Question: I have a contract to sell my condominium. The buyer just told me he is terminating the contract and can get his deposit back because the contract did not disclose that the buyer could terminate the contract within three (3) days after receiving condominium documents. Is my buyer right?
Answer: Florida's Legislature is very protective of real estate purchasers. The protections are particularly extensive in condominium sales. Developers have a lot of mandatory disclosure, but a few years ago the Legislature expanded disclosure requirements to include non-developer sales of residential condominiums.
Section 503 of the Condominium Act requires all contracts for non-developer sales of residential condominiums include specific disclosure language. The contract must either include a buyer acknowledgement the buyer certain documents or a clause advising that the contract is voidable by the buyer within three (3) days after receipt of specific condominium documents. If the contract does not include one of these clauses, the contract is voidable at the option of the buyer prior to closing and the buyer can obtain a refund of any deposit. Right to cancel ends with closing.
The Statute provides that a buyer of a residential condominium from a non-developer has a right, at the seller's expense, to the following documents:
- Current copy of the Declaration of Condominium;
- Articles of Incorporation of the Association;
- By-laws and rules of the Association;
- The most recent year end financial statement for the Association;
- A document entitled "Frequently Asked Questions and Answers" (Q&A); and
- Copy of a Governance Form.
Since a buyer has three (3) days from receipt of these documents within which to cancel a contract and obtain refund of deposit, it is important that sellers make sure their buyers get these documents promptly. Unfortunately, the documents provided to buyers are often incomplete.
One of the most common omissions is the annual financial statement. Instead, some seller provides a copy of the most recent budget. Often, the Association has provided the seller with a packet of documents that the Association believes will meet the statutory requirements and included in that packet the budget rather than the financial statement.
In other cases, the seller has relied on a title company to gather recorded documents from the public records. Generally, financial statements, rules and the Q&A are not recorded. Unless those additional documents are obtained from the Association, the documents provided to the buyer are incomplete.
You may be wondering what is included in the Q&A or the Governess Form. Content of the Q&A is mandated by statute to follow a format adopted by the Florida Division of Condominiums, Time Shares and Mobile Homes and informs buyers regarding their voting rights and use restrictions, restrictions on leasing the unit, if the owners or the Association are obligated to pay rent for recreational or other commonly used facilities, amount of assessments levied upon each unit type, basis upon which assessments are levied, any court cases in which the Association my face liability greater than $100,000.00 and information about any mandatory membership in recreational facilities.
The Governance Form is a form published by the Division providing general information about condominium association operation, such as the role of directors, rights of owners, assessment obligation and remedies available to owners with respect to actions by the directors.
Although these requirements are technical and even the smallest omission gives the buyer a right to terminate the contract and refund of deposit, Florida courts have offered one way to be sure a buyer cannot cancel a contract because of failure to comply with the Statute. If a buyer signs a document confirming receipt of all of the required documents, the buyer will not be allowed to later claim that something was missing. That makes it important to get a signed receipt whenever possible.
These disclosure requirements are a trap for the unwary seller. Not all contract forms utilized in Florida have the required disclosure language. In some cases, the disclosure language is provided by addendum. But how will the inexperienced seller know if the statutory requirements are met? The technical and mandatory requirements of these statutes magnify the importance of representation by an experienced attorney in all real estate sales. Before you proceed further, I suggest that you review your contract and circumstances with an attorney in your area.
By: William G. Morris, Esquire