Condominiums and Time-Sharing

CONDOMINIUMS 

Airspace and common elements Interests and rights Condominium creation Organization and management Owner responsibilities 

A condominium is a hybrid form of ownership of multi-unit residential or commercial properties. It combines ownership of a fee simple interest in the airspace within a unit with ownership of an undivided share, as a tenant in common, of the entire property’s common elements, such as lobbies, swimming pools, and hallways. 

A condominium unit is one airspace unit together with the associated interest in the common elements. 

Airspace and 

common elements The unique aspect of the condominium is its fee simple interest in the airspace contained within the outer walls, floors, and ceiling of the building unit. This airspace may include internal walls which are not essential to the structural support of the building. Section 8: Property Rights, Estates & Tenancies 177 

Common elements are all portions of the property that are necessary for the 

existence, operation, and maintenance of the condominium units. Common elements include: 

 the land (if not leased) 

 structural components of the building, such as exterior windows, roof, and foundation 

 physical operating systems supporting all units, such as plumbing, power, communications installations, and central air conditioning 

 recreational facilities 

 building and ground areas used non-exclusively, such as stairways, elevators, hallways, and laundry rooms 

A buyer who purchases Unit #1 of the condominium illustrated obtains a fee simple interest in the airspace of apartment 1 and a tenancy in common interest in her pro rata share of the common elements. If all units in the building have the same ownership interest, the buyer would own an indivisible one-ninth interest in the common elements– pool, parking lot, garage, pool, building structure, tree, etc. 

Interests and rights The condominium unit can be owned jointly, in severalty, in trust, or in any other manner allowed by state law. Unit owners hold an exclusive interest in their individual apartments, and co-own common elements with other unit owners as tenants in common. 

Possession, use, and exclusion. Unit owners exclusively possess their apartment space, but must share common areas with other owners. The property’s legal documents may create exceptions. For example, unit owners may be required to join and pay fees for use of a health club. 178 Principles of Real Estate Practice in Florida 

Unit owners as a group may exclude non-owners from portions of the common area, for instance, excluding uninvited parties from entering the building itself. 

Transfer and encumbrance. Condominium units can be individually sold, mortgaged, or otherwise encumbered without interference from other unit owners. As a distinct entity, the condominium unit may also be foreclosed and liquidated. An owner may not sell interests in the apartment separately from the interest in the common elements. 

Resale of a unit interest may entail limitations, such as the condominium association’s prior approval of a buyer. 

Condominium units are individually assessed and taxed. The assessment pertains to the value of the exclusive interest in the apartment as well as the unit’s pro rata share of common elements. 

Condominium 

creation Condominium properties are created by executing and recording a condominium declaration and a master deed. The declaration must be legally correct in form and substance according to local laws. The party creating the declaration is referred to as the developer. The condominium may include ownership of the land or exclude it if the land is leased. 

Declaration provisions. The condominium declaration may be required to include: 

 a legal description and/or name of the property 

 a survey of land, common elements, and all units 

 plat maps of land and building, and floor plans with identifiers for all condominium units 

 provisions for common area easements 

 an identification of each unit’s share of ownership in the overall property 

 organization plans for creation of the condominium association, including its bylaws 

 voting rights, membership status, and liability for expenses of individual owners 

 covenants and restrictions regarding use and transfer of units 

Organization and 

management Organization. Condominium declarations typically provide for the creation of an owner’s association to enforce the bylaws and manage the overall property. The association is often headed by a board of directors. The association board organizes how the property will be managed and by whom. It may appoint management agents, hire resident managers, and create supervisory committees. The board also oversees the property’s finances and policy administration. 

Management. Condominium properties have extensive management requirements, including maintenance, sales and leasing, accounting, owner Section 8: Property Rights, Estates & Tenancies 179 

services, sanitation, security, trash removal, etc. The association engages professional management companies, resident managers, sales and rental agents, specialized maintenance personnel, and outside service contractors to fulfill these functions. 

Owner 

responsibilities Individual units. Owner responsibilities relating to the apartment include: 

 maintaining internal systems 

 maintaining the property condition 

 insuring contents of the unit 

Common area assessments. Unit owners bear the costs of all other property expenses, such as maintenance, insurance, management fees, supplies, legal fees, and repairs. An annual operating budget totals these expenses and passes them through as assessments to unit owners, usually on a monthly basis. 

Should an owner fail to pay periodic assessments, the condominium board can initiate court action to foreclose the property to pay the amounts owed. 

The unit’s pro rata share of the property’s ownership as defined in the declaration determines the amount of a unit owner’s assessment. For example, if a unit represents a 2% share of the property value, that unit owner’s assessment will be 2% of the property’s common area expenses. 

