Florida Condo Investment Takes a Hit As Florida's Distressed Condominium Relief Act Is Not Extended by Florida Legislature: But Wait! HB517 Amendment Extends Deadline
Update: As described below, and reported by many industry leaders, it appeared that the Florida Legislature left Tallahassee this March without taking important action. However, as the dust settles, we find that an amendment to HB517, dealing with licensure of appraisers, etc. has included within it an extension of the "bulk buyer" and "bulk assignee" classifications to July 2015. Read the Bill Summary here.
Those foreign interests as well as U.S. buyers interested in purchasing inventories of distressed Florida condominium units got some bad news last week. Buying up lots of condos here in Florida seems like a smart move for lots of folks these days, and they're right: we all know that condos (particularly here in South Florida) are a hot ticket right now.
In fact, for the past few years, Florida's current real estate market has offered real estate investors a great opportunity to buy condos in bulk. Savvy investors have been buying up existing condo units as well as buying up prime real estate at bargain prices to build even more condo projects.
Earlier this month, Business Week covered the huge international interest in Florida's condominium market in an article entitled, "Foreign Buyers Heat Up Miami's Condo Market." There, experts opined that foreign buyers are making up 80% of the Florida condo investment and gave details on just how big the Florida condo market really is right now.
Part of this market rebound has to be credited to the actions of the Florida lawmakers, particularly in the passage of the Florida Distressed Condominum Relief Act. (Read the full text of the Act here.)
Florida Distressed Condominium Act Is Not Extended
However, on March 9, 2012, despite the Florida condo fever two bills died up in Tallahassee that would have extended the life of the Florida Distressed Condominium Act by three years. Florida House Bill 319 and Florida Senate Bill 680 each contained language that would keep the law effective through 2015. Both died in committee last week.
Which means that the Florida Distressed Condominium Act will cease to be effective law on July 1, 2012.
What does the end of the Florida Distressed Condominium Act mean for condo investors?
Without this law being extended, the legal classification of "bulk buyer" or "bulk assignee" as it pertains to Florida condos will no longer have legal effect after the July 2012 deadline. The Florida Distressed Condominium Relief Act (FDCRA) allowed buyers to qualify as "bulk buyers" or "bulk assignees" under Florida law and thereby gain some nice benefits in exchange for their buying up distressed condos in bulk and repositioning the projects.
Which was part of the plan. Passed in 2010, the goal of the FDCRA was to promote the sale of the huge glut of condominiums setting empty in Florida and to help condo associations who were hard hit by falling property values and huge numbers of vacant, unoccupied condos that had been abandoned to foreclosure.
Now, we're close to 90 days of opportunity for real estate investors or foreclosing lenders to qualify as "bulk buyers" or "bulk assignees" which will provide them, among other things, limited liability from any claims that originated with the original condo developer. After July 2012, those buying condos in bulk acquistions here in Florida will need to be aware that they may have successor liabilities involving things like past due assessments, reserves that have not been funded, the responsibility of honoring warranties on individual condominium units, and more.
No more limited liability protections under Florida law when you buy up condos in bulk. At least, after July 1, 2012.
Lesson here? If a real estate investor is considering buying an existing, distressed condominium project in Florida then they need to hurry and make the deal and get that FDCRA protection. The clock is ticking.