Florida Senate - 2010                                     SB 840
       By Senator Sobel
       31-00775-10                                            2010840__
    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
    6         distressed condominium relief; providing a short
    7         title; providing legislative findings and intent;
    8         defining the terms “bulk assignee” and “bulk buyer”;
    9         providing for the assignment of developer rights to
   10         and the assumption of developer rights by a bulk
   11         assignee; specifying liabilities of bulk assignees and
   12         bulk buyers; providing exceptions; providing
   13         additional responsibilities of bulk assignees and bulk
   14         buyers; authorizing certain entities to assign
   15         developer rights to a bulk assignee; limiting the
   16         number of bulk assignees at any given time; providing
   17         for the transfer of control of a board of
   18         administration; providing effects of such transfer on
   19         parcels acquired by a bulk assignee; providing
   20         obligations of a bulk assignee upon the transfer of
   21         control of a board of administration; requiring that a
   22         bulk assignee certify certain information in writing;
   23         providing for the resolution of a conflict between
   24         specified provisions of state law; providing that the
   25         failure of a bulk assignee or bulk buyer to comply
   26         with specified provisions of state law results in the
   27         loss of certain protections and exemptions; requiring
   28         that a bulk assignee or bulk buyer file certain
   29         information with the Division of Florida Condominiums,
   30         Timeshares, and Mobile Homes of the Department of
   31         Business and Professional Regulation before offering
   32         any units for sale or lease in excess of a specified
   33         term; requiring that a copy of such information be
   34         provided to a prospective purchaser; requiring that
   35         certain contracts and disclosure statements contain
   36         specified statements; requiring that a bulk assignee
   37         or bulk buyer comply with certain disclosure
   38         requirements; prohibiting a bulk assignee from taking
   39         certain actions on behalf of an association while the
   40         bulk assignee is in control of the board of
   41         administration of the association and requiring that
   42         such bulk assignee comply with certain requirements;
   43         requiring that a bulk assignee or bulk buyer comply
   44         with certain requirements regarding certain contracts;
   45         providing unit owners with specified protections
   46         regarding certain contracts; requiring that a bulk
   47         buyer comply with certain requirements regarding the
   48         transfer of a unit; prohibiting a person from being
   49         classified as a bulk assignee or bulk buyer unless
   50         condominium parcels were acquired before a specified
   51         date; providing for the determination of the date of
   52         acquisition of a parcel; providing that the assignment
   53         of developer rights to a bulk assignee or bulk buyer
   54         does not release a developer from certain liabilities;
   55         preserving certain liabilities for certain parties;
   56         providing an effective date.
   58  Be It Enacted by the Legislature of the State of Florida:
   60         Section 1. Subsection (16) of section 718.103, Florida
   61  Statutes, is amended to read:
   62         718.103 Definitions.—As used in this chapter, the term:
   63         (16) “Developer” means a person who creates a condominium
   64  or offers condominium parcels for sale or lease in the ordinary
   65  course of business, but does not include:
   66         (a) An owner or lessee of a condominium or cooperative unit
   67  who has acquired the unit for his or her own occupancy;, nor
   68  does it include
   69         (b) A cooperative association that which creates a
   70  condominium by conversion of an existing residential cooperative
   71  after control of the association has been transferred to the
   72  unit owners if, following the conversion, the unit owners will
   73  be the same persons who were unit owners of the cooperative and
   74  no units are offered for sale or lease to the public as part of
   75  the plan of conversion;.
   76         (c) A bulk assignee or bulk buyer as defined in s. 718.703;
   77  or
   78         (d) A state, county, or municipal entity is not a developer
   79  for any purposes under this act when it is acting as a lessor
   80  and not otherwise named as a developer in the declaration of
   81  condominium association.
   82         Section 2. Part VII of chapter 718, Florida Statutes,
   83  consisting of sections 718.701, 718.702, 718.703, 718.704,
   84  718.705, 718.706, 718.707, and 718.708, is created to read:
   85                              PART VII                             
   86                    DISTRESSED CONDOMINIUM RELIEF                  
   87         718.701 Short title.—This part may be cited as the
   88  “Distressed Condominium Relief Act.”