Condominium 

disclosures The Condominium Act. F.S. Chapter 718 (the Condominium Act) requires developers selling condominium units to provide the buyer with copies of the governing documents (Declaration, Articles of Incorporation, Bylaws, Rules of the Association, and Frequently Asked Questions sheet) and have the buyer sign a receipt for the documents. The developer must also include a disclosure with the sales contract that provides the buyer with 15 days after signing the contract and receiving the required materials to submit a written cancellation notice. The buyer may also cancel within 15 days of receiving a contract amendment that is adverse to the buyer. The disclosure must also include language that the budget provided to the buyer contains estimates which, if they do not match actual costs, do not constitute adverse changes to the offering. 

The Act requires condominium unit owners who are reselling their units to provide the buyer with copies of the governing documents, current year-end financial report, Frequently Asked Questions sheet, and a governance form. The Division of Florida Condominiums, Timeshares, and Mobile Homes created the governance form as an informal educational overview of condominium governance. It includes such topics as the role and responsibilities of the board, owners’ rights, remedies available to owners, and more. Sellers will want to have the buyer sign a receipt confirming he or she has received all of the required documents. The Act also requires the seller to include a disclosure with the sales contract that provides the buyer with the right to cancel in writing within 3 business days of signing the contract. 180 Principles of Real Estate Practice in Florida 

If the condominiums are being sold prior to construction completion, the developer must disclose a copy of the plans and specifications for the completion of the units and common areas. All contracts and disclosures must contain language that oral representations cannot be relied upon and that the right to cancel may not be waived. 

TIME-SHARING 

Time-share lease Time-share freehold Regulation 

Time-share disclosures 

Time-share ownership is a fee or leasehold interest in a property whose owners or tenants agree to use the property on a periodic, non-overlapping basis. This type of ownership commonly concerns vacation and resort properties. Time-share arrangements provide for equal sharing of the property’s expenses among the owners. 

Time-share lease In a leasehold time-share, the tenant agrees to rent the property on a scheduled basis or under any pre-arranged system of reservation, according to the terms of the lease. Generally, the scheduled use is denominated in weeks or months over the duration of the lease, a specified number of years. 

Time-share freehold In a freehold time-share, or interval ownership estate, tenants in common own undivided interests in the property. Expense prorations and rules governing interval usage are established by separate agreement when the estate is acquired. 

For instance, the Blackburns want a monthly vacation in Colorado once a year. They find a time-share condominium that needs a twelfth buyer. The available month is May, which suits the Blackburns. The total price of the condominium is $240,000, and annual expenses are estimated to be $9,600. The Blackburns buy a one-twelfth interest with the other tenants in common by paying their share of the price, $20,000. They are also obligated to pay one-twelfth of the expenses every year, or $800. They have use of the property for one-twelfth of the year, in the month of May. 

Interval owners must usually waive the right of partition, which would enable an owner to force the sale of the entire property. 

Regulation The development and sale of time-share properties has come under increased regulation in recent years. Developers and brokers face stringent disclosure requirements regarding ownership costs and risks. Other laws provide for a cooling-off period after the signing of a time-share sales contract, and require registration of advertising. Section 8: Property Rights, Estates & Tenancies 181 

In Florida, anyone selling time-share plans must hold a real estate license unless they are specifically exempted. Owners who occupy the timeshare for their own use are exempt from licensure. Owner/developers who sell timeshares may employ unlicensed individuals to sell the timeshares as long as those individuals are not paid commission on the sales and are not paid based on individual transactions. 

If a timeshare plan is located in Florida but is being offered for sale outside of the state but within the United States, the offering or sale is not subject to the provisions of Florida time-share laws. If the timeshare plan is located in Florida but is being offered for sale outside of the United States, the offering is not subject to the provisions of Florida time-share laws as long as the developer files the timeshare plan with the Division of Florida Condominiums, Timeshares, and Mobile Homes for approval or the developer pays an exemption registration fee and files the required information to the Division for approval. 

If a timeshare is located outside of Florida but is being offered for sale in Florida, the offering or sale is subject only to certain time-share laws, as specified in F.S. Chapter 721.03(1)(c). 

Time-share 

disclosures The Florida Vacation Plan and Timesharing Act and Rule 61J2-23.001, F.A.C. F.S. Chapter 721 (the Florida Vacation Plan and Timesharing Act) and Rule 61J2-23.001 0f the Florida Administrative Code require several disclosures to be included when timeshares are being sold. 

