Rob Samouce: Buyers need to read documents before right to cancel sales contract ends

It happens over and over; another "vacationer" from up north comes down, loves it here and quickly decides to buy a condominium in beautiful Southwest Florida. He signs the sales contract, believes everything told to him by sales agent and doesn't read either the sales contract or the governing condominium documents provide by the sales agent prior to closing.

Lo and behold, after closing, the new owners finds out about all the restrictions he was not told about by the nice sales agent such as the fact that he will not be able to bring pets to live with him in the condominium, he will not be able to lease the unit as he needed to do for a few years to cover the new mortgage, or his pick-up truck is not allowed on the condominium property.

Ignorance is no excuse in these matters. Under Florida law, when one closes on a condominium unit, the new owner has constructive notice of all of the governing documents of the condominium and even though the owner may not have actual notice (hasn't read the documents), the laws says the owner must follow all the rules, regulations, and obligations contained therein.

If a new purchaser does not want to bother taking the time to read the boring documents, the purchaser should consider engaging a competent attorney to review the documents for him to determine if there are any restrictions that were not disclosed to him by the developer or sales agent that could have a profound impact on his expected use of the condominium unit.

Under Chapter 718 of the Florida Statutes, a purchaser of a new condominium unit from a developer has 15 days after signing the sales contract and receipt of the prospectus or disclosure statement (with all exhibits, including the governing documents of the condominium association and other documents that must be provided by the developer, such as a copy of the budget, Q&A sheet, vendor contracts, leases, etc.) to go through with the sale or cancel the contract.

This cancellation period is to give the purchaser a chance to review the documents to determine if he can live with the restrictions and obligations contained therein or decide to bail out of the sale.

There is a similar cancellation period for used condominium purchases. However, the cancellation period is only three days after execution of the sales contract and receipt of the governing documents (declaration of condominium, articles of incorporation, bylaws and house rules) and year-end association financial information and the Q&A sheet.

A recent example of a purchaser not knowing what he was getting into occurred in Palm Beach County as reported by the Palm Beach Post on Feb. 20. According to the article, Brad Eavenson deposited $50,000 to reserve what he thought was a condominium unit in a new luxury development on Singer Island called 2700 N. Ocean. Only after receiving the governing documents from the developer did Eavenson, a Palm Beach Gardens lawyer, find out that he was buying an $850,000 hotel suite. About 100 of the property's 242 units are hotel suites.

As a hotel suite, the unit is classified as restricted and therefore forbids Eavenson from applying for a homestead exemption to make the property his primary residence. In addition, the unit has to be furnished, have maid service, be connected to the main telephone switchboard and can be rented out by the hotel several times a year for up to a month at a time.

Eavenson claimed that it was never once represented to him by his real estate agent that the unit is zoned resort hotel and the information about the zoning is buried in Exhibit F of a 61-page condominium document. Eavenson said, "If buyers don't have a lawyer or they aren't diligent to read this, they wouldn't know."

According to the article, Eavenson's real estate agent also didn't know about the restriction either and steered another client into a $1.2 million dollar condominium unit in the same tower as the hotel units. All the hotel and regular condominium unit owners share the same amenities. Thus, there will likely be a mix of full time upper-class residents sharing the pool with the hotel spring breakers.

These are the kind of surprises that arise for those who do not become knowledgeable about what they are buying by reading in detail the provided condominium governing documents or engaging an attorney to do so for them before their three-day or 15-day cancellation period expires.

Rob Samouce, a principal attorney in the Naples law firm of Samouce, Murrell, & Gal, P.A. concentrates his practice in the areas of community associations including condominium, cooperative and homeowners' associations, real estate transactions and closings, general business law, estate planning, construction defect litigation and general civil litigation. This column is not based on specific legal advice to anyone and is based on principles subject to change from time to time. Those persons interested in specific legal advice on topics discussed in this column should consult competent legal counsel.

© 2005 marconews.com. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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