Bulk Buyers Threaten Condo Owners

hand holding cartoon condo

Bulk Buyers Threaten Condo Owners
| published Sept. 17, 2014 |

By Earl Perkins
Thursday Review features editor

Greedy people with too much money and lots of good lawyers are staying up nights trying to take everything you own. Just ask Florida Rep. Keith Fitzgerald what he and condominium owners statewide think about a 2007 law change.

Back in 2007, the Sarasota lawmaker was the lone vote in opposition to the proposal, and seven years later legislators, lawyers, Gov. Rick Scott and his challenger's campaign operatives are calling for change to protect condo owners, according to the Tampa Bay Times.

"Either I'm onto something, or I'm crazy," Fitzgerald said seven years ago. Now he sees the outcome of what he worried about.

"These are people that are just going about their lives and suddenly their whole life has become this turmoil," Rep. Carl Zimmermann, D-Palm Harbor, told the Tampa Times when referring to hundreds and thousands of condo owners being adversely affected.

A loophole in Florida condominium law allows investors who purchase 80 percent of the condos in a complex to convert it into apartments and force the remaining owners to sell and leave. All it takes is a vote. The only possible hope for aggrieved parties is if the condo's governing documents state otherwise.

This is just a small tweak of the old Eastern European system. Real estate prices were traditionally quite reasonable over there, because you could easily come home from work and be greeted by new owners.

Those with government connections had all new legal paperwork, and you don't want to know what happened if you protested too loudly. In the Sunshine State, it evidently takes just a little longer to have the authorities remove you from your property.

And savvy investors also have rights, so what will happen when lawyers battle it out? They certainly have the law on their side, and all these people will be jettisoned like garbage into space. We're talking about mostly older people who worked their whole lives, scrimping and saving for a down payment, or even worse--they paid cash. Florida is full of brilliant legal minds, so there should be no excuses that politicians couldn't see this one coming. Who vets these people?

Doreen Rosselli, 52, has lived in her Carrollwood condo since 2006. She planned to reside there the remainder of her life, but investors have acquired most of the units in her complex, meaning it is only a matter of time before the new owners can leverage her out. "It really bothers me," she said. "It's wrong to be able to take the house just to make money."

Palm Harbor condo owner Stephanie Krasowski formed the activist group Floridians Against Condo Takeover with people from at least 13 complexes statewide. The association is attempting to help condo owners in East Lake, Tampa, Winter Springs, Boynton Beach, Boca Raton, Fort Myers, Orlando and Pembroke Pines.

Krasowski appealed to Zimmerman for help last year, and under normal circumstances you would think the law would protect people from unreasonable seizure. Her down payment was $32,500 in 2007, leaving $124,500 remaining on the mortgage.

Madison Oaks Partners spokesmen claim they have legal grounds for conversion, and are hoping to negotiate deals with the remaining owners. That's a euphemism for elderly people being tossed from their homes, and being saddled with massive debts on top of that. We don't care about your fixed income—just deal with it. That's the attitude that seeps out.

"I really do empathize with people who have mortgages that are greater than the current value of the real estate," said Eric Granowsky, one of four Madison Oaks investors. Yes, but I'm sure that's not what he's telling his legal counsel and closing agents.

The group evidently has the ability to move forward with termination, paying Krasowski $82,000 to vacate her home. The lender would receive that amount, and she would remain liable for the balance.

"It's been an exhausting year of trying to stay above water and fight with everything we've got," she said at an August news conference Zimmermann held concerning the statute.

Now we'll discover if Florida legislators will be able to do the job they should have been doing all along. Zimmerman raised the issue in the 2014 session, but his efforts were rebuffed. However, next year he will have powerful Republican allies in Representatives John Wood (Winter Haven) and James Grant (Tampa), along with Sen. Jack Latvala (Clearwater).

Gov. Rick Scott has called for legislative change, and hopefully we'll see swift action in the 2015 session. He told Florida Department of Business and Professional Regulation Secretary Ken Lawson he's "deeply concerned."

Before 2007, developers and investors often needed legal consent from each owner before converting condos into apartments. Hurricane-damaged and obsolete properties sat vacant because developers were unable to receive consent from elderly and out-of-state owners, allowing one unreachable owner to block potential condo terminations.

"It's just not possible to get 100 percent signatures in the larger condos, even for something that was completely innocuous or had to be done," said then-Senate Minority Leader Steve Geller, D-Cooper City. In the early 2000s, Geller worked with the Florida Bar to draft legislation lowering the threshold for condominium terminations to 80 percent owner approval.

"Sen. Geller's motives were absolutely pure," said Pete Dunbar, a real estate lawyer and lobbyist who worked on the change with others in the Florida Bar Real Property Probate and Trust Law Section. "(We) agreed with him and provided technical assistance to him, never realizing that there was something unforeseen that was built into the words."

The House and the Senate both passed it into law in 2006, but Jeb Bush, then governor, vetoed the legislation, warning of "unintended consequences." Gov. Charlie Crist took office the following year, and he signed a similar bill into law. The 80 percent threshold was retained, but a 10-percent owner vote could veto a termination. The Senate passed the bill 37-0 and the House voted 117-1, with Fitzgerald standing as the only opposition. Maybe they should have asked him why he wasn't going along with the rest of the herd.

Anybody who knows anything about Florida real estate law should know this exact scenario would come to pass. Values go up and down, like tides in the ocean. They somehow took it for granted values would continuously climb, allowing owners to make money by selling. They didn't consider the possibility of a recession, which would allow investors to buy them out and leave them with debt.

Dunbar, the real estate lawyer, agreed with Scott and legislators who want to change the law, along with Crist's campaign spokesman. "This is an abuse of the spirit and the intent of the law," said Brendan Gilfillan. "No one should be pressured to leave their home."

Unscrupulous investors have been packing condo boards and driving up association dues for years, foisting exorbitant bids from construction and roofer friends onto unsuspecting owners. The few remaining holdouts have traditionally been inundated with bogus bills, overpriced improvements, assessments and liens for nitpicky and untrue claims (i.e. 'unwholesome yards,' towing cars from assigned spaces for various reasons, etc.). These actions allowed powerful interests to 'rescue' the remaining owners and buy up complexes.

Passing legislation next session will almost certainly not help Krasowski and others in similar situations—bulk buyers will surely prevail in the current legal climate. But the clock is ticking. What are they going to do? Offer more money to reluctant sellers or only allow one vote per owner, regardless of how many units you own? Neither of those scenarios sounds very palatable, and I'm certain legal eagles are awaiting these opportunities with baited breath.

This should be a donnybrook when the Legislature debates the ramifications next year. Large-money interests will be lining up on both sides, but the ship might have sailed for these unfortunate souls facing immediate termination. Zimmermann continues to focus on raising awareness concerning this topic, since people just can't believe this is happening. He didn't even believe condo owners when they called him last year.

"I thought for sure she had misread the law," he said. But Zimmerman did look it up, and found for himself that those unforeseen circumstances which so worried Jeb Bush were, in fact, lurking there in the fine print of the legislation.