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Terminating Condominiums According to the Florida Condominium Act: Part II
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Terminating Condominiums According to the Florida Condominium Act: Part II

April 11, 2014 Community Association Industry Legal Blog

Reading Time: 3 minutes

As discussed in Part I of this Blog series, two scenarios lead to most of the termination of condominiums:  1) the condominium is in a nearly uninhabitable condition and the cost of construction or repairs exceeds the projected fair market value of the condominium property (often due to natural disasters); or 2) the condominium is located on prime real estate and a developer has made an offer to purchase the property for alternative development.   Part I focused on the former reason and discussed condominium terminations due to economic waste or impossibility of continuing.  This Blog post concerns the “optional termination process” established by the Florida legislature in the 2007 revision of the Florida Condominium Act’s termination provisions.  See Fla. Stat. §718.117(3).

Prior to the addition of the optional termination process in 2007, a vote of 100 percent of both the unit owners and the mortgage lenders was required to terminate a condominium.  As you can imagine, that was quite an impossible feat to achieve.  Even if such a vote were obtained, an equitable partition action was required for the court to resolve how the condominium property was to be sold and the proceeds divided.

The optional termination process, as contained within Section 718.117(3), Florida Statutes, eased those strict requirements and simplified the process.  This revised process is now controlling when a termination of condominium is sought for reasons other than economic waste or impossibility to continue.  Stated another way, this is the process that applies when a third-party developer seeks to purchase the condominium property for redevelopment.

Under this process, the condominium may be terminated by a written plan of termination approved by at least 80 percent of the total voting interests of the condominium so long as no more than 10 percent of the total voting interests reject the plan by negative vote or written objections.  Fla. Stat. §718.117(3).  An association’s declaration can provide for a lower approval percentage, and if it does so, the declaration’s requirements will control.  Id.  The written plan of termination can be for redeveloping all of the condominium property or merely a portion of it.  Id.  However, the same voting procedures apply regardless of whether the developer’s plan involves a portion or all of the condominium property.

To make this even less cumbersome, the optional termination process does not require mortgage lenders, or holders of the outstanding mortgages, to vote to approve the plan of termination so long as the plan satisfies all outstanding mortgage liens.  Fla. Stat. §718.117(5).   If the plan contemplates the satisfaction of all mortgage liens, then at the time of sale of the condominium property to the developer those liens must be satisfied from the share of sale proceeds designated for each condominium parcel included in the plan.  Id.  If the plan of termination does not satisfy the outstanding mortgage liens then a vote of the mortgage lenders or holders is required for the plan to be approved.  Id.

If more than 75 percent of the condominium units are timeshare units, then a vote of the mortgage lenders, or current mortgage holders, is required regardless of whether the plan includes the satisfaction of those outstanding mortgage liens or not.  Id.  When a vote of the mortgage lenders or holders is required, then in addition to voting against the plan, those entities can also contest the plan of termination though formal legal action.  Id.  Stay tuned for part three in this series of Blog posts, which will focus on the plan of termination itself, including required provisions.

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