“Termination of Condominiums” – FCAP Managers Report
With all the recent news surrounding condominiums and the rising costs of living, you may have noticed an uptick in references to the “termination” of condominiums. In fact, you may have even heard that your condominium association is considering termination, and you are now wondering about the process.
First and foremost, termination is a complicated and expensive process that requires substantial planning, and can take months, or even years to finalize. As such, if there is anything you take away from this article, it is that any condominium association considering termination must thoroughly consult with their attorney on the matter before doing anything else.
Simply put, the “termination” of a condominium is the process by which the condominium form of ownership – where property is divided into portions that are separately owned (such as condominium units) or jointly owned (such as the common elements of a condominium), and governed by an association of owners, is legally dissolved. The members of the condominium association are paid for the sale of their units, and divested of their ownership. Termination results in the members of the condominium association being ultimately paid at least fair market value for their ownership, and ends in members being divested entirely of what they own in the condominium.
Why would a condominium association consider termination? Generally, termination is considered when a condominium association is having trouble meeting its operational and financial obligations; repairs required by the new laws do not make economic sense to complete; and/or owners believe that the condominium form of ownership is no longer in the best interest of the members.
To that end, Section 718.117, Florida Statutes, which generally governs terminations of condominiums, expressly authorizes members of a condominium association to terminate the condominium due to: (1) “economic waste or impossibility” or; (2) because termination is what has been decided by a certain amount of members, i.e., an “optional termination”. You must also review your association’s Declaration, By-Laws, and Articles of Incorporation (the “Governing Documents”) for its termination provisions, as discussed further below. The interaction between your Governing Document provisions and the statutory provisions can be very complicated from a legal point of view, which is why it is imperative your association consult with its attorney if considering this option.
A termination can be forced upon members of the condominium association who do not wish to terminate the condominium. However, Florida law imposes multiple requirements upon any proposed termination. The dozens of complicated requirements imposed by Section 718.117, Florida Statutes, must be analyzed in conjunction with the association’s Governing Documents.
Governing Documents contain requirements that may overlap or even conflict with Florida Statutes, so what does a condominium association do then? As first mentioned in this article – the condominium association should consult its attorney, as any failure by the condominium association to do what is required in connection with a termination might result in the termination process being delayed for years, or even halted entirely, all while costing the condominium association attorney’s fees and costs.
But that is not all a condominium association needs to heed in pursuing a termination – Florida Courts and the Department of Business and Professional Regulation (the “DBPR”) also have jurisdiction over terminations. In fact, if you follow along the provisions of Section 718.117, Florida Statutes, you will find that a condominium association pursuing termination is required to submit to a Florida Court or the DBPR a written “Plan of Termination” to determine compliance with Florida law. Preparing such a written plan and guiding it through the applicable approval process alone may take months, and so, again, it is imperative that a condominium association work hand in hand with its attorney when it comes to termination.
Another factor to take into consideration is that your condominium association will likely need work with its attorney for many more weeks or months after the approval of a Plan of Termination. Indeed, approval is only half the battle so to speak, as Plans of Termination and Florida law impose additional requirements and procedures that only take effect after approval. Section 718.117(3)(6), Florida Statutes, provides that approval does not, in and of itself, terminate a condominium association, and that condominium association may need to exercise the following powers:
(6) POWERS IN CONNECTION WITH TERMINATION.—The approval of the plan of termination does not terminate the association. It shall continue in existence following approval of the plan of termination with all powers and duties it had before approval of the plan. Notwithstanding any provision to the contrary in the declaration or bylaws, after approval of the plan the board shall:
- Employ directors, agents, attorneys, and other professionals to liquidate or conclude its affairs.
- Conduct the affairs of the association as necessary for the liquidation or termination.
- Carry out contracts and collect, pay, and settle debts and claims for and against the association.
- Defend suits brought against the association.
- Sue in the name of the association for all sums due or owed to the association or to recover any of its property.
- Perform any act necessary to maintain, repair, or demolish unsafe or uninhabitable improvements or other condominium property in compliance with applicable codes.
- Sell at public or private sale or exchange, convey, or otherwise dispose of assets of the association for an amount deemed to be in the best interests of the association, and execute bills of sale and deeds of conveyance in the name of the association.
- Collect and receive rents, profits, accounts receivable, income, maintenance fees, special assessments, or insurance proceeds for the association.
- Contract and do anything in the name of the association which is proper or convenient to terminate the affairs of the association.
Ultimately, this article is not intended to serve as an exhaustive list of issues your condominium association may need to consider or grapple with in connection with terminations. Rather, this article is intended to emphasize the complexity and nuance of terminations and that, if your condominium association is considering one, it needs to invest in thorough consultation and planning with its attorney.
To read the original FCAP article, please click here.
Nicolas M. Jimenez is a Community Association attorney in the Miami office. Mr. Jimenez has experience representing clients in Florida state and federal courts and has a diverse range of subject matters, including matters relating to contractual disputes, non-compete litigation, intracorporate disputes, landlord-tenant disputes, employment disputes, class actions, and condominium related litigation.
