MIAMI- On Tuesday, the governor of Florida, Charlie Crist,signed into law the Distressed Condominium Relief Act, which isdesigned to give assurance to bulk condominium buyers that theywon’t be liable for the flaws in a building they did not develop.Theoretically, as bulk buyers are spared this liability, they willbuy up more of the excess units built during the boom years. Thelaw will goes into effect on July 1, 2010.

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Because the new law takes the element of liability off thetable, says Warren Weiser, chairman of Continental Real EstateCompanies in Coral Gables, bulk buyers will no longer have tobudget for possible litigation.

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The new condominium law was written two years ago at thebeginning of the real estate crisis, at a time when there were fewbulk condominium purchases. But in the last couple of years, thenumber of these purchases has grown tremendously. According toCondo Vultures, LLC, a real estate brokerage and consulting firm inMiami, in the period from July 1, 2008 to April 30, 2010, therewere $976 Million worth of bulk condo sales in South Florida,most of which occurred in 2009, when there were $863 Million worthof these sales.

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While there have been a lot of bulk condominium sales in thelast year, still, proponents of the new law argue that prices forthese units would be higher, if bulk buyers were not worried aboutbeing made to pay for the sins of earlier developers.

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As the law stands now, says Mark Grant, attorney withRuden McClosky in Ft. Lauderdale, who helped write the legislation,the way the Division of Florida Condominiums interprets the law,anybody who sells--or leases for five years--more than seven unitsin a condominium development during a 12-month period, isconsidered a developer.

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The current Florida condominium law hasn’t made adistinction between a “creating developer” and a “successordeveloper,” even though the Division of Florida Condominium’sregulations do make that distinction, says Grant. “But the courtsare not bound to follow the regulations, which are theinterpretations of the law by the condominium division,” hesays.

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Although the law says that developers must give warrantieson a building they build, the creating developer doesn’t existanymore and the bulk buyer is the successor to the developer.Therein lies the rub, and the reason for the new law.

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Now that the law has been signed, condominium prices shouldrise, says Grant, because bulk buyers will no longer insist on adiscount for taking on another developer’s risks. Higher pricesserve several purposes, he says. First and foremost, they helpprotect the investments of those who bought into a condominiumearly, because they are the ones who paid the highest prices, saysGrant.

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Currently, says Grant, most of the bulk condominium buyers areforeigners who don’t need financing. This new law will,theoretically, have the effect of encouraging more sales and, asmore units are sold, that makes the remaining units financeable byFannie Mae, because the agency won’t approve loans in buildingswhere more than 15% of the units are in default and not payingassessments. In order words, this new law could end up encouragingmore Americans, who might be eligible for loans backed by FannieMae, to buy condominiums.

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There are a lot of benefits in this law for the residents/ownersof the condominium, not just the bulk buyer. If there is anabsentee owner collecting rent and not paying assessments, this newlaw allows the association to collect the rent directly from thetenant or tell the tenant to pay the rent to the association,rather than the landlord, says Weiser.

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Before this bill passed, says Grant, lenders who foreclosed onunits only had to pay the last six months of assessments beforethey took title. “If it takes two years to foreclosure, thoselenders had to pay only for six months, but the new law will expandthat period to 12 months,” says Grant.

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The way things stand now, says Grant, many people who are livingin the condominium are paying their assessments. But developers whohave gone bust aren’t paying assessments for the units they stillown. Additionally, the banks which have started to foreclose, buthave not taken title to condominiums yet, are not paying, so thebuilding suffers. The new law will help make it easier forcondominium associations to collect what they are owed. In short,this law may help to heal once-fractured condominiums.

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