LEGAL RULING MAY IMPACT CONDOMINIUM DEVELOPMENT

Kyle W. Ohlenschlaeger and Bruce E. Loren
May 3, 2024

A recent decision by Florida’s Third District Court of Appeal may have an impact on condo development in South Florida. Contractors and subcontractors that may have been planning to work on new condominium construction may see a slowdown in projects while the issue runs through the Courts. Specifically, the new ruling impacts planned projects in which the developer seeks to demolish old condominiums and build new, high-end residential and multi-use projects.

A year ago, the developer submitted plans for a three-towered, mixed-use complex on Biscayne Bay in Edgewater. The planned development includes over 700 condominium units, as well as commercial space on the ground floor. Of course, an older building – built in the 1960’s – currently sits on the planned project site. The developer purchased a majority of the units in the condominium in order to reach an 80% threshold, consistent with the Florida Statutes, to terminate the older condominium association, which would allow for demolition and construction. In anticipation of the construction, the developer had already begun selling luxury condos in the new association.

The litigation at issue was brought by some of the hold-out owners of the old condominium association. They refused to sell their condos to the developer and filed the lawsuit alleging that despite the Florida Statutes allowing for termination at 80%, that this association could not be terminated without unanimous vote pursuant to the condominium’s original declaration. While the developer originally prevailed in its argument that it properly amended the declaration, allowing for termination consistent with the statutes, the appeals court reversed and ordered an injunction preventing the termination of the condo association, in effect bringing the development to a halt. The developer has vowed to appeal the decision to the Florida Supreme Court if necessary, but for now it has put the timeline for construction in serious question.

Aside from the impact that this ruling will have on this development, which was already out to bid, this will likely result in a slow down for many future developments due to uncertainty amongst developers and lenders. Until this is resolved by the Courts, developers will be less likely to spend millions of dollars to purchase majority stakes in existing condominium buildings in hopes of terminating the association and starting new development. Similarly, lenders will be less likely to fund developers without certainty regarding the planned development.

As a result, if this ruling stands, it could result in a significant slowdown in new projects, which many contractors and subcontractors were anticipating as a significant source of income over the next few years – especially considering the amount of money moving to South Florida and the impact of the Surfside Condominium collapse. Contractors and subcontractors are advised to look to their prospective jobs to determine if this could alter planned construction schedules to ensure that any potential gaps caused by delays to large-scale development of condominiums are filled with alternative work.

Bruce E. Loren and Kyle W. Ohlenschlaeger of the Loren & Kean Law Firm are based in Palm Beach Gardens and Fort Lauderdale. Loren & Kean Law is a boutique law firm concentrating in construction law, employment law, and complex commercial litigation. Mr. Loren and Mr. Ohlenschlaeger have achieved the title of “Board Certified in Construction Law” by the Florida Bar, exemplifying the Bar’s recognition of this expertise. The firm’s construction clients include owners/developers, general contractors, specialty contractors in every trade, suppliers and professional architects and engineers. Mr. Loren and Mr. Ohlenschlaeger can be reached at bloren@lorenkeanlaw.com or kohlenschlaeger@lorenkeanlaw.com or 561-615-5701.