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Distressed Condominium Relief Act Extended

Bilzin Sumberg Client Alert

Client Alert
April 10, 2012

On Friday, April 6, 2012, Governor Rick Scott signed HB 517 which contains a provision extending the Distressed Condominium Relief Act (Act) otherwise due to sunset July 1, 2012.

The Act was adopted in 2010 as a way to promote the absorption of the substantial inventory of unsold condominium units arising from the collapse of the real estate market in Florida. In substance, the Act provided a shield to bulk purchasers of condominium units against potential developer liability.

Prior to the passage of the Act, it was unclear under Florida law whether bulk purchasers of condominium units faced developer-imposed liability for construction defects or mismanagement of the condominium since they technically qualified under the Condominium Act's definition of "developer." The unsettled state of the law negatively impacted bulk purchases of unsold condominium units since purchasers were faced with the risk of inheriting an undeterminable amount of potential liability.

With the passage of the Act, bulk purchasers were shielded from developer liability and a substantial number of bulk purchases were facilitated. The Act, however, had a sunset date of July 1,2012 and many in the condominium community were concerned that the loss of the shield provided by the Act would have a chilling effect on the absorption of remaining unsold inventory.

This led the Condominium and Planned Unit Development Committee of The Florida Bar to sponsor an extension of the Act. The extension was initially part of a larger condominium bill which stalled and died in the Senate. Like a phoenix arising from the ashes, however, it was added to HB 517 in the waning days of the session and enacted by the Legislature. This new legislation extends the life of the Act to July 1, 2015.

The extension of the Act will help promote the continued absorption of unsold condominium inventory in Florida since prospective purchasers can rely on the continued availability of the Act's protection for another three years.

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