This is the final edition in a series of Blog posts dedicated to explaining the process for the termination of condominiums according to the Florida Condominium Act. This series has provided an overview of the entire termination of condominium process from the reasons for seeking termination (part I; part II), to the written plan of termination (part III; part IV) and the persons involved in carrying out the plan (part V). Arguably, the most important part of the process is allocating the sale proceeds once the plan of termination has been completed. This Blog post will discuss that process and provide the statutory requirements for distributing assets and allocating proceeds.
Section 718.117(12)(a), Florida Statutes, establishes required default provisions for the plan of termination concerning the allocation of proceeds from the sale of condominium property if a condominium’s declaration fails to expressly provide for an alternative method of allocation. This requires the proceeds to be apportioned between the aggregate value of all units and the value of the common elements. Id. This apportionment must be based on the fair market values immediately prior to the termination as determined by one or more independent appraisers selected by the association or termination trustee. Id. If there is a partial termination of the condominium property, then the aggregate values of the units and common elements that are part of the plan of termination must be separately determined.
The proceeds that are allocated to the common elements are then apportioned among the individual units based upon their respective interests in the common elements as provided in the declaration. Fla. Stat. § 718.117(12)(c). The proceeds allocated to the units must then be apportioned among the individual units that were terminated in the plan. The plan of termination can provide for an agreed-upon method for allocating these proceeds among the various units, but if the plan of termination is silent, the apportionment is deemed fair and reasonable if it is based on one of the three following methods of valuation:
- The individual units are each separately valued by an independent appraiser selected by the association or termination trustee;
- The individual units are valued based on the most recent market value of the units as found in the county property appraiser’s records; or
- The individual units’ values are based on upon the respective interests of the units in the common elements as specified in the declaration.
Fla. Stat. § 718.117(12)(b).
Once all proceeds have been allocated among the terminated units, they must then be distributed by the termination trustee or receiver according to Section 718.117(17), Florida Statutes. Any existing liens that encumber each individual unit shall be satisfied according to their priority in the public records. See Fla. Stat. § 718.112(12)(d); Fla. Stat. § 718.117(17). The Florida Condominium Act provides the following priority for this distribution:
- The termination trustee’s reasonable fees and costs;
- holders of liens recorded prior to the recording of the declaration;
- purchase-money lienholders;
- holders of liens of the association;
- creditors of the association;
- individual unit owners based upon each respective unit owners’ designated allocation as specified in the plan of termination or the Florida Condominium Act.
Fla. Stat. § 718.117(17)(c)1.- 8.
At least 30 days prior to the first distribution of proceeds, a notice must be delivered to all unit owners and lienholders providing a good faith estimate of the amount distributed to each. Fla. Stat. § 718.117(17)(b). This notice must also outline the procedures and deadline for objecting to the proposed distributions. Id. After all known debts and liabilities of the association have been paid, any remaining assets can be divided by the termination trustee pursuant to the plan of termination. Fla. Stat. § 718.117(d). If there is a period stated in which creditors can make claims then the final distribution of assets cannot be made until that period has elapsed. Id. The final distribution can then be made via money, property or securities and in either installments or as a lump sum so long as it is in conformity with the plan of termination. Fla. Stat. § 718.117(f).