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CHAPTER

REAL PROPERTY RIGHTS

REAL AND PERSONAL PROPERTY 1

2

Real Property 3

4 F.S. 475.01 provides definitions related to licensed individuals who receive 5

compensation for the various services of real estate for real property. In this context, the 6 terms real property and real estate are used interchangeably to refer to any interest or 7

OVERVIEW This chapter examines the concept of real property ownership, what it is, and what it is not. The physical aspect of real estate and the legal rights associated with ownership are discussed. Various methods of owning property and limitations that affect ownership are discussed. Certain rights of use are distinguished from actual ownership of property.

OBJECTIVES After completing this chapter, you should be able to do all of the following:

Know the F.S. 475 definition of real property

List and explain the physical components of real property

Explain the four tests used by the courts to determine if an item is a fixture

Distinguish between real and personal property

Describe the bundle of rights associated with real property ownership

List the principal types of estates (tenancies) and describe their characteristics

Describe the features associated with the Florida Constitutional Homestead Rights

Distinguish between cooperatives, condominiums and timeshares

Describe the four main documents associated with condominiums

KEY TERMS

Community development districts Condominium Cooperative Declaration Fee simple estate Fixture Freehold estate Homeowners’ Association Homestead property Joint tenancy Land Leasehold estate Life estate

Personal property Proprietary lease Real estate Real property Remainderman Right of survivorship Separate property Tenancy at sufferance Tenancy at will Tenancy by the entireties Tenancy (estate) for years Tenancy in common Timeshare

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estate in land and any interest in business enterprises or business opportunities, 1 including any assignment, leasehold, sub-leasehold, or mineral right. 2

Although the terms real estate and real property are often used interchangeably by 3 most people, there are important differences in these terms regarding property 4 ownership rights and use that must be understood. Each is defined below: 5

6

Real estate. Real estate is physical, tangible, and immobile. It includes the 7 earth’s surface, subsurface, and the air above the surface. It also includes 8 anything growing on the land, anything permanently attached to the land, and all 9 improvements on and to the land. There are, however, certain exceptions. 10 Improvements are anything man-made, such as buildings or other relatively 11 permanent structures attached to or located on the land. The definition of real 12 estate includes everything provided by nature such as mineral deposits, wildlife, 13 timber, fish, water, and soil. 14

15

Real property. Real property includes the physical land and improvements (real 16 estate), together with legal rights to own or use the property. An individual’s 17 property rights are guaranteed and protected by government. 18

19 Although one may own the air extending 20

above the surface of the property, the right to own 21 it is limited. For example, an owner cannot 22 prevent airplanes from flying through his or her 23 airspace. 24

As can be seen in this diagram, real estate 25 includes the surface, the subsurface to the center 26 of the earth, and the airspace above the surface. 27

Ownership of the subsurface extends below 28 the surface to the center of the earth in a “V” 29 shape. This includes ownership of natural 30 resources such as coal, oil, and natural gas. 31

Surface rights allow property owners to use 32 the surface of the land to build buildings, grow 33 crops, and so on. 34

The physical real estate can be divided and its components bought and sold 35 separately. Mineral rights, for example, are often sold while ownership of the surface and 36 air is not affected. Buildings can be built on air rights, without the actual transfer of 37 ownership of the land or subsurface. 38

Of special concern are the rights associated with the use or ownership of water. 39 Water, in some instances, may be the property of the owner; in other cases, it may be 40 considered to be public domain. A man-made lake on an owner’s property is typically 41 considered to be fully owned by the property owner. On the other hand, a natural lake 42 may or may not be. Laws involving the ownership or use of water are complex. 43 Licensees are cautioned to investigate carefully the rights associated with water that is 44 on or contiguous to a property. 45

The following two types of water rights are of particular significance: 46 47

Riparian rights. Riparian rights are the rights of an owner whose property 48 borders a flowing waterway such as a river or stream. The property owner is not 49 considered to be the owner of the water flowing over or past the property, but has 50 a right of reasonable use of the water. This includes fishing, swimming, and so 51 on, but the property owner is not allowed to divert or pollute the water, thus 52 interfering with the rights of others who have a subsequent right to use the same 53 water. 54

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Littoral rights. Littoral rights are the rights of owners of property bordering non-1 flowing water, such as an ocean, sea, or lake. These rights generally give the 2 property owner rights only to the shoreline or high-water mark. In the case of 3 ocean- or gulf-front properties, the ownership extends to the mean high-tide 4 mark. 5

6 Natural processes related to water and their definitions include the following: 7

8

Erosion. Erosion refers to the loss of soil that is carried away by water washing 9 against a riverbank or a beach. 10

11

Accretion. Accretion is an increase in land area as moving water deposits soil in 12 other than its original location. This is the opposite of erosion. 13

