Amendment to SB 880 approved by Community Affairs Committee intends to encourage purchase of remaining inventory by limiting liability.
Last week the Community Affairs Committee advanced SB 880 with a significant amendment entitled the “Distressed Condominium Relief Act”.
If the bill becomes law, new Section 718.702, Florida Statutes sets forth the legislative intent for the protections afforded to “bulk assignees” and “bulk buyers” of condominium units.
“Bulk assignees” are defined as purchasers of more than 7 units who receive an assignment of some or all of the rights of the developer of the project. “Bulk buyers” are also defined as purchasers of more than 7 units, but have not obtained an assignment (other than rights to conduct sales, leasing and marketing activities within the condominium).
Bulk assignees are not responsible for implied warranties, the obligation to fund converter reserves for units owned by others or honor conversion warranties. Bulk assignees will not have to provide the Association with a full transition audit and will not have to fund developer guarantees or assessment obligations, unless they receive an assignment of the right to guarantee assessment levels and therefore take on the obligation to fund budget deficits.
This section of the proposed bill provides for three distinct methods of assignment of development rights, to wit:
- By the Developer;
- By a previous Bulk Assignee; or
- By a Court.
While bulk assignees are required to deliver any of the documents identified in Section 718.301(4), Florida Statutes in their possession or control to the association upon transition, they are not liable for production or delivery of documents and other materials normally required as part of the transition process, if they cannot obtain them after a “good faith” effort.
Both bulk buyers and bulk assignees need to update the prospectus, the Frequently Asked Questions and Answers Sheet, the required form of escrow agreement (if applicable) and financial information pertaining to the Association. Disclosure statements, identifying the rights assigned and warranty limitations, are also required.
The legislative history suggests these provisions are necessary to encourage the purchase of remaining inventory in failed projects.