   89         718.702 Legislative intent.—
   90         (1) The Legislature acknowledges the massive downturn in
   91  the condominium market which has transpired throughout the state
   92  and the impact of such downturn on developers, lenders, unit
   93  owners, and condominium associations. Numerous condominium
   94  projects have either failed or are in the process of failing,
   95  whereby the condominium has a small percentage of third-party
   96  unit owners as compared to the unsold inventory of units. As a
   97  result of the inability to find purchasers for this inventory of
   98  units, which results in part from the devaluing of real estate
   99  in this state, developers are unable to satisfy the requirements
  100  of their lenders, leading to defaults on mortgages.
  101  Consequently, lenders are faced with the task of finding a
  102  solution to the problem in order to be paid for their
  103  investments.
  104         (2) The Legislature recognizes that all of the factors
  105  listed in this section lead to condominiums becoming distressed,
  106  resulting in detriment to the unit owners and the condominium
  107  association on account of the resulting shortage of assessment
  108  moneys available to support the financial requirements for
  109  proper maintenance of the condominium. Such shortage and the
  110  resulting lack of proper maintenance further erode property
  111  values. The Legislature finds that individuals and entities
  112  within Florida and in other states have expressed interest in
  113  purchasing unsold inventory in one or more condominium projects,
  114  but are reticent to do so because of the potential of
  115  accompanying liabilities inherited from the original developer,
  116  which are potentially by definition imputed to the successor
  117  purchaser, including a foreclosing mortgagee. This results in
  118  the potential purchaser having unknown and unquantifiable risks,
  119  and potential successor purchasers are unwilling to accept such
  120  risks. The result is that condominium projects stagnate, leaving
  121  all parties involved at an impasse without the ability to find a
  122  solution.
  123         (3) The Legislature finds and declares that it is the
  124  public policy of this state to protect the interests of
  125  developers, lenders, unit owners, and condominium associations
  126  with regard to distressed condominiums, and that there is a need
  127  for relief from certain provisions of the Florida Condominium
  128  Act geared toward enabling economic opportunities within these
  129  condominiums for successor purchasers, including foreclosing
  130  mortgagees, while at the same time clarifying the ambiguity in
  131  the law. Such relief would benefit existing unit owners and
  132  condominium associations. The Legislature further finds and
  133  declares that this situation cannot be open-ended without
  134  potentially prejudicing the rights of unit owners and
  135  condominium associations, and thereby declares that the
  136  provisions of this part shall be used by purchasers of
  137  condominium inventory for a specific and defined period.
  138         718.703 Definitions.—As used in this part, the term:
  139         (1) “Bulk assignee” means a person who:
  140         (a) Acquires more than seven condominium parcels in a
  141  single condominium as set forth in s. 718.707; and
  142         (b) Receives an assignment of all or substantially all of
  143  the rights of the developer as are set forth in the declaration
  144  of condominium or in this chapter by a written instrument
  145  recorded as an exhibit to the deed or as a separate instrument
  146  in the public records of the county in which the condominium is
  147  located.
  148         (2) “Bulk buyer” means a person who acquires more than
  149  seven condominium parcels in a single condominium as set forth
  150  in s. 718.707 but who does not receive an assignment of any
  151  developer rights other than, at the bulk buyer’s option, the
  152  right to conduct sales, leasing, and marketing activities within
  153  the condominium; the right to be exempt from the payment of
  154  working capital contributions to the condominium association
  155  arising out of or in connection with the bulk buyer’s
  156  acquisition of a bulk number of units; and the right to be
  157  exempt from any rights of first refusal which may be held by the
  158  condominium association and would otherwise be applicable to
  159  subsequent transfers of title from the bulk buyer to any third
  160  party purchaser concerning one or more units.
  161         718.704 Assignment of developer rights to and assumption of
  162  developer rights by bulk assignee; bulk buyer.—
  163         (1) A bulk assignee shall be deemed to have assumed and is
  164  liable for all duties and responsibilities of a developer under
  165  the declaration and this chapter, except:
  166         (a) Warranties of a developer under s. 718.203(1) or s.
  167  718.618, except for design, construction, development, or repair
  168  work performed by or on behalf of such bulk assignee.