14

Alluvion. Alluvion is soil resulting from accretion. 15 16

Reliction. Reliction is the exposure of dry land once covered by water when the 17 level in a lake recedes, or a river or stream changes course. 18

19

Personal Property, Personalty, or Chattels 20

21 Personal property, personalty, and chattels are synonymous terms. Personal 22

property is movable, which means that it is not permanently attached to the land or 23 buildings on the land. Personal property includes items such as furniture, automobiles, 24 stocks, bonds, money, and mortgages. 25 26

Tangible versus Intangible 27

28 Something that is tangible has physical existence. Real estate is considered to be 29

tangible. Something that is intangible has no physical existence, which means that it 30 cannot be touched. Stocks and bonds, for example, are intangible. 31 32

Fixtures 33

34 A fixture is an item that was once personal property, but has been installed or 35

attached to the land or building in a permanent way that has caused it to become part of 36 the real estate. When a residential tenant adds a fixture to a property, it cannot be 37 removed at the expiration of the lease and becomes the property of the landlord. 38 39

Trade Fixtures 40

41 Trade fixtures are articles of personal property that have been attached to real estate 42

that is rented or leased by a tenant and used in the conduct of business. Personal 43 property installed to conduct a business or trade is not considered part of the real estate 44 and can be removed during or at the termination of a lease. 45 46

Real Estate Transaction Property Distinctions 47

48 In a real estate transaction, licensees should be careful to distinguish between real 49

and personal property. Unless a contract states otherwise, the sale of real property does 50 not include items of personal property. The potential for conflict between the parties to a 51 real estate transaction can be significantly reduced by clearly identifying in a sales 52 contract those items of personal property that are to be included. It is often wise to 53

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identify items of personal property that are not to be included, but may become the 1 subject of a later disagreement. 2

If a lawsuit should arise between the parties to a real estate sales transaction over 3 which items were to be included in the sale and which were not, courts may be called 4 upon to decide. Courts usually employ four legal tests to decide if an item is real or 5 personal property. Since the sale typically only involves the transfer of real property, this 6 can be an extremely important decision. 7 8

The four tests used by courts to determine real or personal property are as follows: 9 10

Intent of the parties. By reviewing the listing and sales contracts, the court may 11 be able to decide what was intended. The words and actions of the parties 12 before, during, and after the sale may also be considered in making this decision. 13

14

Relationship of the parties. The terms of a lease, for example, may specify that 15 certain improvements made by a tenant during the term of the contract may be 16 removed at the expiration of the lease. This legal relationship may be the basis 17 for the court’s decision. 18

19

Method of annexation. How an article is attached to the property may very well 20 determine, in the judgment of the court, whether an item should be removed or 21 not. Typically, if tools are required for the removal, and damage may occur to the 22 item or the property from which the article is to be removed, it is classified as part 23 of the real estate. There are exceptions to this general rule. 24

25

Adaptation of the article. This test looks to the manner in which the item in 26 dispute is being used. If the item is necessary to fulfill the purpose and utility for 27 which the building was constructed, the court will usually decide the item is real 28 property. 29

30 31 32 33 34 35 36 37 38 39 40 41

Legal Rights in Property 42

43 Real property laws in the United States are based on the allodial system, which 44

allows private citizens the right to own land. The legal rights of ownership are often 45 compared to a bundle of sticks, with each stick representing a separate transferable 46 right. All property rights taken together may be thought of as a bundle of rights with each 47 right representing a separate “stick” in the bundle. 48 49

There are five large “sticks” in the bundle of rights: 50

Memory Device: “IRMA” The four tests used by courts to distinguish between real and personal property are: I = Intent R = Relationship M = Method of annexation A = Adaptation



Possession. An owner has a right to possess or occupy the property. 1 2

Disposition. An owner generally has the right to sell the property, to give it 3 away, or leave it in a will. There are exceptions as will be discussed later. 4

5

Enjoyment. An owner has the right to quiet use and enjoyment of the property 6 without disturbance by hostile claimants. 7

8

Exclusion. Owners have the right to prevent others from entering or using their 9 property. 10

11

Control. An owner has the right to determine how the property will be used. 12 13

The physical real estate and the legal rights of ownership can be subdivided into a 14 countless variety of smaller “bundles.” This divisibility feature is very important to 15 understand, and will be illustrated later in this chapter. 16 17

ESTATES 18

19

Estates Defined 20

21 An estate is the degree, quantity, nature, and extent of interest or ownership rights a 22

person can have in real property. That portion of the bundle of rights the individual has 23 determines the extent or type of estate held. As was discussed previously, real property 24 ownership can be undivided, or divided into various types of smaller estates. 25

