federal levels, as a violation of owners’ rights to “acquire, possess, and protect property.” The Peyton Bolin law firm is listed among CAI’s member service providers.

Ironically, in the midst of terminations of unsuccessful condo projects, a south Florida real estate blog reports that lenders have eased financing for development of 260 new condo towers (over 35,000 units) in South Florida alone, most of them close to the water and on the high end of the market.

So what is CAI’s official Public Policy on the matter?

Look no further than page 58 of CAI Government & Public Affairs Public Policies:

“Community Associations Institute (CAI) supports protections that enable property owners to challenge governmental taking of common or private property. CAI opposes legislative or judicial actions that would limit or restrict the ability and rights of community associations to maintain control over association common property.”

Read between the lines: Developers and private investors who take control of the Association must not have their property rights restricted. Furthermore, it would be inappropriate to protect owners’ rights where the party seeking to take property rights is not the government.  CAI maintains, generally supported by the courts, that Community Associations are corporate entities, and are not government entities.

Whose interests does CAI actually represent? The introduction to Public Policies provides some contradictory language:

“CAI is dedicated to fostering vibrant, responsive, competent community associations that promote harmony, community and responsible leadership. CAI advances excellence though a variety of education programs, professional designations, research, networking and referral opportunities, publications, and advocacy before legislative bodies, regulatory bodies, and the courts.

In addition to individual homeowners, CAI’s multidisciplinary membership encompasses community association managers and management firms, attorneys, accountants, engineers, builders/developers, and other providers of professional products and services for homeowners and their associations. CAI represents this extensive constituency on a range of issues including taxation, insurance, private property rights, telecommunications, fair housing, and community association manager credentialing. CAI’s over 32,000 members participate actively in the public policy process through more than 60 local, regional and state chapters and 35 state Legislative Action Committees and one federal Legislative Action Committee.”

Are Community Association Boards that are controlled by developers and investors exercising “responsible leadership” in these hostile corporate takeovers that deprive Americans of their property rights? Does Florida Statute 718 represent the “individual homeowners” constituency of CAI, through optional termination provisions drafted by one of their own member attorneys? It seems the statute as written supports the collective interests of the Association rather than the individual interests of owners.

Is it realistically possible to provide “advocacy” that will encompass a “multidisciplinary membership” where the interests of one subset of a constituency are often in direct conflict with the interests of another?  You be the judge.

References:

http://investing.businessweek.com/research/markets/news/article.asp?docKey=600-201408291903KRTRIB__BUSNEWS_31950_37969-1

http://www.caionline.org/info/provider/Pages/CAINationalServiceDirectory.aspx

http://www.caionline.org/govt/news/Political%20HeadsUp%20Public%20Document%20Library/CAIPublicPoliciesJan2013.pdf

https://www.facebook.com/Floridiansact

http://www.peytonbolin.com/recent-press/

http://online.wsj.com/articles/in-florida-condo-battles-play-out-1407260650

http://therealdeal.com/miami/blog/2014/08/29/condo-construction-financing-spigot-begins-to-open-in-south-florida/

 

If It Seems Too Good To Be True………..RUN!!!

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What if you had a chance to buy a million dollar condo in one of Chicago’s fanciest high rises for a mere half million dollars? Wow! That’s luxury living for half the price. You trust the developer because he’s one of the richest, most famous, most successful people to ever convert high rise apartments into fancy, high priced condominiums.

What if you learned this famous developer was secretly trying to develop this project by borrowing millions of dollars at a 50% interest rate? As you look around at your unfinished condo, rancid unpainted hallways, and busted elevators wouldn’t you begin to feel a little bit queasy about your investment?

When you buy into any kind of Common Interest Community your heart, soul, and your net worth are all jointly owned by your neighbors….and the developer. The story linked below might make you long for that single family cottage way out in the country.

