A proposed law would change the legal liability bulk buyers of distressed condos face in Florida, potentially energizing a sector that has been relatively quiet despite an over-abundance of inventory.
State Rep. Julio Robaina, R-Miami, and state Sen. Eleanor Sobel, D-Hollywood, are sponsoring identical bills designed to spur bulk-buying activity, accelerating Florida’s residential real estate recovery.
Robaina said HB 327 would also go far in alleviating individual unit owners from having to make up for owners who aren’t paying their maintenance fees.
Sobel said she’s been getting strong feedback from homeowner associations that are suffering financially as a result of delinquent owners. She hopes SB 840 would help address delinquency issues and eliminate some federal prohibitions on lending due to delinquent owners.
Existing law states that a buyer of seven or more units in a building with 70 or more units becomes responsible for all liabilities normally assumed by the project developer, including defects and issues with common areas.
The liability issue has killed a significant number of developing deals, said Mark Grant, a partner at Ruden McClosky, who worked with both legislators to craft the bill. Investors have pushed down pricing to incorporate the risk into their bulk bids, which has prompted developers and lenders to reject offers.
The bill will alleviate some of that pressure on pricing, which will help stabilize projects, he said.
The pace of bulk transactions has been accelerated at the end of the year. A recent deal involved the bulk buy of 20 units at Artech Residences at Aventura for $6.3 million – 31 percent less per square foot than another bulk purchase that occurred there this summer.
In all, 30 condo bulk deals with new or renovated product have closed in South Florida since last summer, accounting for 2,500 units and 3 million square feet of space, according to Condo Vultures.
Those numbers could easily double next year if the bill passes, said Jack McCabe, CEO of McCabe Research & Consulting in Deerfield Beach.
Grant explained that, in order to get widespread support, bill supporters had to make some concessions, including prohibiting bulk buyers from voting to waive an association’s funding reserves.
Another detail that may benefit all players is that bulk buyers could negotiate with the developer or lender to accept some ownership rights. For example, an investor might want to buy control of the common area rights around the pool if they are buying 50 units around the pool. That way, the investor can upgrade the pool facilities and charge a premium for the units, Grant said.
McCabe said the proposed changes in the law would also create a more favorable environment for lenders to foreclose and resell units.
He noted that this version of the bill would likely not suffer the same fate as it predecessor did during the last legislative session. A bulk buyer bill failed, crushed under the weight of controversial amendments.
But, legislators can’t address some issues plaguing condominiums. The bill won’t address restrictions placed on buildings by federal lenders who won’t lend in buildings with bulk-buying activity greater than 10 percent.
Said McCabe: “That’s going to continue to be a problem.”
Source: http://southflorida.bizjournals.com/southflorida/stories/2009/12/21/focus4.html?b=1261371600^2605991
omusibay@bizjournals.com | (954) 949-7567
The Criscitos has been selling South Florida luxury and commercial real estate for over a decade and has sold over $1 billion dollars of property. They work as a multi-lingual team speaking english, Spanish, Italian and Portuguese. They carved out a niche as a leading boutique real estate company with two distinct divisions -residential and commercial- both personally overseeing by Marcela and Anthony Criscito.
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