Court decision hurts Florida condo owners wishing to sell

Since the collapse of the Champlain Towers South three years ago, Florida has been scrambling to prevent another tragedy, instituting new laws and regulations to ensure condo building safety.

With critical deadlines coming at the end of this year, condo owners are facing dramatically and unexpected increased costs and the potential of having to leave their homes — but indecision from the Third District Court of Appeal over a key case is creating a market standstill, and threatening the homes and livelihoods of thousands of condo owners.

Time is quickly running out to save Florida’s condo market. The Third District Court of Appeals needs to deliver a decision — now.

It was always going to be a challenging year for Florida condo owners. Significant changes to Florida’s Condo Act mean that by the end of this year, condominiums over three stories are required to have completed Structural Integrity Reserve Studies.

By the end of 2025, condo associations will have to have assessed and begun the collection of funds required to address structural issues.

For many older condominiums, the cost of owning a condominium unit is going to increase dramatically. Thousands of Floridians will face astronomical hikes in condo association fees and special assessments, and the number of bankruptcies and foreclosures in the state is expected to skyrocket.

Already, we’ve seen the market for condos over 30 years old in Florida plummet. This is because no buyer will purchase a condo and inherit a costly special assessment and monthly condo maintenance fees that are three to four times higher than before. Also, lenders will be very reluctant to lend in projects with a high risk of delinquency.

The legislature has refused to consider a special session or any type of emergency action and will not consider this issue again until the legislative session officially begins in March of 2025.

Desperate condo owners may effectively have only one option remaining: agree to a bulk sale with a developer and the termination of their condominium declaration. In many cases the land underlying the building is very valuable and can actually result in unit owners getting a higher price per unit than they normally would in the market.

At least that was a viable option for those who wanted out, until a court ruling in March created a significant legal obstacle for developers to pursue bulk acquisitions.

The ruling from the Third District Court of Appeal interpreted a provision of the condominium declaration to require 100% approval for the bulk acquisition, contrary to existing court decisions and the understanding of practitioners in the market. That means condo associations now need to reach a much higher threshold of approval by unit owners in order to be able to sell their property to a developer.

Under this decision, one unit owner can effectively halt a bulk acquisition by filing a lawsuit. That can be unfair to the majority of owners.

The decision has chilled the market. In-progress condo terminations have been left in limbo, and developers are backing away from any deal that has anything less than unanimous owner alignment — something that’s almost never seen.

It’s a decision with massive implications, and if the Third District Court of Appeal does not reverse its decision in a rehearing, the case is expected to be appealed to the Florida Supreme Court.

Billions of dollars are on the line, and thousands of Florida condo owners may be negatively impacted if they cannot find a financial resolution before the Structural Integrity Reserve deadline at the end of the year.

The developer in the court case filed a motion for rehearing. Ordinarily, the court responds to such motions within ten days. However, the Third DCA has not responded in almost eight months with no explanation.

The inaction of the Third DCA has effectively locked the escape hatch for thousands of condo owners. With no clarity from the courts, developers are unwilling to risk entering into buyout deals and owners cannot sell.

Whether the Third DCA overturns its prior decision, or the Florida Supreme Court resolves the case the resolution of this issue is likely to be significantly delayed.

Condo owners deserve and need answers. 

Joseph Hernandez is a real estate partner at Miami-based Bilzin Sumberg.