  169         (b) The obligation to:
  170         1. Fund converter reserves under s. 718.618 for a unit that
  171  was not acquired by the bulk assignee; or
  172         2. Provide converter warranties on any portion of the
  173  condominium property except as may be expressly provided by the
  174  bulk assignee in the contract for purchase and sale executed
  175  with a purchaser and pertaining to any design, construction,
  176  development, or repair work performed by or on behalf of the
  177  bulk assignee.
  178         (c) The requirement to provide the association with a
  179  cumulative audit of the association’s finances from the date of
  180  formation of the condominium association as required by s.
  181  718.301. However, the bulk assignee shall provide an audit for
  182  the period for which the bulk assignee elects a majority of the
  183  members of the board of administration.
  184         (d) Any liability arising out of or in connection with
  185  actions taken by the board of administration or the developer
  186  appointed directors before the bulk assignee elects a majority
  187  of the members of the board of administration.
  188         (e) Any liability for or arising out of the developer’s
  189  failure to fund previous assessments or to resolve budgetary
  190  deficits in relation to a developer’s right to guarantee
  191  assessments, except as otherwise provided in subsection (2).
  193  Further, the bulk assignee is responsible for delivering
  194  documents and materials in accordance with s. 718.705(3). A bulk
  195  assignee may expressly assume some or all of the obligations of
  196  the developer described in paragraphs (a)-(e).
  197         (2) A bulk assignee receiving the assignment of the rights
  198  of the developer to guarantee the level of assessments and fund
  199  budgetary deficits pursuant to s. 718.116 shall be deemed to
  200  have assumed and is liable for all obligations of the developer
  201  with respect to such guarantee, including any applicable funding
  202  of reserves to the extent required by law, for as long as the
  203  guarantee remains in effect. A bulk assignee not receiving an
  204  assignment of the right of the developer to guarantee the level
  205  of assessments and fund budgetary deficits pursuant to s.
  206  718.116 or a bulk buyer is not deemed to have assumed and is not
  207  liable for the obligations of the developer with respect to such
  208  guarantee, but is responsible for payment of assessments in the
  209  same manner as all other owners of condominium parcels.
  210         (3) A bulk buyer is liable for the duties and
  211  responsibilities of the developer under the declaration and this
  212  chapter only to the extent provided in this part, together with
  213  any other duties or responsibilities of the developer expressly
  214  assumed in writing by the bulk buyer.
  215         (4) An acquirer of condominium parcels is not considered a
  216  bulk assignee or a bulk buyer if the transfer to such acquirer
  217  was made prior to the effective date of this Distressed
  218  Condominium Relief Act or was made with the intent to hinder,
  219  delay, or defraud any purchaser, unit owner, or the association,
  220  or if the acquirer is a person who would constitute an insider
  221  under s. 726.102(7).
  222         (5) An assignment of developer rights to a bulk assignee
  223  may be made by the developer, a previous bulk assignee, or a
  224  court of competent jurisdiction acting on behalf of the
  225  developer or the previous bulk assignee. At any particular time,
  226  there may be no more than one bulk assignee within a
  227  condominium, but there may be more than one bulk buyer. If more
  228  than one acquirer of condominium parcels in the same condominium
  229  receives an assignment of developer rights from the same person,
  230  the bulk assignee is the acquirer whose instrument of assignment
  231  is recorded first in applicable public records.
  232         718.705 Board of administration; transfer of control.—
  233         (1) For purposes of determining the timing for transfer of
  234  control of the board of administration of the association to
  235  unit owners other than the developer under s. 718.301(1)(a) and
  236  (b), if a bulk assignee is entitled to elect a majority of the
  237  members of the board, any condominium parcel acquired by the
  238  bulk assignee shall not be deemed to be conveyed to a purchaser,
  239  or to be owned by an owner other than the developer, until such
  240  condominium parcel is conveyed to an owner who is not a bulk
  241  assignee.
  242         (2) Unless control of the board of administration of the
  243  association has already been relinquished pursuant to s.
  244  718.301(1), the bulk assignee is obligated to relinquish control
  245  of the association in accordance with s. 718.301(1) or (2) and
  246  this part as if the bulk assignee were the developer.