(link to Chicago Tribune story on Gouletas)

 

 

 

HOA Residents Try To Bail Out

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guest blog by Deborah Goonan

The HOA, Association of Poinciana Villages (FL), wants to become a city. In fact, a group of residents have been attempting to become a municipal corporation for several years. The group has recently completed a feasibility study that it will submit to Florida Legislature.

It seems as though the large subdivision of Poinciana is tired of being underfunded and getting no services from Osceola and Polk Counties, despite the fact that 47,000 residents pay taxes to both Counties and the state of Florida. Their mature HOA cannot provide needed services provided to residents of nearby cities of similar size. Apparently the residents pay assessments, while the developer does not. The residents are tired of Developer Avatar retaining majority control since 1971 and want each resident to have voting rights, instead of a 9 member Board of Directors voting on behalf of each of Poinciana’s Villages. What a concept!

Who can blame these residents? After all, compare PUBLIC local government (municipal or county level) to PRIVATE governance in HOAs.

*A municipality has access to property and sales tax revenues, low interest loans, issuance of municipal bonds, state and federal grants. * The HOA is limited to collection of assessments that are NOT based on assessed property values. (often the $50K home pays the same assessment as the $500K home and even commercial property owners) The HOA has very limited access to financing through loans.

*A municipality can take advantage of economies of scale, and can cooperate with nearby towns and cities, or enter into local agreements to provide needed services. * HOAs have no option to collaborate with neighboring communities or public entities to provide needed services. In fact, its governing documents (the so-called CC&Rs contract) often state that the local governing entity will NOT provide such services, because the Developer has given away owner rights to these services as part of the development agreement at the time permits were issued.

*Local government elected officials are compensated, are publicly vetted, and they generally possess experience relevant to their respective roles. They often have term limits. Should these officials fail in their work, they are usually voted out of office in the next election. If they engage in unethical or illegal conduct, they will eventually be investigated, and held personally liable, without constituents having to bring a legal suit. *The HOA Board is comprised of volunteers who are practically immune from personal liability and oversight. The burden is placed upon owners and residents to investigate wrong-doing or spend personal funds in filing a civil suit.

*Voting and elections in a city – one vote per registered adult voter vs. one vote per unit (dwelling) owned. That means tenants vote, and each adult in the household gets to vote. No one in the community gets more than one vote. * The HOA Developer is granted weighted voting rights and appoints the Board as long as he controls most of the votes. After turnover, Boards are often elected by representative voting members, proxies, and other dubious means. Of course, allocation of voting rights is inequitable: the more property one owns, the more votes one has. They and the managers they hire often lack necessary personal and professional skills to do the job.

*The city has sovereign immunity, limiting its legal liability. * The HOA is a corporation that must insure itself against potentially high legal liability.

This is one evolving story to monitor closely.

(article on Poinciana seeking municipality status)
(PINCHOS residents group statement on reasons to incorporate)
(Letter from PINCHOS to Florida Legislators)

 

Cypress Woods vs Wilbur…Battle Rages On!

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guest blog by Nila Ridings

It’s been almost two months (7/7/14) since I wrote about Wilbur the pig that provides companionship and comfort to the Halpern children.

Nothing has been settled and the parents and pig are appearing on a radio show to explain their side of the story. They have now received a $1,000 fine but the HOA attorney, Ryan Aboud  knows nothing about that. The property manager and board members aren’t speaking about it…so who has what trick up their sleeve now?

Ward just wrote about heart problems versus neighborhood relations.  We just had two American journalists beheaded on foreign soil by terrorists.  The economy we are hearing is near collapse.  We are approaching the 13th anniversary of the worst attacks on American soil on 9/11/01.

And…Cypress Woods wants to keep battling over a pig???  Please, tell me this is not so!

I have a question for Mr. Ryan Aboud.  The Halperns now have a pro bono attorney helping them.  If you were handling this case pro bono for the HOA would it keep raging on?  Or is it the billable hours that are making Wilbur the most sought after HOA pig?  It’s time to STOP the madness Mr. Aboud.

(link to Sun Sentinel story about Wilbur)