A ruling from the Third District Court of Appeal found that Florida’s law governing terminations, or sale of entire condominium projects, does not apply to older properties.
That’s bad news for thousands of associations with declarations, or governing documents, predating Florida’s 2007 amendment to its condominium statute. It’s especially jolting for The Tropicana Condominium Association Inc., a Sunny Isles Beach group battling minority owners over a blocked sale in one of Miami-Dade’s most expensive submarkets.
The Tropicana association wants its members to approve a sale as developers swarm the neighborhood scooping up modest buildings at top dollar to replace them with glitzy high-rises. But a small group of owners, accused of being straw buyers, moved to prevent potential sales.
The Third DCA sided with the minority owners, who argued that the property’s bylaws required unanimous approval for a sale, despite the 80 percent threshold in the amended legislation. It agreed that the holdouts’ refusal to sell was enough to block the deal, because Tropicana’s 1983 governing documents predate the legislative amendment and require all unit owners to approve termination.
The appellate court made the decision in a case pitting unit owners at the Sunny Isles midrise against developers planning the neighboring 52-story Ritz-Carlton Residences.
The Tropicana condominium association claimed its future neighbor resorted to covert measures to gain control of the modest property as developers swoop in to create luxury projects. They accused Ritz-Carlton developers Edgardo Defortuna and Manuel Grosskopf of using straw buyers to secretly scoop up five of Tropicana’s 48 units— just enough to meet the 10 percent threshold for blocking future sales. They alleged the developers sought to prevent rival investors from acquiring the Tropicana, then demolishing the midrise to create a grander building that would obstruct views at the Ritz-Carlton.
Public documents link the Ritz-Carlton developers to the companies used to acquire the five Tropicana units. Defortuna, for instance, is title manager for one of the corporations, Tropical Condominium LLC, and Eduardo Klinger, a Grosskopf business associate involved in the suit, also invested in Tropicana.
The case turned on the court’s interpretation of a portion of the Florida law covering terminations. The amendment allows the sale of an entire property if 80 percent of unit owners agree and not more than 10 percent object. It “applies to all condominiums in this state in existence on or after July 1, 2007.” Tropicana argued the law applied to all condos, beginning in 2007, but the appellate court’s reading was that it only applied to condos created after July 1, 2007.
The Third DCA ruled the statute is not retroactive, so did not govern Tropicana. It found the property needed to amend its bylaws to match the legislation or use so-called “Kaufman language” to specifically state that the property’s rules automatically update to reflect legislative changes.
“We’re very disappointed with that interpretation,” said Tropicana Condominium Association lawyer Glen Waldman of Heller Waldman in Miami. “The impacts are huge.”
The ruling will affect attorneys like Lindsey Thurswell Lehr of Siegfried Rivera Hyman Lerner De La Torre Mars & Sobel in Coral Gables.
Although the minority owners triumphed in the Tropicana appeal, Thurswell Lehr said the ruling eliminates a key strategy for others that rely on the law’s prohibition of sales in cases where 10 percent of owners object. In the past, these attorneys pointed to the wording of the legislation to argue it covered all properties in the state.
“The argument we like to make is the termination statute offers this protection,” Thurswell Lehr said. “But now you have an appellate court basically saying that the amended termination statute does not apply retroactively. You are bound by what’s in your declaration.”