In March, Florida’s Third District Court of Appeal issued a pivotal ruling that could significantly impact land developers aiming to acquire entire condominium buildings. The ruling challenges a long-standing practice in Florida, where developers would acquire enough units to gain control of the condo board, enabling them to amend rules and limit a condominium association’s ability to modify its governing documents, particularly regarding the termination of the condominium form of ownership.

In Avila v. Biscayne 21 Condominium, a group of unit owners filed a suit to block the termination of their 13-story, 192-unit waterfront condominium in Miami’s Edgewater neighborhood, seeking to prevent the sale of the entire property. The unit owners argued that the original condominium declaration required unanimous approval—100% of all unit owners—for termination. However, the developer, in conjunction with the Biscayne 21 Condominium Association, amended the governing documents, reducing the voting requirement for termination from 100% to 80%. Typically, in these cases, the condominium board is required to amend their governing documents and record them in the public records in Miami-Dade County.

This practice, commonly employed by developers and condominium associations, serves various purposes, including enhancing neighborhood aesthetics, improving real estate market efficiency for highest and best uses, and addressing life, health and safety concerns. For instance, in light of the tragic 2021 Surfside condominium collapse that claimed 98 lives, Florida passed legislation requiring safety inspections and measures for older buildings, often leading to costly special assessments. These expenses can amount to hundreds of thousands of dollars per unit, making the typically above-market offers from developers a welcomed alternative for many owners.

As a result of the Avila case, existing condominium terminations are effectively prohibited, pending appeal, with retroactive application for other pending condominium terminations in line with the Third DCA’s ruling.

Given the ongoing uncertainties, land developers looking to acquire condominium buildings—or those already in the process of acquiring units with the intent to sell – should consider the following strategies as they await the appeal:

• Understand the governing documents: Thoroughly review the declaration of covenants, restrictions and easements, especially for the key voting thresholds. Some documents may already allow for lower voting thresholds for termination, meaning not all deals are necessarily prohibited under the current ruling.
• Pursue properties with willing associations: A determination should be made focusing on properties where the condominium association and the unit owners agree to a plan to sell, ensuring clear terms and enforceable deadlines.
• Monitor the Avila v. Biscayne 21 Condominium appeal: Stay updated on the case as it could have significant implications for your plans.
• Consult an attorney: Seek legal advice on the Florida condominium statutory and legal framework. For instance, current Florida law allows condominium terminations to proceed with just over 95% approval.

In this evolving legal environment, developers must approach condominium acquisitions with both caution and foresight. The outcome of the Avila appeal could redefine the landscape for condominium terminations in Florida. By staying informed, engaging in transparent negotiations with condominium associations, and seeking expert legal counsel, developers can navigate these challenges effectively, positioning themselves to seize opportunities while mitigating risks. As the legal framework continues to shift, a strategic, informed approach will be essential to success in this complex market.

* * *

Originally published in the Daily Business Review.

Reprinted with permission from Daily Business Review, © ALM Media Properties LLC. All rights reserved.