Developer Turnover of Condominium Associations in Florida: Part I
The developer of a condominium manages the association’s operations and governance during the construction and initial sales phase of units. During that time, the developer acts as the association’s board of directors. After construction is completed and units are sold, turnover of control of the association from the developer to the unit owners must eventually happen. This blog post provides a summary of what condominium members must know about developer turnover of the association.
The turnover process and procedure that a developer must follow in order to properly turn over the association’s operations and board of director governance to the unit owners is regulated by the Florida Condominium Act. After the developer sells at least 15 percent of the units, those non-developer owners are entitled to elect at least one-third of the board of director seats. Fla. Stat. § 718.301(1). When any of the following events occur, the non-developer unit owners are entitled to elect at least a majority of the board of director seats:
- Three years after 50 percent of the units have been sold to non-developer owners;
- Three months after 90 percent of the units have been sold to non-developer owners;
- When all unit construction has been completed, some units have been sold to non-developer owners, and none of the remaining units are being offered for sale by the developer in the ordinary course of business;
- When the developer files for bankruptcy;
- When a court appoints a receiver for the developer and the receiver is not discharged within 30 days;
- Seven years after the date of the recording of the certificate of surveyor and mapper. Fla Stat. § 718.301(1)(a)-(g).
Prior to turnover, and while the developer has control of a majority of the association’s board of director seats, the developer is liable for all violations of the association’s governing documents and violations of Florida law. 61B-23.003(7)(g), F.A.C. Prior to and after turnover, the developer remains responsible to the association and its members for its actions, subject to statute of limitations. Within 75 days after the unit owners are entitled to elect at least one board of director seat, the developer must schedule an election and provide not less than 60 days’ notice of the election meeting so that the owners may conduct this vote. Fla. Stat. § 718.301(2).
The developer still has authority to elect at least one board of director seat so long as the developer holds for sale in the ordinary course of business at least 5 percent of the units (in condominiums with fewer than 500 units) or 2 percent of the units (in condominiums with more than 500 units). Fla. Stat. § 718.301(1). The developer, even after turnover, still has the right to cast votes on association matters on behalf of any developer-owned units just as any other unit owner may cast votes.
The developer, or any successor or assignee of the developer, is precluded from regaining majority control of the board of directors after turnover occurs. Even if the developer, or a successor or assignee of the developer, purchases additional units after turnover, it cannot regain majority control of the association. Id. Part II of this blog series will discuss the disclosures and documents required of the developer at turnover.
Join our Community Association Practice Group Educational Webinar Series, hosted by Hans C. Wahl, Wednesday 10/27/21 at 11 A.M. Hans will be presenting a detailed overview of Developer Turnover for Community Associations with a 30 minute Q&A.