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Buying a home or investment property is not without risk. Buyers should be working with experienced attorneys, Realtors and other professionals to avoid anticipated problems. But, buyers often move full speed ahead without professional advice. Many of these buyers feel that saving professional fees is more important than making sure their purchases is a good one and others do not even think about what might go wrong.

One area where buyers can be surprised after purchase is the cost of ownership. Property in a condominium or homeowners association, usually comes with fees payable to the association. Another area of surprise can be restriction on use. Can the property be rented? Will a dog be allowed? Can the lanai be enclosed?

Florida's legislature has long tried to protect residential buyers. Perhaps the farthest reaching effort involves residences within condominium or homeowners associations. Florida's Condominium Act (Chapter 718 Florida Statutes) and Florida's Homeowners Association Act (Chapter 720 Florida Statutes) are both designed to protect buyers (and after purchase, protect owners).

Florida's legislature first started with developer sales of residential condominiums. The legislature wanted to make sure buyers all over the country would feel safe buying a Florida condominium. The Condominium Act was adopted in 1963 due in large part to problems with condominium developers. Developers promised unrealistic completion dates, under estimated operating budgets and as-built units were often far different from the model. Some developers also entered long term management and other contracts which where obligation of the condominium association inherited by purchasers.

The Condominium Act has been amended many times since adoption and its current form is quite extensive. One protection for buyers is an extensive list of documents which must be furnished to a prospective buyer. Developers are prohibited from closing on sale less than 15 days following delivery of the documents to the buyer and the statute requires a signed receipt for the documents.

After some experience with mandated developer disclosure, the legislature decided to require similar disclosure for non-developer residential condominium sales.

Prospective purchasers from non-developers are now entitled, at the seller's expense, to a current copy of the declaration of condominium, articles of incorporation of the association, bylaws and rules of the association, year-end financial information including detailed records of receipts and expenditures, audits, reviews, accounting statements and financial reports and a document entitled "Frequently Asked Questions and Answers" and a Governance Form prepared by the Division of Florida Condominiums, Timeshares and Mobile Homes. The statute mandates the contract tell buyers in bold print that the buyer has the right to void the contract within 3 days, excluding Saturdays and Sundays and legal holidays, after execution of the contract by the buyer and receipt by the buyer of the current copy of the required documents if the buyer so requests in writing. The contract must also confirm that any purported waiver of the voidability right is of no effect, and that the buyer may extend the closing to accommodate the 3 day voidability term although the buyer's right to void the contract terminates with closing.

The Condominium Act requires condominium associations maintain an adequate number of copies of the required documents and to make them available to unit owners and prospective purchasers. The association may charge its actual cost for preparing and furnishing the documents.

Perhaps the biggest problem with the legislature's well intended protection of buyers is that many involved in the process of obtaining and providing the mandated documents do not know what they are doing. In some cases, condominium documents are obtained from a title company that has simply made copies of those recorded with the Clerk of Courts. Recorded documents usually do not include rules and regulations, question and answer sheet or financial information. Associations often provide a budget instead of year-end financial statement and some even forget to include rules or the recent year-end financial information or the Frequently Asked Questions and Answers sheet. These documents not only provide information, they also provided technical opportunity for a buyer to void the contract at any time before closing by using the buyer's 3- day voidability right. If the buyer is not given all of the documents required by statute, the buyer's right to terminate the contract never ends until closing.

Although the Act prohibits waiver of the 3 day voidability right, if a buyer signs a receipt stating the buyer has received all of the required documents, the buyer will be bound by that signature and not able to successfully argue the buyer did not actually receive all of the required documents. Even if the buyer gets all of the required documents, most buyers lack the experience and knowledge to properly review the documents and understand their meaning.

Homeowners associations are not governed by the Condominium Act, unless all of the units in the homeowners association and condominiums. To help those buyers, the legislature decided that the biggest area of concern was assessments. Reports of buyers being shocked by assessments due a homeowner association resulted in more protective action by the legislature, which adopted mandatory financial disclosure as part of Florida's Homeowners Association Act. That Act requires same disclosure from developers and non-developers by mandating a disclosure summary be given to a prospective buyer before the buyer signs a contract for sale. The Act provides the disclosure summary be in form substantially similar to a form included in the Act.

Even though the disclosure summary is required to be given prior to a buyer signing the contract, it appears the legislature understands that buyers will often not be given the summary until a later time. The legislature provides that if the disclosure summary is not given to the buyer until after the buyer signs the contract, the buyer has a voidability right for 3 days after receipt of the disclosure summary, which cannot be waived other than by closing. The contract must contain in conspicuous type a clause mandated by the Act telling the buyer of the buyer's right of voidability based on time the disclosure summary was received.

The information provided by the disclosure summary is primarily financial. The summary warrants the buyers that the buyer will be obligated to pay assessments and required disclosure of the current amount of assessments, any land use fees for recreational commonly used facilities required for members in the homeowners association and the current amount of any special assessments. The disclosure summary also advises that there have been or will be recorded restrictive covenants governing the use and fee of properties in the community. The disclosure summary is not required for property in homeowners associations. It is required only for those where an owner must be a member of the association and pay homeowners association assessments that, if not paid, may result in a lien.

As with condominium disclosure, the disclosure summary is well intentioned but can provide a technical basis for a buyer with a change of heart to void a contract. Failure to provide the summary leaves the buyer's voidability right open ended. Providing an incorrect or improperly completed disclosure summary does the same. The most common mistake made when completing the disclosure summary is using the summary as a form to disclose all "association type" expenses which a buyer will pay after taking title (that can mean including condominium association, multiple homeowner associations or even golf club dues in an effort to provide the buyer with complete disclosure). A disclosure summary that does anything other than include the correct figures for a single homeowner association is invalid.

The legislature's effort to protect buyers may be lauded by some and considered too much government by others. In either event, the mandated disclosure only goes part way to providing information a buyer might want in making a purchasing decision. Condition of common property is not a mandated disclosure. Possible special assessments to pay for repairs, updates or propose renovation are not included. Pending rule or document changes are not addressed. Existing lawsuits in which an association is involved does not have to be disclosed, with exception of a case in which a condominium association may face liability in excess of $100,000.00. The statute does not mandate disclosure of minutes of meeting issues in the community or current and pending matters of concern other than what might be gained from the disclosure documents.

There are a lot of gaps in information a buyer might need to make a purchasing decision. The mandatory disclosure can be hard to understand and many buyers do not even try to review it. That makes it important that a buyer retain an experienced attorney, Realtor and other experts to assist in the purchasing decision and that consultation with experts be done prior to signing instead of after a contract is signed.

William G. Morris is the principal of William G. Morris, P.A. William G. Morris and his firm have represented clients in Collier County for over 30 years. His practice includes litigation and divorce, business law, estate planning, associations and real estate. The information in this column is general in nature and not intended as legal advice.