A party entitled to rights in property is a tenant. The word tenant is commonly thought 26 of in connection with rentals; however, at law, the term refers to anyone who has rights 27 in property. An owner of property is a tenant with reference to his or her property, as is a 28 renter when in possession of someone else’s property. 29

Obviously, the rights of an owner and those of a renter are quite different. Each, 30 however, has an estate that can be defined by the duration and quality of those rights. 31 32

Freehold Estates 33

34 A freehold estate is an estate involving ownership. Anyone who owns real property 35

has a freehold estate. Freehold estates have no specified time for the rights to expire. 36 There are two types of freehold estates: fee simple estate and life estate. 37 38

Fee simple estate (fee, fee simple, fee simple absolute). In a fee simple 39 estate, the owner has a complete bundle of rights. A fee simple estate is the 40 simplest and yet the most comprehensive estate in land. It is the most desirable 41 and most common type of estate. 42

There are four ways the fee simple estate may be held: 43 44

o Estate in severalty. An estate in severalty is sole ownership of the entire 45 bundle of rights. With an estate in severalty, the owner may leave his or her 46 interest in a will. If the owner dies intestate (without a will), the interest will 47 descend to the owner’s heirs. 48 49

o Tenancy in common (estate in common). A tenancy in common is a fee 50 estate held by two or more persons. Each person has an undivided interest in 51 the whole property. A tenancy in common ownership can be created by the 52 same or different deeds, at the same or different times, with equal or unequal 53

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shares of ownership. All owners, however, have equal rights of use and 1 possession. 2

The owner of a tenancy in common interest may sell his or her interest 3 during his or her lifetime without the consent of the other owners, and without 4 affecting any other owner’s rights. 5

A tenancy in common owner may leave his or her interest in a will. If the 6 owner dies intestate, the interest will descend to the owner’s heirs. 7 8

o Joint tenancy (joint estate). A joint tenancy is a fee estate shared by two or 9 more persons who must have equal and undivided interests. A joint tenancy 10 can be created only when the four unities of possession, interest, time, and 11 title are present. In other words, all tenants must have equal rights of use and 12 possession, equal and undivided interests, and have acquired their 13 ownership at the same time by the same deed or conveyance. 14

The distinctive characteristic of a joint tenancy is the right of survivorship. 15 Upon the death of a joint tenant, the interest of the decedent does not pass 16 according to a will or by descent and distribution; it passes instead to the 17 surviving joint tenants. 18

The interest cannot be left in a will since the form of ownership dictates 19 the succession of ownership. 20

A joint tenant can sell the ownership interest during his or her lifetime. 21 However, the purchaser will be a tenant in common since the four unities are 22 not present. 23

In Florida, a joint tenancy can only be created if the right of survivorship is 24 clearly expressed in the deed or conveyance. If not, a tenancy in common 25 results. 26

27 28 29 30 31 32 33 34 35 36

o Tenancy by the entireties. Tenancy by the entireties is an estate for a 37 husband and wife only. The marriage is considered to be the owner of the 38 property in which each spouse has a right of survivorship. Upon the death of 39 one spouse, the surviving spouse will own the property in fee simple as an 40 estate in severalty. 41

Since the marriage is the technical owner of the property, one spouse 42 alone cannot do anything that affects the ownership without the other 43 spouse’s consent. Debts incurred by only one spouse cannot be enforced 44 against the property. A spouse, by his or herself, may not place a mortgage 45 against the property, sell his or her interest outside of the marriage, or leave 46 his or her interest in a will. The law serves to protect the marriage against the 47 inappropriate actions of one spouse that negatively affect the other. 48

The estate by the entireties is created automatically whenever a husband 49 and wife purchase property at the same time if both names appear on the 50 deed and no other ownership form is specified. 51

In the event of a divorce, the ownership converts to a tenancy in common, 52 unless otherwise dictated by a court. 53

In Florida, a husband and wife are permitted to own property separately 54

Memory Device: “PITT” The four unities required to create a joint tenancy, use this mnemonic. P = Possession I = Interest T = Time T = Title



from the marriage. Property owned in one spouse’s name before the 1 marriage or acquired by gift or inheritance during the marriage is considered 2 separate property. The spouse owning this property can convey it without the 3 consent of the other. [F.S. 61.075 (4)(b)] 4

Florida does not recognize community property, which is the case in 5 some states. In a community property state, all property acquired during the 6 marriage is owned jointly by both spouses. 7

8

Life estate. A life estate is a freehold estate created when an owner of a fee 9 simple estate conveys ownership to another, but only for the balance of the 10 lifetime of the party to whom the property is conveyed. The party who receives 11 the ownership of a life estate is called a life tenant. During the life of the life 12 tenant, he or she has all rights in the property. He or she may lease it, mortgage 13 it, or even sell it. However, the life tenant cannot convey more rights than he or 14 she possesses and must preserve the property for the one who is to receive it 15 upon his or her death. 16

