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Condominium Conversions – What is covered under developer warranties?

Condominium conversions are existing rental apartment buildings where legal ownership is changed to a condominium form of ownership. Since these buildings were in existence for several years prior to conversion, they often deteriorate quickly or suffer from deferred maintenance. Most purchasers are unaware that Florida law reduces the statutorily imposed warranties and liability on a developer selling a conversion, as opposed to new construction.   If structural and maintenance defects exist, the association has limited options and shortened time frames in which to address them. Those associations that sit on their rights may allow a developer to avoid liability altogether.

FL Law: New Condominium Construction

A developer’s statutory warranties for newly constructed condominiums are established by Florida Statute Section 718.203. These warranties include, among others:

  1. a three-year warranty of fitness and merchantability for each unit commencing with the completion of the building containing the unit;
  2. a three-year warranty after completion of construction or 1 year after turnover, whichever occurs last as to the roof and structural components of a building or other improvements and as to mechanical, electrical, and plumbing elements serving improvements or a building;
  3. c) warranty of fitness and merchantability on personal property transferred with or appurtenant to each unit commensurate with the manufacturer’s warranty (e.g., refrigerator);
  4. d) warranty of fitness and merchantability on all other personal property (e.g., club house appliances or furniture) commensurate with the manufacturer’s warranty; and
  5. e) a three-year warranty of fitness and merchantability on all other improvements for use by the unit owners (e.g., pool or tennis court)

FL Law: Condominium Conversion

Warranties for condominium conversions are very different. Under Florida Statute Section 718.618 the developer has three options when converting an apartment building to a condominium:

  1. a) grant an implied warranty of fitness and marketability as to the roof and structural components of the improvements, as to fireproofing and fire protection systems, and as to mechanical, electrical and plumbing elements servicing the improvements (except mechanical elements servicing only one unit);
  2. b) establish converter reserve accounts; or
  3. c) post a surety bond equal to the total amount of reserve accounts which would otherwise be required.

When a developer chooses to fund converter reserve accounts the developer seeks to avoid implied warranties of fitness and marketability and eliminate or limit claims by the association that implied warranties exist. An association may challenge a limitation on warranties or establish other claims against a developer if:

  1. a) converter reserve accounts were not properly established or funded;
  2. b) the developer failed to properly maintain the common elements during developer control of the association;
  3. c) the developer failed to disclose or remedy structural or maintenance defects he knew or should have known of existed during the developer of the association; or
  4. d) the developer failed to make the appropriate disclosures under Section 718.616.

Of also great import, and association should understand that if the developer choose to grant warranties in a condominium conversion the time limit on those warranties likely run upon the recording of the declaration of condominium or upon the filing of the notice of intent to convert. This means the time period likely runs well before turnover actually occurs greatly reducing an association’s time to discover defects and make demands upon the developer. Therefore, it is imperative associations seek legal counsel immediately after turnover so as to understand which warranties the developer has provided and what remedies are available for structural or maintenance defects.

As your Central Florida real estate & association attorneys, AriasBosinger takes pride in partnering with our clients and solving their legal problems. We encourage you to keep up with our blog for more insight pertaining to Florida community association and real estate law.

Posted in Arias Bosinger
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