The Real Deal Miami

Legislature leaves obstacle to bulk condo sales

By Mike Seemuth | May 07, 2009 12:46PM

The Florida Legislature ended its session without passing a bill that would clear the way for investors to pursue bulk condo sales with reduced legal liabilities.

The proposed change in the law would have blocked transfer of a developer’s liabilities — including construction warranties — to bulk condo investors, which advocates said would have spurred purchases and helped to reduce Florida’s bulging inventory of unsold condos.

“It’s really a shame. I think a change in the law to protect bulk buyers is something that is very necessary for the state,” said Fort Lauderdale attorney Mark Grant, who worked with the Florida Home Builders Association to campaign for approval of the legislation.

Bulk buyers of condo units are defined as developers under Florida’s condominium law, making them liable for construction warranties and any prior misdeeds by the original developers.

“I’ve represented a number of bulk buyers that have closed, but I’ve also represented a number that heard of these potential liabilities and said, ‘Oh, I think I’m going to buy a shopping center, instead,’ ” said Grant, a shareholder of law firm Ruden McCloskey.

Florida condominium law “defines a developer as any person or entity that sells or leases condominium units in the ordinary course of business. It does not mean the person or entity that created the condominiums,” Grant said. “So if you’re selling or leasing in the ordinary course of business, you fall under the definition of a developer.”

The legislative proposal to block the transfer of developer liabilities to bulk buyers of condos was part of a broader bill that the Florida House approved. But neither the House bill nor a companion bill in the Florida Senate has been put to a full vote in the Senate.

Grant said state senators and representatives he spoke with “told me it was not because of the language of the bulk buyer provisions. Everybody recognized the need for it.” But the bulk buyer provisions were part of a larger bill, and legislators tried to tack on amendments that created political frictions, he said.

“It got caught up in the sausage making. We’ll see if we can try to revive it,” he said. “Hopefully it can go back as a separate bill and stand on its own rather than be tainted by other provisions. That’s what I’m going to try to look at.”

In the meantime, “there are significant legal risks and potential liabilities making it difficult for investors to buy bulk units” at condominium developments, said Edie Ousley, a spokeswoman for the Tallahassee-based Florida Home Builders Association. Florida’s legal treatment of investors in multiple condos is a “significant barrier to bulk sales.”

Removing that barrier would trigger a surge in bulk condo sales that Deerfield Beach-based real estate consultant Jack McCabe and other analysts have been anticipating.

“It would really open up the floodgates for all these bulk deals that I’ve been talking about and many others have been talking about happening,” McCabe said.

But without a change in Florida law, he said, “even if you buy 25 units in a building with 500 units, you could be held liable as if you were the developer.”