Florida’s new condo association law needs to be clarified | Opinion

Florida House Bill 1021, signed into law on June 14, started as a creditable attempt to improve corporate governance and transparency for condominium associations.

It also helped to make owners and prospective purchasers of condominium apartments in mixed-use buildings (buildings with both commercial space and condominium apartments) aware that the commercial space owners control the key parts (“common elements”) of these buildings.

The law has at least two major flaws: It seemingly exempts the commercial space owner from the structural integrity study and reserve requirements imposed on condominiums after the Surfside building collapse disaster.

The law’s sponsor, Miami Republican State Rep. Vicki Lopez, was quoted in the Miami Herald as saying that “…she had no intention of requiring businesses, like hotel developers, to have reserves for repairs for infrastructure under their control because they almost always have the money from revenues generated by their operations to make the repairs when needed.”

This optimism ignores the fact that more than one major hotel has gone bankrupt in recent history (among them the Carillon and the Fontainebleau hotels).

The fact is that Section 20 of the law was slipped into the bill at the eleventh hour by special interest groups without fanfare and without consulting the ultimate stakeholders. For the owners of residential units in mixed-use buildings, Section 20 eviscerates the protections previously given them by Chapter 718 of the Florida Statutes which made it illegal for the commercial space owner to control the key parts of a mixed-use building.

Section 20 now makes this legal, and just to turn the knife in the wound, Section 31 applies the law retroactively. Thus, even if HB 1021 puts potential buyers in a mixed-use building on notice that the commercial space owner controls the common elements, existing owners or preconstruction buyers in Miami’s numerous mixed-use projects, such as the Epic, Mandarin Oriental, Dolce & Gabbana and Baccarat are out of luck.

Sections 20 and 31 are clearly in response to the decision in the Carillon case, which took away control of the common elements in that Miami Beach building from the hotel and gave it to the condominium, thereby causing a frisson of panic in the mixed-use building developer community.

Controlling the common elements in a mixed-use building allows commercial space owners to turn them into profit centers, despite what Mark Grant, the lawyer behind these provisions, may say. He is quoted in a recent Miami Herald article as saying that developers have no “profit incentive” to keep control of the common elements. Of course, I believe this is pure sophistry; profit is what it is all about.

The condominium documents in these buildings allow this control, and the legal sleight of hand by which control is given to and maintained by the commercial space owner is a masterpiece of drafting that conceals this information in plain sight from the untrained eye.

Firstly, they give the hotel control of most of the common elements, designating them as “shared facilities” (a creative oxymoron since they are often not shared).

Secondly, they allocate an arbitrary and often excessive percentage of the expenses supposedly incurred for the common elements to the condominium.

Finally, to cap it all off, they give the condominium no decision-making power or right to share in the profit generated by these shared facilities.

State Rep. Lopez has told reporters those conditions in the law are not what she intended and vows to help fix it. She should work to restore Chapter 718’s protections.

If the law is not amended, it will benefit lawyers because it will inevitably spawn a torrent of litigation.

Richard Ortoli is a Miami-based attorney and the President of the Epic West Condominium, the association that shares the downtown Miami Epic building with the Epic hotel.