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Condominium Management: Closing Condos

With all the condos in South Florida, inevitably, some are bound to shut down. These occurrences don’t happen every day – but when they do happen, they bring many challenges to an organization.

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There are several reasons why a condo association would decide to dissolve. Attorney Donna DiMaggio Berger, a shareholder with the law firm of Becker & Poliakoff in Fort Lauderdale, gives several of them: “One might be a lucrative offer from a developer who covets an older community’s prime location. This is one of the scenarios in which an HOA might literally be demolished—a developer could decide to raze the buildings and build something else there; another might be if a building has been extremely damaged as a result of a catastrophic event like fire or hurricane, and would require significant ongoing maintenance and repairs. There may not be sufficient insurance proceeds and owner assets to rebuild—and that can lead an association to disband.”

In another scenario, says attorney Kevin Fabrikant, owner, and partner in the law firm of Kevin H. Fabrikant & Associates in Hollywood, a building owner might initially try to convert a rental development into a condo, only to have the venture fail. “I’ve seen rentals converted to condos where an owner can only sell 10 percent of the units. The owner says, `Let’s get back to rental and dissolve the association.”

Berger calls these “cramdown” terminations, but says that “cramdowns are becoming less frequent as the real estate market grows healthier.”


Attorney Alexander Dobrev, partner in the Distressed Real Estate Solutions Practice Group of the firm of Lowndes Drostick Doster Kantor & Reed, P.A. in Orlando, describes in detail how it’s done:

Before 2007, termination of an association required 100 percent approval from unit owners, as well as affirmative approval from all lien holders, unless the condominium declaration specifically provided for a lower approval percentage.

Since 2007, Dobrey continues, revisions in the Florida Condominium Act have made the process simpler. Termination now requires 80 percent approval and less than 10 percent opposition, by vote or written objection. Lien holders’ approval is not required, although they do have the right to contest, if not paid in full, says Dobrev, who is a vice-chair of the Condominium and Planned Development Committee of the Florida Bar.

The Process

During the termination process, according to Dobrev, the association continues to exist with all the powers it had before the approval of the plan, employing attorneys, agents or other professionals to conclude or liquidate its affairs. It can carry out contracts; collect, settle and pay debts; defend suits against the association, conduct lawsuits in the name of the association and more.

The plan of termination must be a written document executed by the unit owners having requisite percentage of voting interests to approve the plan as well as the termination trustee. If the plan is approved by the required number of unit owners and lien holders, it must then be recorded in the public records. A notice that the approved plan has been recorded, adds Dobrev, must be sent to all unit owners by certified mail within 30 days after the plan is recorded. A unit owner or lienor may contest a plan by starting a summary procedure under s.51.011, F.S., within 90 days after the plan is recorded.

The association acts as the termination trustee, unless another person is appointed in that position.


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