It appears that some last minute legislative fail-safe maneuvering has in fact averted the untimely demise of the Distressed Condominium Relief Act. While most of the provisions of SB 680 and HB 319 proved too controversial to pass, the extension of the Relief Act was salvaged by being added to a different bill altogether - HB 517, which now awaits signature by the governor.
The parties that will be impacted most by this extension include foreclosing lenders and investors in distressed condominium properties on the one hand, and sellers of these properties seeking to maximize the value of these assets on the other.
The extended Relief Act will continue the two "limited liability" classifications that can apply to both foreclosing lenders and investors - "bulk buyer" or "bulk assignee". These classifications explicitly protect the acquirer (whether a lender enforcing its loan rights or a third party investor) against some significant liabilities which could be inherited from the original developer (a.k.a. "successor developer" liabilities), while allowing the new owner to retain certain useful and valuable rights with respect to the development, operations, and eventual disposition of the assets.
The extension of the Relief Act will lessen the concerns of foreclosing lenders and investors relating to statutory warranties on units and common elements, unfunded reserves, past due assessments or deficit funding obligations, the acts and/or omissions of the prior developer's board of directors, and the like.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
