Q: After the developer transfers control of the condominium association to the unit owners, can the association increase the assessments for the common expenses only against the developer owned units to cover the costs of repair for construction defects? (C.D., via e-mail)
A: No.
Section 718.301(3) of the Florida Condominium Act provides that after control is turned over and where the developer still holds units out for sale, the condominium association cannot assess the developer as a unit owner for capital improvements or take any action that would be detrimental to the sale of the developer’s units without written approval from the developer.
Further, the statute requires that assessments for condominium units, which can result in a lien and foreclosure if unpaid, can only be based on the percentages of common element ownership set forth in the declaration of condominium. These percentages must either be equal (one share per unit) or based on the relative square footage of the units (or apartments) in relation to each other.
Section 718.203 of the Florida Condominium Act provides unit owners with a series of warranties that are generally in effect for three years from the date of completion of the building, one year for certain items. These warranties are deemed to be given by not only the developer, but contractors, subcontractors and material suppliers. These warranties, as to the developer, also can be extended to one year from the date of transition of control (“turnover”) if that date is later than 3 years from competition.
The association is given class standing by the statute and Florida Rules of Civil Procedure to bring warranty and other claims involving defective construction. There is a statute of limitations which is 4 years from the date of completion of the improvement, but the statute tolls that time until the turnover date, so the association generally has 4 years from turnover to bring a claim, subject to an outside date to bring claims, called the “statute of repose,” which runs 10 years from the date of completion of the improvement.
It is universally recommended that associations have an independent engineer evaluate condominium buildings as soon as is practicable after turnover. While the developer is legally obliged to provide a separate engineering report as part of the turnover process, the board will want to have its own consultant review the situation.
Most claims are resolved without the need for litigation, some are not. This is the “one bite at the apple” that the association gets in addressing what may be the most significant financial investment for some owners. It is important to use due diligence in getting proper engineering and legal support to make sure your owners got what they paid for and will not be left with the financial burden of fixing problems that should have been taken care of.
Q: I am under contract to buy a condominium unit that is still under construction. What is the developer allowed to use my deposit money for? (A.C., via e-mail)
A: The developer must pay into an escrow account all payments from the buyer up to 10% of the sale price. These funds can be released to either the buyer (e.g., if the buyer properly terminates the purchase contract) or to the developer (e.g., if the buyer defaults on his or her obligations under the purchase contract).
Escrow funds in excess of 10% of the sale price may be withdrawn for actual “hard” construction costs incurred by the developer and designated “soft” costs, such as impact fees.
Escrowed funds may not be used for salaries, commissions or expenses of salespersons; advertising, marketing, or promotional purposes; or loan fees and costs, principal and interest on loans, attorneys’ fees, accounting fees, or insurance costs.
Originally posted on floridacondohoalawblog.com Written by Joseph E. Adams of Becker & Poliakoff, P.A.,