HB 327

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

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