Senate Bill sb1556c2

CODING: Words stricken are deletions; words underlined are additions.
    Florida Senate - 2006                    CS for CS for SB 1556

    By the Committees on Judiciary; Regulated Industries; and
    Senator Geller




    590-1976-06

  1                      A bill to be entitled

  2         An act relating to condominiums; amending s.

  3         718.117, F.S.; substantially revising

  4         provisions relating to the termination of the

  5         condominium form of ownership of a property;

  6         providing legislative findings; providing

  7         grounds for termination; providing powers and

  8         duties of the board of administration of the

  9         association; waiving certain notice

10         requirements following natural disasters;

11         providing requirements for a plan of

12         termination; providing for the allocation of

13         proceeds from the sale of condominium property;

14         providing powers and duties of a termination

15         trustee; providing notice requirements;

16         providing a procedure for contesting a plan of

17         termination; providing rules for the

18         distribution of property and sale proceeds;

19         providing for the association's status

20         following termination; allowing the creation of

21         another condominium by the trustee; specifying

22         an exclusion; providing an effective date.

23  

24  Be It Enacted by the Legislature of the State of Florida:

25  

26         Section 1.  Section 718.117, Florida Statutes, is

27  amended to read:

28         (Substantial rewording of section. See

29         s. 718.117, F.S., for present text.)

30         718.117  Termination of condominium.--

31  

                                  1

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2006                    CS for CS for SB 1556
    590-1976-06




 1         (1)  LEGISLATIVE FINDINGS.--The Legislature finds that

 2  condominiums are created as authorized by statute. In

 3  circumstances that may create economic waste, areas of

 4  disrepair, or obsolescence of the condominium property for its

 5  intended use and thereby lower property tax values, the

 6  Legislature further finds that it is the public policy of this

 7  state to provide by statute a method to preserve the value of

 8  the property interests and the rights of alienation thereof

 9  that owners have in the condominium property before and after

10  termination. The Legislature further finds that it is contrary

11  to the public policy of this state to require the continued

12  operation of a condominium when to do so would constitute

13  economic waste or when the ability to do so is made impossible

14  by law or regulation. The provisions of this section shall

15  apply to all condominiums in this state in existence on or

16  after the effective date of this act.

17         (2)  TERMINATION BECAUSE OF ECONOMIC WASTE OR

18  IMPOSSIBILITY.--

19         (a)  Notwithstanding any provision to the contrary in

20  the declaration, the condominium form of ownership of a

21  property may be terminated by a plan of termination approved

22  by the lesser of a majority of the total voting interests or

23  as otherwise provided in the declaration for approval of

24  termination in the following circumstances:

25         1.  When the total estimated cost of repairs necessary

26  to restore the improvements to their former condition or bring

27  them into compliance with applicable laws or regulations

28  exceeds the combined fair market value of all units in the

29  condominium after completion of the repairs; or

30  

31  

                                  2

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2006                    CS for CS for SB 1556
    590-1976-06




 1         2.  When it becomes impossible to operate or

 2  reconstruct a condominium in its prior physical configuration

 3  because of land-use laws or regulations.

 4         (b)  Notwithstanding paragraph (a), a condominium in

 5  which 75 percent or more of the units are timeshare units may

 6  be terminated only pursuant to a plan of termination approved

 7  by 80 percent of the total voting interests of the association

 8  and the holders of 80 percent of the original principal amount

 9  of outstanding recorded mortgage liens of timeshare estates in

10  the condominium, unless the declaration provides for a lower

11  voting percentage.

12         (3)  OPTIONAL TERMINATION.--Except as provided in

13  subsections (2) and (4) or unless the declaration provides for

14  a lower percentage, the condominium form of ownership of the

15  property may be terminated pursuant to a plan of termination

16  approved by at least 80 percent of the total voting interests

17  of the condominium. This subsection does not apply to

18  condominiums in which 75 percent or more of the units are

19  timeshare units.

