Law Would Strengthen Condo Contracts
Written by Eric Kalis on April 12, 2007
By Eric Kalis
Buyers of converted condominiums would see more contractual protections and condo flippers would find it harder to back out of contracts under a bill that has cleared the Senate and is slated for a final vote on minor amendments in the House.
Sen. Gwen Margolis’ bill requires additional cost disclosures to condo buyers and includes more impediments for buyers who want to rescind contracts before closing. The bulk of the bill deals with bringing insurance cost-saving measures for condo associations in line with those for individual homeowners, she said.
Contract provisions for conversions are the main priority, she said. The Florida Bar Association and former Gov. Jeb Bush’s condo task force played key roles in drafting the legislation, Ms. Margolis said.
The senator is a developer and Realtor whose District 35 includes portions of Miami-Dade and Broward counties.
"We realized that in condo law, there are strong protections for buyers of condos that should be in place for conversions as well," Ms. Margolis said.
She said she is concerned about older buildings being converted. "Additional disclosures are needed," she said. "These are not brand-new buildings. The buyer needs to know what condition the unit is in. Engineers have to stand by their reports."
The bill passed through the Senate and House last month. Once the House approves a minor amendment to the bill and the governor signs it, it will become law, Ms. Margolis said.
About 10 public hearings have been conducted on the bill and elements will continue to be tweaked, said Pete Dunbar, former chairman and a member of the state’s Condo Advisory Council who worked with Sen. Margolis on drafting the bill.
"When the advisory council had hearings in Miami-Dade, conversions came up as a major problem," Mr. Dunbar said. "Part of the bill is designed to address how to better prepare for conversions. There will be more scrutiny of conversion inspection reports. Before this bill, there was no direct remedy for the purchaser. This goes to the heart of consumer protection."
According to the bill, a developer who converts an apartment into a condo will have to establish a converter reserve fund for capital expenditures and deferred maintenance.
For flippers, the bill would make it more difficult to prove a developer violated contract terms, Mr. Dunbar said. Developers would be obligated to provide good-faith estimates in updated unit costs, but differences between the estimates and actual costs would not constitute a material modification, he said.
Buyers who want out of condo deals generally cite material modifications to the original contract, Mr. Dunbar said. A buyer has 15 days to rescind a deal before closing on a unit.
"If you’re a flipper and you want your money back, you may not like" the bill, he said. "People who intend only to flip have to find a way out. Now the question becomes what constitutes a material modification?"