As always, should you have any questions regarding any of thQuestion: I am buying a condominium and have heard there is mandatory seller disclosure. Can you explain?
Answer: Florida’s legislature apparently believes condominium buyers require special attention. The legislature confirms that position through Section 718.503, Florida Statutes. That statute addresses developer disclosure, non-developer disclosure and even creates a right of voidability for condominium buyers.
Mandatory developer disclosure is far more extensive than the disclosure required by a non-developer seller. A buyer from a developer is granted 15 days from the date the developer supplies all of the mandated documents to review and determine if the buyer wants to cancel the contract. A buyer from a developer can even extend the closing until end of the 15-day period. The buyer can cancel the contract within the 15-day review period and obtain refund of any deposit.
Most developers are familiar with and follow the statutory notice requirements. Because they want to know if the buyer will proceed as soon as possible, they go to great length to comply with mandatory disclosure. That means, the real disclosure problems involve sale or resale of condominiums by non-developer owners.
Unlike developer disclosure, the statute does not require automatic provision of documents from non-developer seller to buyer. It provides all prospective purchasers under contract for purchase of a condominium unit are entitled to specific documents at the seller’s expense. That means, a buyer should ask the seller for the documents rather than assume they will be provided.
The statute mandates non-developer sale contracts include disclosure language. That language advises the buyer that after the contract is signed, the buyer has a right to cancel within 3 days, excluding Saturdays, Sundays and legal holidays, after receipt of disclosure documents.The statute lists the disclosure documents as the following:
a. Current copy of Declaration of Condominium;
b. Articles of Incorporation for the condominium association;
c. By-Laws and Rules of the condominium association;
d. Copy of the most recent year-end financial information for the condominium association;
e. Frequently Asked Questions and Answers document (this form is established by statute and summarizes certain important aspects of condominium ownership including explanation of voting rights, unit use restrictions, leasing restrictions, whether the unit or association is obligated to pay rent or land use fees for recreational or other commonly used facilities, a statement identifying the amount of assessments levied against each unit type, explanation of the basis upon which assessments are levied, and list any court cases in which the association may face liability of more than $100,000.00); and;
f. Copy of a Governance Form (this form is 5 pages long and published by the Department of Business and Professional Regulation Division of Florida Condominiums, Timeshares and Mobile Homes. It summarizes condominium operations including board meetings, finances and unit owner rights and responsibilities).
The buyer’s right to terminate under either developer or non-developer contract cannot be waived, except that the buyer can close before end of the review period and closing ends the buyer’s right to terminate the contract. If the contract does not have the mandated disclosure language explaining the buyer’s right to documents, the buyer’s right to terminate extends to closing, no matter how far into the future the closing date is set.
Because the non-developer buyer has a 3-day right of rescission from date the buyer receives all of the disclosure documents, it is in a seller’s best interest to be sure those documents are delivered quickly. But, there can be many slips between good intention to collect and deliver those documents and actual result.
Sometimes, the seller will ask a title company to get condominium documents. The title company may then obtain copies of all documents recorded in the Public Records but, those documents will generally be limited to the Declaration, Articles of Incorporation, By-Laws and possibly Rules of the association. The financial information, Frequently Asked Questions and Answers, Governance Form and most Rules will not often be found in the Public Records. If the seller relies on an incomplete set of documents, the buyer’s right to terminate continues to closing.
More experienced sellers may realize they have to go to the condominium association to get a complete package. Even then, mistakes are made. It is not unusual for an association to include a budget rather than a financial statement in the document package it provides. And, only a minority includes a copy of the Governance Form. Either of these omissions stops the 3-day rescission clock from running.