20         (4)  JURISDICTION FOR PLAN-OF-TERMINATION REVIEW.--

21         (a)  If 80 percent of the total voting interests fail

22  to approve the plan of termination but fewer than 20 percent

23  of the total voting interests vote to disapprove of the plan,

24  the circuit court shall have jurisdiction to entertain a

25  petition by the association or by one or more unit owners and

26  approve the plan of termination, and the action may be a class

27  action.

28         (b)  All unit owners and the association must be

29  parties to the action. The action may be brought against the

30  nonconsenting unit owners as a class action. Service of

31  process on unit owners may be by publication, but the

                                  3

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2006                    CS for CS for SB 1556
    590-1976-06




 1  plaintiff must furnish each unit owner not personally served

 2  with process a copy of the petition and plan of termination,

 3  and after entry of judgment, a copy of the final decree of the

 4  court, by mail at the owner's last known address.

 5         (c)  After the consideration of whether the rights and

 6  interests of unit owners are equitably set forth in the plan

 7  of termination as required by this section, the plan of

 8  termination may be approved or rejected by the court.

 9  Consistent with the provisions of this section, the court may

10  also modify the plan of termination to provide for an

11  equitable distribution of the interests of unit owners prior

12  to approving the plan of termination.

13         (d)  This subsection does not apply to condominiums in

14  which 75 percent or more of the units are timeshare units.

15         (5)  EXEMPTION.--A plan of termination is not an

16  amendment subject to s. 718.110(4).

17         (6)  MORTGAGE LIENHOLDERS.--Notwithstanding any

18  provision to the contrary in the declaration or this chapter,

19  approval of a plan of termination by the holder of a recorded

20  mortgage lien affecting a condominium parcel in which fewer

21  than 75 percent of the units are timeshare units is not

22  required unless the plan of termination will result in less

23  than the full satisfaction of the mortgage lien affecting the

24  condominium parcel. If such approval is required and not given

25  and if the holder of a recorded mortgage lien objects to the

26  plan of termination, such lienor may contest the plan as

27  provided in subsection (17). At the time of sale, the lien

28  shall be transferred to the proportionate share of the

29  proceeds assigned to the condominium parcel in the plan of

30  termination or as subsequently modified by the court.

31  

                                  4

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2006                    CS for CS for SB 1556
    590-1976-06




 1         (7)  POWERS IN CONNECTION WITH TERMINATION.--The

 2  association shall continue in existence following approval of

 3  the plan of termination with all powers it had before approval

 4  of the plan. Notwithstanding any contrary provision in the

 5  declaration or bylaws, after approval of the plan the board

 6  has the power and duty:

 7         (a)  To employ directors, agents, attorneys, and other

 8  professionals to liquidate or conclude its affairs.

 9         (b)  To conduct the affairs of the association as

10  necessary for the liquidation or termination.

11         (c)  To carry out contracts and collect, pay, and

12  settle debts and claims for and against the association.

13         (d)  To defend suits brought against the association.

14         (e)  To sue in the name of the association for all sums

15  due or owed to the association or to recover any of its

16  property.

17         (f)  To perform any act necessary to maintain, repair,

18  or demolish unsafe or uninhabitable improvements or other

19  condominium property in compliance with applicable codes.

20         (g)  To sell at public or private sale or to exchange,

21  convey, or otherwise dispose of assets of the association for

22  an amount deemed to be in the best interests of the

23  association, and to execute bills of sale and deeds of

24  conveyance in the name of the association.

25         (h)  To collect and receive rents, profits, accounts

26  receivable, income, maintenance fees, special assessments, or

27  insurance proceeds for the association.

28         (i)  To contract and do anything in the name of the

29  association which is proper or convenient to terminate the

30  affairs of the association.

31         (8)  NATURAL DISASTERS.--

                                  5

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2006                    CS for CS for SB 1556
    590-1976-06




 1         (a)  If, after a natural disaster, the identity of the

 2  directors or their right to hold office is in doubt, if they

 3  are deceased or unable to act, if they fail or refuse to act,

 4  or if they cannot be located, any interested person may

 5  petition the circuit court to determine the identity of the

 6  directors or, if found to be in the best interests of the unit

 7  owners, to appoint a receiver to conclude the affairs of the

 8  association after a hearing following notice to such persons

 9  as the court directs. Lienholders shall be given notice of the

10  petition and have the right to propose persons for the

11  consideration by the court as receiver.

