Friday, February 27, 2015

Unit Owners In Failed Florida Condo Complexes Get Squeezed Out Of Their Homes As Developers Acquiring 80% Interest In Defunct Projects File For "Condominium Termination", Then Give Unit Owners The Boot

In Winter Springs, Florida, the Orlando Sentinel reports:
  • Shirley Lofgren, 85, is being forced to sell the sun-filled, waterfront condo she and her husband bought nine years ago for less than a third of the $217,000 they paid for it.

    The sale is allowed under a "condominium termination" law passed by the Legislature in 2007.

    "Nobody can believe this is legal — that they can just take your home and they'll give you what they want to give you," said the former Chicago resident, whose husband now lives in a nearby Alzheimer's treatment center.

    Rep. Chris Sprowls, R-Clearwater, said Lofgren and condo owners across Florida are being "divested" of their own homes.

    Under the law, developers must get an appraisal to determine the value of a home. But Sprowls said owners are left with little negotiating leverage.

    "In this situation, these people are not being permitted to stay in their homes, and that's just wrong," said Sprowls, who has proposed a reform bill that would pay relocation fees and above-market value for condo owners who live in their units.

    The law, passed in order to reinvigorate stalled condo projects, lets developers take title to condos when only 20 percent of the units are in the hands of individual owners.

    Throughout the state since the law was passed, developers and investors have used the condo-termination law to take ownership of more than 11,000 condominiums in 160 condo complexes, according to records from the state Department of Business and Professional Regulation. In Central Florida, Enders Place at Baldwin Park, Conway Forest, Esplanade Condos, Harbor Beach, Summerlin at Winter Park and Harbor Bay Retirement Village are among the condominium projects that have gone through a wholesale change of ownership.

    Many condo complexes had been apartments before converting to condominiums during the real-estate boom of a decade ago. Now they are reverting back to apartments as rental demand grows.

    Outside the sliding-glass doors of Lofgren's home, the green lawn is trimmed. The developer, Prestwick Partners LLC, has painted apartment buildings cheery shades of yellows and blues to entice renters as it urges Lofgren and other remaining condo owners to sell.

    Representing Prestwick Partners LLC, Miami lawyer Michael Cosculluela contacted Lofgren's family last week urging it to accept the offer to sell her unit to Prestwick. In an email, Cosculluela told them that the company is "under considerable pressure from the lender to simply file suit for ejectment [eviction]," and that if Lofgren seeks a higher price through the courts and then fails, "it will result in far less money for her unit after attorney's fees and costs."

    April Woods, whose company owns a unit in the same complex, said Prestwick is attempting to acquire ownership of the units by amending the condo documents. She said she has contested it in Seminole County courts.

    In Metro Orlando, the value of condos suffered during the economic downturn, dropping by more than half after the housing-market collapse. For the price Prestwick is offering, which is covered by a confidentiality agreement, Lofgren said she can find no similar condos anywhere, let alone near the Publix, SunTrust and restaurants she can now walk to. She said she has started looking at a mobile-home park off University Boulevard.

    The developer Prestwick Partners LLC has offered Lofgren the chance to rent her home from it at a reduced rate.

    At her condo, Lofgren walks onto her patio and fills a water bowl for a stray cat that has wandered up. She said she loves her place, which was bought mostly with cash, and would prefer to stay. She still has to pay off a $20,000 mortgage that paid for travertine tile, custom molding, granite counters and fireplace upgrades.

    The octogenarian said she isn't certain that she would she have enough money left from the sale of her condo to rent it back for the remainder of her days.

    Up until 2007, all the owners in a condominium project had to agree to terminate their ownership. In 2007, legislators changed the laws so that only 80 percent of owners had to agree to end their ownership.

    The law became the "Distressed Condominium Relief Act" in 2010, and it helped restore Florida's bottomed-out condominium market by encouraging lenders and developers to take over the condo projects with "fractured" ownership, said Fort Lauderdale attorney Mark Grant, who helped author that legislation.

    "That worked very well. Bulk buyers came in droves," Grant said.

    Condo complexes had been so empty that the few remaining holdout owners were saddled with association fees, maintenance costs and taxes, he added.

    Grant said some of the provisions in Sprowls' proposed bill are "poison pills" that could limit investors' appetite to reclaim challenged condo complexes. They would be more likely to encounter financial obstacles from trying to buy out remaining owners.

    Grant said he is working with Sen. George Moraitis, R-Fort Lauderdale, on a compromise measure. Among other things, developers would have more opportunities to terminate ownership if condo owners initially rejected the idea.

    Sprowls said that without laws in place to protect owner occupants of condos, buyers such as Lofgren are likely to shy from buying condos, and Florida's condominium market could soften.

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