Listing agreement disclosures. Listing agreements with brokers must be in writing and provided to the signing client at the time of signing. The agreement must include the following disclosures: 

 THERE IS NO GUARANTEE THAT YOUR TIME-SHARE PERIOD CAN BE SOLD AT ANY PARTICULAR PRICE OR WITHIN ANY PARTICULAR PERIOD OF TIME. 

This disclosure must be included in conspicuous type and located directly above the signature line for the owner of the time-share period. The statement must also be included in any written advertising material used to solicit listing agreements. 

 a complete and clear disclosure of fees, commissions, and other costs or compensation that will be paid to or received by the broker 

 the term of the agreement with a statement regarding any party’s ability to extend the agreement’s term and a description of the conditions under which the agreement may be extended and at what cost 

 a description of the services the broker will provide and the obligations of each party to the resale transaction, including costs and obligations in notifying the managing entity of the plan and any exchange company 

182 Principles of Real Estate Practice in Florida 

 whether the broker has exclusive rights of obtaining a buyer during the agreement’s term, to whom and when proceeds from the sale are to be disbursed, under what conditions any party may terminate the agreement, and the amount of commission or compensation owed to the broker at agreement termination prior to resale closing. 

 whether the broker or anyone else may use the subject time-share period, a description of such use rights, and to whom rents or profits from the use will be paid 

 the existence of any judgments or pending litigation against the broker due to or alleging a violation of Florida real estate statutes or consumer fraud 

Resale contract disclosures. It is considered a violation of Florida real estate license laws if a licensee executes any contract or purchase agreement without complying with the required provisions. The contract or agreement must include the following disclosures, for which the broker may rely on written information provided by the managing entity: 

 an explanation of the form of time-share ownership being purchased and a legally sufficient description of the time-share period being purchased 

 the name and address of the plan’s managing entity 

 in conspicuous type and located directly above the signature line for the owner of the time-share period, the statement: 

THERE IS NO GUARANTEE THAT YOUR TIME-SHARE PERIOD CAN BE SOLD AT ANY PARTICULAR PRICE OR WITHIN ANY PARTICULAR PERIOD OF TIME. 

 in at least 10-point type, all capitalized, and directly above the buyer’s signature line, the statement: 

THE CURRENT YEAR’S ASSESSMENT FOR COMMON EXPENSES ALLOCABLE TO THE TIME-SHARE PERIOD YOU ARE PURCHASING IS ___. THIS ASSESSMENT, WHICH MAY BE INCREASED FROM TIME TO TIME BY THE MANAGING ENTITY OF THE TIME-SHARE PLAN, IS PAYABLE IN FULL EACH YEAR ON OR BEFORE ___. THIS ASSESSMENT (INCLUDES/DOES NOT INCLUDE) YEARLY AD VALOREM REAL ESTATE TAXES, WHICH (ARE/ARE NOT) BILLED AND COLLECTED SEPARATELY. 

 if ad valorem real property taxes are not included in the current year’s assessment for common expenses, the statement: 

THE MOST RECENT ANNUAL ASSESSMENT FOR AD VALOREM REAL ESTATE TAXES FOR THE TIME-SHARE PERIOD YOU ARE PURCHASING IS ___.) EACH OWNER IS PERSONALLY LIABLE FOR THE PAYMENT OF HIS ASSESSMENTS FOR COMMON EXPENSES, AND FAILURE TO TIMELY PAY THESE ASSESSMENTS MAY RESULT IN Section 8: Property Rights, Estates & Tenancies 183 

RESTRICTION OR LOSS OF YOUR USE AND/OR OWNERSHIP RIGHTS. 

 if a time-share estate is being conveyed, in conspicuous type, the statement: 

For the purpose of ad valorem assessment, taxation and special assessments, the managing entity will be considered the taxpayer as your agent pursuant to section 192.037, Florida Statutes. 

 the terms and conditions of the purchase and closing, including the closing costs and title insurance obligations of the seller and/or the buyer 

 the existence of any mandatory exchange program membership included in the plan 

Disclosure for Florida timeshare being offered for sale outside of Florida. The following disclosure statement is required within the purchase contract in conspicuous type located directly above the buyer’s signature line. 

The offering of this timeshare plan outside the jurisdictional limits of the United States of America is exempt from regulation under Florida law, and any such purchase is not protected by the State of Florida. However, the management and operation of any accommodations or facilities located in Florida is subject to Florida law and may give rise to enforcement action regardless of the location of any offer. 

Disclosure of right to cancel. All time-share purchase agreements must include a disclosure that buyers have the right to cancel without penalty or obligation within 10 calendar days after the date of contract signing or the date the buyer received all of the required documents, whichever is later. The buyer must notify the seller of the cancellation in writing. The transaction closing may not take place before the expiration of the 10-day cancellation period. This right to cancel may not be waived.