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(This story, in slightly different form, originally appeared in Incisive Media’s Daily Business Review.)

FORT LAUDERDALE, FL-Buyers suing celebrity real estate investor Donald Trump and developers of the local Trump International Hotel & Resort won’t be getting any help from state condominium regulators. Attorney Joseph Altschul last month asked the state Division of Land Sales, Condominiums and Mobile Homes to investigate alleged bad-faith dealings by the hotel’s developers.

But the division’s Bureau of Compliance chief Jonathan Peet said in a letter last week to Altschul that state regulators only oversee residential condominiums. Unless the units are private temporary or permanent residences, they aren’t considered residential units, Peet said. He did not address what agency would otherwise regulate condo-hotels.

Peet’s letter comes after Trump International buyers were told they had to close on their unit purchases by the end of May. If at least 50% of the 298 units didn’t close, the hotel wouldn’t open, and if the hotel didn’t open the condo units couldn’t be occupied, a representative of developer SB Hotel Associates wrote buyers.

In two separate lawsuits, buyers contended that the developer’s notice was an effort to keep them from closing so that the developer could declare them in default and claim their deposits. Altschul asked regulators to step in and block the developer’s “fraudulent closing charade,” but Peet’s response to Altschul ended that tactic.

Before May 2007, the division reviewed problems tied to condo-hotels if the developer indicated at least two of the units were residential. But the division subsequently decided a condo would be treated as residential only if the unit was a private temporary or permanent residence.

“If a unit owner did not have the right to reside in his or her unit year-round, but had to make [the] unit available for transient occupancy by the public for some period of the year, then the condominium was not a residential condominium” under state law, Peet wrote in the June 16 letter. Altschul contends that nothing in city, county or state laws prohibits an owner from occupying a unit year-round or requires an owner to make the unit available for temporary occupancy.

Besides, Altschul told the state, condo-hotel units are still condominiums whether they are deemed residential or commercial. That means they are still governed by state condo law, he said in his letter to regulators. “Any attempt by the division to abdicate its authority over this condominium is improper,” he replied to Peet Tuesday.

That’s a boon to condo-hotel developers, says attorney Mark Grant of Ruden McClosky Smith Schuster & Russell in Fort Lauderdale. The developer won’t have go through filings and state approval, though still must comply with the law, he says.

For people who have already bought condo-hotel units in projects throughout Florida, it means they will get little if any protection and their only remedy in disputes with developers and hotel operators will be a lawsuit.

It’s not the first time the issue of condo-hotel regulation has arisen. Grant says the Condominium and Planned Unit Development Committee of the Florida Bar has grappled with the regulatory issue for at least two years.

“We’ve tried to propose legislation that would clarify that hotel-condos are not residential condos,” says Grant, who usually represents developers. “The statute is not very clear on the issue, so we created a definition of hotel-condo and had four characteristics that would make the property a hotel-condo as opposed to a [residential] condo.”

He declined to specify the committee’s findings, saying it’s still in discussion. But the presence of transient zoning and a front-desk operation likely would be considered, he said.

Altschul said there is no 30-day transient limit in Fort Lauderdale. Fort Lauderdale City Attorney Harry Stewart said a proposed ordinance in 2005 sought to mandate a 30-day limit but was not approved.

“We’ve researched this,” Altschul says. “A lot of people have opinions on this, and my response is ‘show me.’ It shouldn’t be so difficult to get a clear answer.”

Grant says regulators favor the clarification because they don’t want jurisdiction over condo-hotels. He adds that the typical 15-day right of rescission in condo-hotel purchase contracts is in a section of state law that deals with residential units.

“Some hotel developers still give buyers a 15-day rescission right anyway,” he says. “But a seller could take a position that hotel-condos are not residential, and the division says they aren’t residential, so I’m not going to give buyers the notice that they have a 15-day rescission right.”

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