12         (b)  The receiver shall have all powers given to the

13  board pursuant to the declaration, bylaws, and subsection (7),

14  and any other powers that are necessary to conclude the

15  affairs of the association and are set forth in the order of

16  appointment. The appointment of the receiver is subject to the

17  bonding requirements of such order. The order shall also

18  provide for the payment of a reasonable fee to the receiver

19  from the sources identified in the order, which may include

20  rents, profits, incomes, maintenance fees, or special

21  assessments collected from the condominium property.

22         (9)  REPORTS AND REPLACEMENT OF RECEIVER.--

23         (a)  The association, receiver, or termination trustee

24  shall prepare reports each quarter following the approval of

25  the plan of termination setting forth the status and progress

26  of the termination, costs and fees incurred, the date the

27  termination is expected to be completed, and the current

28  financial condition of the association, receivership, or

29  trusteeship and provide copies of the report by regular mail

30  to the unit owners and lienors at the mailing address provided

31  to the association by the unit owners and the lienors.

                                  6

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2006                    CS for CS for SB 1556
    590-1976-06




 1         (b)  The unit owners of the association in termination

 2  may recall or remove members of the board of administration

 3  with or without cause at any time as provided in s.

 4  718.112(2)(j).

 5         (c)  The lienors of an association in termination

 6  representing at least 50 percent of the outstanding amount of

 7  liens may petition the court for the appointment of a

 8  termination trustee which shall be granted upon good cause

 9  shown.

10         (10)  PLAN OF TERMINATION.--The plan of termination

11  must be a written document executed in the same manner as a

12  deed by unit owners having the requisite percentage of voting

13  interests to approve the plan and by the termination trustee.

14  A copy of the proposed plan of termination shall be given to

15  all unit owners, in the same manner as for notice of an annual

16  meeting, at least 14 days prior to the meeting at which the

17  plan of termination is to be voted upon or prior to or

18  simultaneously with the distribution of the solicitation

19  seeking execution of the plan of termination or written

20  consent to or joinder in the plan. A unit owner may document

21  assent to the plan of termination by executing the plan or by

22  consent to or joinder in the plan in the manner of a deed. A

23  plan of termination and the consents or joinders of unit

24  owners and, if required, consents or joinders of mortgagees

25  must be recorded in the public records of each county in which

26  any portion of the condominium is located. The plan of

27  termination is effective only upon recordation or at a later

28  date specified in the plan.

29         (11)  PLAN OF TERMINATION; REQUIRED PROVISIONS.--The

30  plan of termination must specify:

31  

                                  7

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2006                    CS for CS for SB 1556
    590-1976-06




 1         (a)  The name, address, and powers of the termination

 2  trustee.

 3         (b)  A date after which the plan of termination is void

 4  if it has not been recorded.

 5         (c)  The interests of the respective unit owners in the

 6  association property, common surplus, and other assets of the

 7  association, which shall be the same as the respective

 8  interests of the unit owners in the common elements

 9  immediately before the termination, unless otherwise provided

10  in the declaration.

11         (d)  The interests of the respective unit owners in any

12  proceeds from any sale of the condominium property. The plan

13  of termination may apportion those proceeds pursuant to any of

14  the methods prescribed in subsection (13). If, pursuant to the

15  plan of termination, condominium property or real property

16  owned by the association is to be sold following termination,

17  the plan must provide for the sale and may establish any

18  minimum sale terms.

19         (e)  Any interests of the respective unit owners in any

20  insurance proceeds or condemnation proceeds that are not used

21  for repair or reconstruction at the time of termination.

22  Unless the declaration expressly addresses the distribution of

23  insurance proceeds or condemnation proceeds, the plan of

24  termination may apportion those proceeds pursuant to any of

25  the methods prescribed in subsection (13).