  247         (3) When a bulk assignee relinquishes control of the board
  248  of administration, the bulk assignee shall deliver all of those
  249  items required by s. 718.301(4). However, the bulk assignee is
  250  not required to deliver items and documents not in the
  251  possession of the bulk assignee during the period during which
  252  the bulk assignee was entitled to elect not less than a majority
  253  of the members of the board of administration. In conjunction
  254  with the acquisition of condominium parcels, a bulk assignee
  255  shall undertake a good faith effort to obtain the documents and
  256  materials required to be provided to the association pursuant to
  257  s. 718.301(4). To the extent the bulk assignee is not able to
  258  obtain all of such documents and materials, the bulk assignee
  259  shall certify in writing to the association the names or
  260  descriptions of the documents and materials that were not
  261  obtainable by the bulk assignee. Delivery of the certificate
  262  relieves the bulk assignee of responsibility for the delivery of
  263  the documents and materials referenced in the certificate as
  264  otherwise required under ss. 718.112 and 718.301 and this part.
  265  The responsibility of the bulk assignee for the audit required
  266  by s. 718.301(4) shall commence as of the date on which the bulk
  267  assignee elected a majority of the members of the board of
  268  administration.
  269         (4) If a conflict arises between the provisions or
  270  application of this section and s. 718.301, this section shall
  271  prevail.
  272         (5) Failure of a bulk assignee or bulk buyer to
  273  substantially comply with all the requirements contained in this
  274  part shall result in the loss of all protections or exemptions
  275  provided under this part.
  276         718.706 Specific provisions pertaining to offering of units
  277  by a bulk assignee or bulk buyer.—
  278         (1) Before offering any units for sale or for lease for a
  279  term exceeding 5 years, a bulk assignee or a bulk buyer shall
  280  file the following documents with the division and provide such
  281  documents to a prospective purchaser or tenant:
  282         (a) An updated prospectus or offering circular, or a
  283  supplement to the prospectus or offering circular, filed by the
  284  creating developer prepared in accordance with s. 718.504, which
  285  shall include the form of contract for purchase and sale in
  286  compliance with s. 718.503(1)(a);
  287         (b) An updated Frequently Asked Questions and Answers
  288  sheet;
  289         (c) The executed escrow agreement if required under s.
  290  718.202; and
  291         (d) The financial information required by s. 718.111(13).
  292  However, if a financial information report does not exist for
  293  the fiscal year before acquisition of title by the bulk assignee
  294  or bulk buyer, or accounting records cannot be obtained in good
  295  faith by the bulk assignee or the bulk buyer which would permit
  296  preparation of the required financial information report, the
  297  bulk assignee or bulk buyer is excused from the requirement of
  298  this paragraph. However, the bulk assignee or bulk buyer must
  299  include in the purchase contract the following statement in
  300  conspicuous type:
  308         (2) Before offering any units for sale or for lease for a
  309  term exceeding 5 years, a bulk assignee shall file with the
  310  division and provide to a prospective purchaser a disclosure
  311  statement that must include, but is not limited to:
  312         (a) A description of any rights of the developer which have
  313  been assigned to the bulk assignee;
  314         (b) The following statement in conspicuous type:
  321         (c) If the condominium is a conversion subject to part VI,
  322  the following statement in conspicuous type:
  332         (3) In addition to the requirements set forth in subsection
  333  (1), a bulk assignee or bulk buyer must comply with the
  334  nondeveloper disclosure requirements set forth in s. 718.503(2)
  335  before offering any units for sale or for lease for a term
  336  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 the
  349  requirements of s. 718.302 regarding any contracts entered into
  350  by the association during the period the bulk assignee or bulk
  351  buyer maintains control of the board of administration. Unit
  352  owners shall be afforded all the protections contained in s.
  353  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 assignee
  363  or bulk buyer.—A person acquiring condominium parcels may not be
  364  classified as a bulk assignee or bulk buyer unless the
  365  condominium parcels were acquired before July 1, 2012. The date
  366  of such acquisition shall be determined by the date of recording
  367  of a deed or other instrument of conveyance for such parcels in
  368  the public records of the county in which the condominium is
  369  located or by the date of issuance of a certificate of title in
  370  a foreclosure proceeding with respect to such condominium
  371  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.