In a case pitting the Tropicana Condominium Association against the developers of the Ritz-Carlton Residences in Sunny Isles Beach, an appellate court largely sided with the developers.
The court ruled to limit the reach of a state law that allows owners of 10 percent of the units at a condominium to block termination of the building’s condo ownership and a subsequent sale of the entire property.
The Third District Court of Appeals upheld most of a lower court ruling against the owners’ association at the Tropicana Condominium in Sunny Isles Beach.
The Tropicana Condominium Association had accused developers Edgardo Defortuna and Manuel Grosskopf of blocking a sale of the nine-story Tropicana to preserve the oceanfront view at Ritz-Carlton Residences Sunny Isles Beach, a 52-story condominium the developers are building next door. Grosskopf runs the real estate development firm Chateau Group, and Defortuna is president of Fortune International Realty.
The association alleged in litigation in Miami-Dade Circuit Court that Defortuna and Grosskopf used employees and other straw buyers to acquire five of the 48 units at the Tropicana – or 10.4 percent of the total number – to block efforts by the condominium association to dissolve itself and sell the entire nine-story building to a developer who could put a much taller building in its place.
But the Third District Court of Appeals on Wednesday upheld most of a trial court ruling against the Tropicana Condominium Association in August 2015. Tropical Condominium LLC, held by the owners of the five units, filed suit in January 2015 against the association.
The Third DCA acknowledged in its ruling that “the association alleges that the Tropical owners are associated with the developer of an adjacent condominium tower, who does not favor a redevelopment of the Tropicana Condominium.”
But the appellate court’s ruling centered more on flawed voting procedures adopted by the Tropicana Condominium Association to determine the process for terminating the association and condominium ownership of the 48-unit building.
Under a statutory amendment enacted in Florida in 2007, 80 percent voting approval is enough to terminate the condominium ownership of a building unless owners of 10 percent or more of the units vote against termination.
The owners of the five Tropicana units contended in their successful circuit court suit that the association’s board of directors invalidly adopted two amendments to the process of terminating Tropicana’s condominium ownership structure.
Most unit owners approved the amendments – but not all of them did so, as the Tropicana’s 1983 declaration of condominium requires for enactment of such amendments.
The Third DCA ruled that the 2007 changes to the Florida statute don’t apply retroactively to condominium declarations from prior to 2007 unless they contain certain language that incorporates amendments to the state’s Condominium Act.
The appellate court said in its ruling that “when referencing Florida’s Condominium Act, the declaration [for Tropicana] did not contain the words ‘as amended from time to time.’ Absent this language in the declaration, changes by the legislature to the Condominium Act subsequent to the effective date of the declaration do not become part of the declaration automatically.”
In its ruling in the Tropicana case, the appellate court said it upheld the trial court’s finding that the legislature’s 2007 amendments to Florida’s Condominium Act “could not be retroactively applied without causing a constitutional impairment of contract.”
“The statute seemingly had language that suggested the intent was to make it retroactive,” said law firm partner Helio De La Torre, who has represented condo associations in similar cases centering on termination of associations through votes by unit owners. He is a partner of Coral Gables-based Siegfried, Rivera, Hyman, Lerner, De La Torre, Mars & Sobel, P.A.
“We had communities where bulk purchasers were coming with 80 percent [of the units] and terminating,” he told The Real Deal, “and the only chance we had to fight them was to make the argument that it shouldn’t have been approved with 80 percent, that we had more than 10 percent opposed. So, under the new statute we could fight them.”
But De La Torre said the ruling in the Tropicana case made that argument less potent: “Now, this court knocks out that argument.”
The Third District Court of Appeal sided with the Tropicana Condominium Association on one issue, in declining to uphold the lower court’s finding that the association’s limit of two or fewer condo units per owner is unreasonable.
Many Tropicana condo owners, including a large number or retirees, believe the combined sales of their individual units would be less than the price a developer would pay for the Tropicana’s oceanfront location at 15645 Collins Avenue, and developers have made offers up to $100 million, the Tropicana Condominium Association claimed in the suit it filed in Circuit court.
Chateau Group, run by Grosskopf, offered less than $50 million for the Tropicana property, Michael Waldman, an attorney for the Tropicana Condominium Association, told TRD last year. “They were told, ‘No.’ And there was a discussion with Defortuna, but it didn’t go anywhere,” he said.