26         (12)  PLAN OF TERMINATION; OPTIONAL PROVISIONS;

27  CONDITIONAL TERMINATION.--

28         (a)  The plan of termination may provide that each unit

29  owner retains the exclusive right of possession to the portion

30  of the real estate that formerly constituted the unit, in

31  which case the plan must specify the conditions of possession.

                                  8

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2006                    CS for CS for SB 1556
    590-1976-06




 1         (b)  In the case of a conditional termination, the plan

 2  must specify the conditions for termination. A conditional

 3  plan does not vest title in the termination trustee until the

 4  plan and a certificate executed by the association with the

 5  formalities of a deed, confirming that the conditions in the

 6  conditional plan have been satisfied or waived by the

 7  requisite percentage of the voting interests, have been

 8  recorded.

 9         (13)  ALLOCATION OF PROCEEDS OF SALE OF CONDOMINIUM

10  PROPERTY.--

11         (a)  Unless the declaration expressly provides for the

12  allocation of the proceeds of sale of condominium property,

13  the plan of termination must first apportion the proceeds

14  between the aggregate value of all units and the value of the

15  common elements, based on their respective fair-market values

16  immediately before the termination, as determined by one or

17  more independent appraisers selected by the association or

18  termination trustee.

19         (b)  The portion of proceeds allocated to the units

20  shall be further apportioned among the individual units. The

21  apportionment is deemed fair and reasonable if it is

22  determined by the unit owners approving the plan of

23  termination by any of the following methods:

24         1.  The respective values of the units based on the

25  fair-market values of the units immediately before the

26  termination, as determined by one or more independent

27  appraisers selected by the association or termination trustee;

28         2.  The respective values of the units based on the

29  most recent market value of the units before the termination,

30  as provided in the county property appraiser's records; or

31  

                                  9

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2006                    CS for CS for SB 1556
    590-1976-06




 1         3.  The respective interests of the units in the common

 2  elements specified in the declaration immediately before the

 3  termination.

 4         (c)  The methods of apportionment in paragraph (b) do

 5  not prohibit any other method of apportioning the proceeds of

 6  sale allocated to the units agreed upon in the plan of

 7  termination. The portion of the proceeds allocated to the

 8  common elements shall be apportioned among the units based

 9  upon their respective interests in the common elements as

10  provided in the declaration.

11         (d)  Liens that encumber a unit shall be transferred to

12  the proceeds of sale of the condominium property and the

13  proceeds of sale or other distribution of association

14  property, common surplus, or other association assets

15  attributable to such unit in their same priority. The proceeds

16  of any sale of condominium property pursuant to a plan of

17  termination may not be deemed to be common surplus or

18  association property.

19         (14)  TERMINATION TRUSTEE.--The association shall serve

20  as termination trustee unless another person is appointed in

21  the plan of termination. If the association is unable,

22  unwilling, or fails to act as trustee, any unit owner may

23  petition the court to appoint a trustee. Upon the date of the

24  recording or at a later date specified in the plan, title to

25  the condominium property vests in the trustee. Unless

26  prohibited by the plan, the termination trustee shall be

27  vested with the powers given to the board pursuant to the

28  declaration, bylaws, and subsection (7). If the association is

29  not the termination trustee, the trustee's powers shall be

30  coextensive with those of the association to the extent not

31  prohibited in the plan of termination or the order of

                                  10

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2006                    CS for CS for SB 1556
    590-1976-06




 1  appointment. If the association is not the termination

 2  trustee, the association shall transfer any association

 3  property to the trustee. If the association is dissolved, the

 4  trustee shall also have such other powers necessary to

 5  conclude the affairs of the association.

