condominium termination: notes on a threat and preventing it

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abwjms
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condominium termination: notes on a threat and preventing it

Post by abwjms »

just saw a news item on "condominium termination" which is apparently made easy in Florida by a law there put in place in response to hurricane damage. If a high enough percentage of a condo complex is owned by a particular entity, they can force the termination of the condo agreement, convert it to rentals or whatever they want, and force other owners to sell, at "fair market price" (i.e. a loss).

This is in Florida, which by reputation is a corrupt dumpsite which always favors shady business over the public interest.

Nevertheless, my interest was piqued so I did some reading.

I am not a lawyer. Our HOA does a great job, including consulting with our lawyers as needed.

Keeping that in mind:

As I read it, in Delaware, condo termination is governed by Title 25 http://delcode.delaware.gov/title25/c08 ... ndex.shtml and specifically section 81-218 (search the page for "termination") which starts with:

(a) Except in the case of a taking of all the units by eminent domain or in the case of foreclosure against an entire cooperative of a security interest that has priority over the declaration, a common interest community may be terminated only by agreement of unit owners of units to which at least 80 percent of the votes in the association are allocated, or any larger percentage the declaration specifies. The declaration may specify a smaller percentage only if all of the units are restricted exclusively to nonresidential uses.

Reading through Fairfield's Declaration and Code of Regulations (copies from our purchase in March 2008) I don't find an explicit section titled "termination".

** in Declaration.2:Definitions.R, I read: "'"Revocation' means an instrument signed by all of the unit owners and by all holders of liens against the Units by which the Property is removed from the provisions of this chapter" [presumably chapter 25, unit property act]

** in Declaration.19:No Revocation or Partition, I read: "...the dedication of the property [not Property as in Definitions, but presumably that's what's meant ?] under the Unit Property Act shall not be waived or revoked unless 75% of all the unit owners and 75% of the mortgagees... agree to such revocation or waiver." The section seems to refer to common elements rather than the condo agreement as a whole, but that's not clear to me.

** in Code of Regs.article 14:Abandonment, I read: "In the event of condemnation of, or substantially total destruction to, the units and/or Common Elements, and subject to the provisions of applicable law, the Council may not, unless at least 75% of the unit owners and 75% of the ...first mortgagees... give their prior written consent... (1)by either act or omission seek to abandon and terminate the legal status of the Condominium". The section seems to refer to termination in case of destruction but again that's not clear to me.

What I net out of these sections of our governing docs is that there are different percentages of unit owner consent required: current DE law requires 80% unless the condo Declaration specifies higher; what appears to be the definition of termination ('revocation') in our Declaration specifies 100%, and two sections which seem to refer to special situations specify 75%. It would be interesting to learn what the answer is for Fairfield; I'll ask the HOA.

More broadly re: termination, it seems to be enabled by some party gaining a controlling interest of the units in the Property (specified by that percentage in question) and then turning around and exercising the termination mechanism against any other owners, including forcing them to sell at a loss.

So avoiding its becoming a possibility would seem to involve keeping an eye on any attempts by a particular party to buy up units. This is what I had in mind, without knowing about condo termination, when I sent an email to residents in October 2013 about an odd (disguised) telephone contact I had had from the apartment broker Archstone Smith.

I am NOT claiming that anything along these lines (attempts to gain a controlling stake in FFLN) is happening now (any more than I claimed at that time to have information that it was happening then).

I do claim that in the year 2015 in the US, scumbags abound, pardon my language, and are more than ready to exploit those in financial difficulty - as one of the "developers" reported on in the Florida news item said, morality has no place in business (that was a quote).

Therefore, this kind of behavior is a potential threat to us as owners of a condo corporation and its units. To prevent it, I again suggest:

Be alert to odd contacts from unexpected or unconvincing parties made to you or your family members which ultimately arrive at the question of your ownership at Fairfield. Or certainly any open contact from a real estate industry participant seeking to "help" you with your "burden". In this scenario, working together would produce the best outcomes for all of us, rather than each of us negotiating individually with an entity whose primary intent would be to acquire as much property, and control, as cheaply as possible. If you get any information indicating that something along these lines may be afoot, please share it.
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