An appeals court ruling this week upending a condo termination in Miami is causing shockwaves among developers, as it will likely put buyouts in legal limbo.
The court’s opinion regarding Biscayne 21 in Miami’s Edgewater marks a major win for the condo owners who fought to block the termination of their association. Furthermore, it has huge implications for developers, lenders, condo associations, investors and unit owners, attorneys say. The developer has vowed to take the case to the Florida Supreme Court if it is not successful in a rehearing.
Florida’s Third District Court of Appeal on Wednesday reversed a lower court decision that had denied the plaintiffs, unit owners at the waterfront Edgewater condo building, a temporary injunction in the lawsuit they filed against Two Roads Development, the developer that completed a bulk buyout of the property.
The litigation centers around the termination of the Biscayne 21 condominium, a 13-story, 192-unit building at 2121 North Bayshore Drive. A group of 10 owners that include Angelica Avila sued the developer last year, alleging Two Roads illegally amended the association’s condominium documents to lower the threshold for termination to 80 percent of owners versus the original 100 percent.
Current state law, amended in 2007, allows associations to move forward with terminations with 80 percent of their owners approval, though 5 percent can vote to block the termination. In the case of Biscayne 21, the original condo declaration governing the association was created prior to that law and required 100 percent approval. Biscayne 21 was built in 1964 on a 3.5-acre site.
In its ruling, the higher court determined that the original declaration gave every unit owner an effective veto over any termination, which would be lost if the amendments passed by the developer-controlled association were enforced.
The decision halts the planned demolition of the property and puts the future of Two Roads’ planned project, a multi-tower Edition-branded luxury condo development, into question. Two Roads paid $150 million for the majority of units in 2022 and launched sales of Edition Residences later that year. Edition is a Marriott International brand.
Developers are increasingly eyeing bulk purchases of older condo buildings, especially those along the waterfront, after the deadly Surfside collapse of the 40-year-old Champlain Towers South. But many will likely be scrambling to determine how this order will change the landscape, attorneys said.
Any developer in the market for financing such a deal will also face more challenges.
TRD Biscayne, the Two Roads Development affiliate that bought out Biscayne 21, said in a statement that the ruling “undermines the laws put in place to protect residents who are living in old, deteriorating buildings which are in need of significant maintenance and repair.”
The condo termination statute is “written in a manner designed to prevent a small group of holdouts from thwarting a termination that is supported by an overwhelming majority of residents,” the statement continued. “Any interpretation to the contrary threatens the very premise of condo terminations serving as a viable exit strategy for cost-burdened residents eager to realize the value of their home, thus setting a dangerous precedent for aging properties across the state.”
Glen Waldman of Miami-based Armstrong Teasdale, who represents the plaintiffs, said the biggest implications are for associations where the condo declaration mandates 100 percent approval to terminate, because it means a developer can’t go in and vote to amend the threshold without full approval.
“These guys are in a heap of a lot of trouble,” Waldman said, referring to the developers. “The damage is in the hundreds of millions of dollars.”
The Third DCA would next issue a mandate later this month that will codify the ruling into law, Waldman said.
The language in Biscayne 21’s condo declaration is “pretty common” for buildings that are 30 years and older, said attorney Joseph Hernandez, who represented the developer-controlled association at the property.
He said the whole market is now in limbo.
“That could hold up financings. It could hold up transactions. It could hold up individual condo sales,” Hernandez said.
The Pérez family’s Related Group, David Martin’s Terra, Edgardo Defortuna’s Fortune International Group, 13th Floor Investments and Camilo Miguel Jr.’s Mast Capital are among the developers actively involved in potential buyouts in South Florida.
“Financing bulk transactions like the one at Biscayne 21 has increasingly become much more difficult in the last two years,” Hernandez added. “This obstacle makes it even tougher because now it’s introduced another significant legal risk that creates a problem.”
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