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2014 Legislature: Less is Not Always Best – Significant Changes to the Commercial Condominium Regime

Recently, several new laws went into effect that only affect commercial condominiums. While only a few of these changes make sense, most do not and illustrate the significant misunderstanding of the need to protect all condominium unit owners without regard to whether the condominium is residential or commercial.

Remember, before you get too excited, this article only addresses changes to COMMERCIAL, and NOT residential condominium associations.
Why our Florida legislators have determined that unit owners of commercial condominiums are not entitled to the same protections as owners of residential condominiums shall forever remain a mystery. If you own a unit in a commercial condominium, you need to be aware of these important changes. There is no longer any protection for an owner of a minority of units in a commercial condominium, WHATSOEVER! In other words, there is no equality – whoever owns the most units or the most square footage is “King of the Condo”, FOREVER AND EVER AND EVER AND EVER AND EVER!!!

The changes affecting only commercial condominium associations include:

• Board members can serve for unlimited terms.

• If there is more than one owner of the commercial condominium unit then all of the owners can serve on the board at the same time thereby completely obliterating fair representation on the board.

• Board members do not have to sign a “loyalty oath” that they have read the condominium documents and will discharge their fiduciary duties in a responsible manner. In effect, this means the controlling owners/board members can do what is best for them, personally, and not what is best for the condominium association.

• The election requirements for running and voting for the board as set out in Chapter 718, Florida Statutes (the “Condominium Act”), are no longer applicable to commercial condominiums.

• Voting by “general proxy” is permitted for all matters, even elections of the board. A “general proxy” allows the proxy holder to vote however he or she sees fit on ANY matter that may be undertaken, while a “limited proxy” lists the issues that a proxy holder may cast a vote for on behalf of a voting interest and instructs the proxy holder on how to vote on those issues. Until this new law went into effect, even owners of commercial condominiums had to vote by limited proxy. Now that this requirement has been removed for commercial condominiums, once a commercial unit owner appoints their proxy, that person can cast the vote of their choosing on any and every matter under consideration. If you add the right of the general proxy holder to the new board member rights, you can begin to understand the dangers. Most unit owners end up appointing a board member to act as their proxy. Given the board will now be fully controlled by the owners who own the largest or the most units, commercial condominium unit owners who do not understand these new UBER-dangers, will soon find themselves completely and utterly powerless to stop the board from doing what is best for their own individual interests.

• The hurricane shutter, impact glass and other hurricane protection provisions set out in the Condominium Act no longer apply to commercial condominiums. Does the legislature really believe that commercial condominiums are immune from dangers of hurricanes? Oh brother!

• The build-out of what is referred to as a “phased condominium project” occurs in phases, just as the title suggests. Until now, once the phase plan is established, early purchasers are protected from drastic development changes that could negatively affect their property value and assessment liability. As to commercial condominiums, these protections are now completely obliterated. The unsuspecting commercial condominium purchaser will, no doubt, bear the brunt of this new legislation.

There is, however, one change that does make sense.

• It is clarified that the Division of Florida Condominiums, Timeshares, and Mobile Homes, which has jurisdiction over certain disputes in residential condominiums, has no jurisdiction whatsoever over similar disputes in a commercial condominium.

While it is a commonly accepted legal principal that the purchaser of commercial property purchases such commercial property at their own risk and, for all practical purposes, has little recourse against the seller for nondisclosure, these recent changes to the commercial condominium regime are reckless and extremely dangerous. In the end, if you purchase a commercial condominium, DANGER WILL ROBINSON, DANGER!