 6         (15)  TITLE VESTED IN TERMINATION TRUSTEE.--If

 7  termination is pursuant to a plan of termination under

 8  subsection (2), subsection (3), or subsection (4), the unit

 9  owners' rights and title as tenants in common in undivided

10  interests in the condominium property vest in the termination

11  trustee when the plan is recorded or at a later date specified

12  in the plan. The unit owners thereafter become the

13  beneficiaries of the proceeds realized from the plan of

14  termination. The termination trustee may deal with the

15  condominium property or any interest therein if the plan

16  confers on the trustee the authority to protect, conserve,

17  manage, sell, or dispose of the condominium property. The

18  trustee, on behalf of the unit owners, may contract for the

19  sale of real property, but the contract is not binding on the

20  unit owners until the plan is approved pursuant to subsection

21  (2), subsection (3), or subsection (4).

22         (16)  NOTICE.--

23         (a)  Within 30 days after a plan of termination has

24  been recorded, the termination trustee shall deliver by

25  certified mail, return receipt requested, notice to all unit

26  owners, lienors of the condominium property, and lienors of

27  all units at their last known addresses that a plan of

28  termination has been recorded. The notice shall include the

29  book and page number of the public records in which the plan

30  was recorded, notice that a copy of the plan shall be

31  

                                  11

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2006                    CS for CS for SB 1556
    590-1976-06




 1  furnished upon written request, and notice that the unit owner

 2  or lienor has the right to contest the fairness of the plan.

 3         (b)  The trustee, within 90 days after the effective

 4  date of the plan, shall provide to the division a certified

 5  copy of the recorded plan, the date the plan was recorded, and

 6  the county, book, and page number of the public records in

 7  which the plan was recorded.

 8         (17)  RIGHT TO CONTEST.--A unit owner or lienor may

 9  contest a plan of termination by initiating a summary

10  procedure pursuant to s. 51.011 within 90 days after the date

11  the plan is recorded. A unit owner or lienor who does not

12  contest the plan within such 90-day period is barred from

13  asserting or prosecuting a claim against the association, the

14  termination trustee, any unit owner, or any successor in

15  interest to the condominium property. In an action contesting

16  a plan of termination, the person contesting the plan has the

17  burden of pleading and proving that the apportionment of the

18  proceeds from the sale among the unit owners was not fair and

19  reasonable. The apportionment of sale proceeds is presumed

20  fair and reasonable if it was determined pursuant to the

21  methods prescribed in subsection (13). The court shall adjudge

22  the rights and interests of the parties and order the plan of

23  termination to be implemented if it is fair and reasonable. If

24  the court determines that the plan of termination is not fair

25  and reasonable, the court may void the plan or may modify the

26  plan to apportion the proceeds in a fair and reasonable manner

27  as required by this section based upon the proceedings and

28  order the modified plan of termination to be implemented. In

29  such action, the prevailing party may recover reasonable

30  attorney's fees and costs.

31         (18)  DISTRIBUTION.--

                                  12

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2006                    CS for CS for SB 1556
    590-1976-06




 1         (a)  Following termination of the condominium, the

 2  condominium property, association property, common surplus,

 3  and other assets of the association shall be held by the

 4  termination trustee, as trustee for unit owners and holders of

 5  liens on the units, in their order of priority.

 6         (b)  Not less than 30 days prior to the first

 7  distribution, the termination trustee shall deliver by

 8  certified mail, return receipt requested, a notice of the

 9  estimated distribution to all unit owners, lienors of the

10  condominium property, and lienors of each unit at their last

11  known addresses stating a good-faith estimate of the amount of

12  the distributions to each class and the procedures and

13  deadline for notifying the termination trustee of any

14  objections to the amount. The deadline must be at least 15

15  days after the date the notice was mailed. The notice may be

16  sent with or after the notice required by subsection (16). If

17  a unit owner or lienor files a timely objection with the

18  termination trustee, the trustee need not distribute the funds

19  and property allocated to the respective unit owner or lienor

20  until the trustee has had a reasonable time to determine the

21  validity of the adverse claim. In the alternative, the trustee

22  may interplead the unit owner, lienor, and any other person

23  claiming an interest in the unit and deposit the funds

24  allocated to the unit in the court registry, at which time the

25  condominium property, association property, common surplus,

26  and other assets of the association are free of all claims and

27  liens of the parties to the suit. In an interpleader action,

28  the trustee and prevailing party may recover reasonable

29  attorney's fees and costs and court costs.

