WEST PALM BEACH, Fla. (CN) – An antitrust lawsuit in South Florida court claims an investment firm bought up condo units in a large community and then wielded its statutory power as a “bulk owner” to try to force the remaining owners to sell their units against their will.
In the lawsuit in Palm Beach County court, condo owners say investment firm Axonic Properties used a controversial Florida condominium statute to gain leverage over them and pressure them to sell their units in the Palm Hill apartment complex in West Palm Beach. According to the complaint, it’s a common but often contentious investment strategy employed by large-scale investors.
The Chapter 718 statute at play generally dictates that once an investment company or bulk owner controls a certain percentage of the votes in a community (e.g. by buying most of the units), it can terminate the community’s status as a condominium and force the remaining owners to relinquish their units at market value.
That law has been revised by the state legislature in recent years to provide more protections to homeowners.
But the newly filed case claims the statute is still being taken advantage of.
According to the lawsuit, Axonic Properties’ purchasing entity Residential Condominiums LLC would give Palm Hill sellers side-payments so that the true sales prices of units would be under-reported. The strategy mitigated property tax exposure while artificially depressing market valuations as Residential Condominiums LLC bought up property in the Palm Hill community, the lawsuit alleges.
The side-payments were purported to be made for personal property such as appliances and other belongings in a purchased condo unit, the complaint claims. But the payments were, according to the plaintiffs, highly disproportionate to the actual worth of these items. One plaintiff unit owner claims it was offered $30,000 for personal items that were not “worth even close” to that sum.
Though the plaintiffs were all offered these large compensatory sums for their personal effects, they maintain the bids they received from Residential Condominiums LLC were still unfair. They claim they were pressured to sell while facing the prospect of a condo termination under the 718 statute, which would entail forced sale at the distorted market valuations listed in the county records, they claim.
The plaintiffs in the Palm Beach County case include two individuals — Paula Ramierez and Sonia Velez — alongside a group of landlord companies who own property in Palm Hill.
The plaintiff landlords, who have not sold their units, say that the association for the community didn’t properly address water leaks and other issues, and poached prospective renters from them.
Plaintiff Ramierez, who did sell, claims Axonic’s purchasing entity raised maintenance assessments and levied special project fees in the community to the point where she couldn’t afford to live there. She sold her 792 square-foot unit to the firm for an $85,000 price tag, according to county records. She says she received an additional $15,000 from Residential Condominiums LLC for her personal belongings.
Among other relief, the lawsuit demands damages under the Florida Antitrust Act, as well as a declaratory judgment that Residential Condominiums LLC has not met the legal requirements to carry out its plan of condominium termination, which was set in motion last week.
The case was filed May 19 and docketed Wednesday May 23.
The plaintiffs are represented by Geoffrey Ittleman in Fort Lauderdale.
A review of property records show that Palm Hill is located in an urban area of West Palm Beach and contains more than 350 units, which typically measure about 790 square feet.
In a sample of 40 recent Palm Hill sales since May 2017, the records show that a large majority of unit owners in the complex sold their properties to Residential Condominiums LLC at prices significantly higher than what they originally paid, booking more-than 100-percent gains in many instances.
A separate but similar piece of litigation was filed in Lee County last week over the Chapter 718 condo termination statute.
Unlike the Palm Hill residents who booked a gain on their sale, the two Lee County plaintiffs, a couple, claim they’ll face massive losses if an investment firm (not Axonic) is allowed to carry out its planned condominium termination in the Oasis Tower Two community where they live.
After taking control of the Oasis condo, the firm offered these plaintiffs $251,000 less than what they paid for their unit back in 2008, they say. If they accepted that pricetag, it would leave them $165,000 in the hole on their mortgage, they say.
Among other counts, the Lee County lawsuit requests that court find Florida’s condo termination statute unconstitutional under the Takings Clause.
“Plaintiffs have fundamental rights and a liberty interest in their private property that may not be deprived without due process of law and/or adequate compensation,” the Lee lawsuit reads.
The defendants in that case include the Florida Department of Business and Professional Regulation and the termination trustee; the investment firm is not named as a defendant. In addition to the constitutional arguments, the plaintiffs have a back-up count to challenge the condo termination within the framework of the Chapter 718 statute.
The statute, which has been the subject of controversy for years, was revised in 2015 and 2017 to address complaints from disgruntled condo owners and property rights advocates who have lamented alleged unfair treatment by investment groups.
According to a Bakalar and Associates review, the 2017 revisions expanded compensation protections for homesteaded condo owners so that all of them are entitled to, at a minimum, their original purchase price when a bulk owner induces them to sell under the so-called “optional” condo termination process in the statute. The revision also reduced the percentage of objecting condo owners required to halt the termination process.