30         (c)  The proceeds of any sale of condominium property

31  or association property and any remaining condominium property

                                  13

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2006                    CS for CS for SB 1556
    590-1976-06




 1  or association property, common surplus, and other assets

 2  shall be distributed in the following priority:

 3         1.  To pay the reasonable termination trustee's fees

 4  and costs and accounting fees and costs.

 5         2.  To lienholders of liens recorded prior to the

 6  recording of the declaration.

 7         3.  To purchase money lienholders on units to the

 8  extent necessary to satisfy their liens.

 9         4.  To lienholders of liens of the association which

10  have been consented to under s. 718.121(1).

11         5.  To creditors of the association, as their interests

12  appear.

13         6.  To unit owners, the proceeds of any sale of

14  condominium property subject to satisfaction of liens on each

15  unit in their order of priority, in shares specified in the

16  plan of termination, unless objected to by a unit owner or

17  lienor.

18         7.  To unit owners, the remaining condominium property,

19  subject to satisfaction of liens on each unit in their order

20  of priority, in shares specified in the plan of termination,

21  unless objected to by a unit owner or a lienor as provided in

22  paragraph (b).

23         8.  To unit owners, the proceeds of any sale of

24  association property, the remaining association property,

25  common surplus, and other assets of the association, subject

26  to satisfaction of liens on each unit in their order of

27  priority, in shares specified in the plan of termination,

28  unless objected to by a unit owner or a lienor as provided in

29  paragraph (b).

30         (d)  After determining that all known debts and

31  liabilities of an association in the process of termination

                                  14

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2006                    CS for CS for SB 1556
    590-1976-06




 1  have been paid or adequately provided for, the termination

 2  trustee shall distribute the remaining assets pursuant to the

 3  plan of termination. If the termination is by court proceeding

 4  or subject to court supervision, the distribution may not be

 5  made until any period for the presentation of claims ordered

 6  by the court has elapsed.

 7         (e)  Assets held by an association upon a valid

 8  condition requiring return, transfer, or conveyance, which

 9  condition has occurred or will occur, shall be returned,

10  transferred, or conveyed in accordance with the condition. The

11  remaining association assets shall be distributed pursuant to

12  paragraph (c).

13         (f)  Distribution may be made in money, property, or

14  securities and in installments or as a lump sum, if it can be

15  done fairly and ratably and in conformity with the plan of

16  termination. Distribution shall be made as soon as is

17  reasonably consistent with the beneficial liquidation of the

18  assets.

19         (19)  ASSOCIATION STATUS.--The termination of a

20  condominium does not change the corporate status of the

21  association that operated the condominium property. The

22  association continues to exist to conclude its affairs,

23  prosecute and defend actions by or against it, collect and

24  discharge obligations, dispose of and convey its property, and

25  collect and divide its assets, but not to act except as

26  necessary to conclude its affairs.

27         (20)  CREATION OF ANOTHER CONDOMINIUM.--The termination

28  of a condominium does not bar the creation by the termination

29  trustee of another condominium affecting any portion of the

30  same property.

31  

                                  15

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2006                    CS for CS for SB 1556
    590-1976-06




 1         (21)  EXCLUSION.--This section does not apply to the

 2  termination of a condominium incident to a merger of that

 3  condominium with one or more other condominiums under s.

 4  718.110(7).

 5         Section 2.  This act shall take effect July 1, 2006.

 6  

 7          STATEMENT OF SUBSTANTIAL CHANGES CONTAINED IN
                       COMMITTEE SUBSTITUTE FOR
 8                     CS for Senate Bill 1556

 9                                 

10  Clarifies that if the plan of termination is contested and the
    court finds that it is not fair and reasonable, the court has
11  the discretion to (i) void the plan or (ii) modify and approve
    the plan based on findings during the court proceedings.
12  

13  

14  

15  

16  

17  

18  

19  

20  

21  

22  

23  

24  

25  

26  

27  

28  

29  

30  

31  

                                  16

CODING: Words stricken are deletions; words underlined are additions.