Since the life tenant has no ability to control the property after his or her 17 death, in the event the property is leased, mortgaged, or sold, those rights 18 terminate upon the death of the life tenant. 19

Provision must be made in the deed that creates a life estate for the 20 succession of ownership upon the death of the life tenant. The party who created 21 the life estate, called the grantor, may wish to have the property ownership 22 returned to him or her or to his or her heirs. The right to regain the ownership is 23 called a reversion estate. The grantor may instead wish to have the property 24 pass to another person or entity named in the original deed. If someone other 25 than the original owner is to receive the ownership, it is called a remainder 26 estate. The difference between a reversion estate and a remainder estate is 27 simply who is to receive the ownership. 28

If the remainderman is certain to receive the rights, he or she is a vested 29 remainderman. If there is uncertainty as to whether or not the rights will pass to 30 the remainderman, he or she is a contingent remainderman (e.g. future children). 31 A life estate is usually, but not always, based on the life of the life tenant. Instead, 32 it may be based on the life of a third person. When based on the life of a third 33 person, the estate is called an estate pur autre vie, which means “an estate for 34 the life of another.” 35

One who has possession or control of property has an estate in possession. 36 An owner in fee simple or a life tenant has an estate in possession. When a party 37 is to receive rights in the future, they have an estate in expectancy. A 38 remainderman would have an estate in expectancy. 39

40

Non-freehold (Leasehold) Estates 41

42 A non-freehold, or leasehold, estate is an estate in which the tenant does not have 43

an ownership interest in the property. The tenant only has a right of possession and use. 44 There are three types of non-freehold estates as follows: 45 46

Tenancy at will. A tenancy at will is a non-freehold estate with the tenant in 47 lawful possession of the property under an agreement with the landlord, but with 48 no definite time limit for the rights to terminate. The agreement can be oral or 49 written, and is referred to as a period-to-period tenancy. All oral leases are 50 tenancies at will. 51

A tenancy at will is terminated by the sale of the property or by death of either 52 party. It can also be terminated at the will of either the landlord or tenant by 53 giving proper legal notice. 54

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The length of the tenancy determines the notice period required to terminate 1 a tenancy at will. The frequency of the rental period typically determines the 2 length of the tenancy and establishes the notice period required to terminate the 3 agreement. 4

The required notice periods are: 5 6

Tenancy Residential Nonresidential 7 8 Week-to-week 7 days 7 days 9 Month-to-month 15 days 15 days 10 Quarterly 30 days 45 days 11 Annual 60 days 90 days 12 13

14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45

Tenancy for years. A tenancy for years is a non-freehold estate with the tenant 46 in lawful possession of the property under an agreement with the landlord for a 47 specified period of time. There must be a definite beginning and a definite ending 48 date for the rights to exist, and these dates must be specified. A tenancy for 49 years must be in writing, signed by the landlord, and witnessed by two persons. 50 Termination of a tenancy for years can occur by mutual agreement of the parties, 51 by expiration of the agreed-upon lease period, or by a breach of contract, which 52 may result in a lawsuit. The landlord has an estate in reversion while the tenant is 53 in possession of the property. 54

Types of Estates (or Tenancies)

Freehold (Ownership)

Non-Freehold (or Leasehold)

(Temporary Possession and Use) Fee Simple Life Estate

Type Definition Type Definition Type Definition

In Severalty

Sole ownership; inheritability

Life Estate

Ownership is conveyed to the life tenant only for the balance of the lifetime.

At Will No definite time limit; oral or written

In Common

Co-ownership with undivided interest in property; equal or unequal shares of ownership; inheritability

Reversion

Ownership is returned to grantor upon death.

For Years Specified time period; written and witnessed

Joint

Co-ownership; with equal rights of possession, interest, time, and title; survivorship

Remainder Ownership is passed to another.

At Sufferance

No agreement

By the Entireties

Co-ownership between husband and wife; survivorship



Tenancy at sufferance. A tenancy at sufferance is a non-freehold estate that 1 arises when a tenant occupies a landlord’s real estate in the absence of any 2 agreement. The most common example is when a tenant “holds over” after the 3 expiration of a lease. A tenancy at sufferance may be terminated by either 4 landlord or tenant without notice. In this situation, the tenant owes the landlord 5 fair market rent for the period of occupancy. [F.S. 83.58] 6

7

Elective Share 8

9 Dower and curtesy laws are a common law system, which establish the rights in 10

property of widows and widowers upon the death of a spouse. These laws were 11 repealed in Florida in 1976 and replaced by the elective share. Under dower and curtesy 12 laws, spouses were not treated equally. Florida enacted the elective share provision to 13 create a balance of rights in property between marital partners. 14

Elective share provides for a surviving spouse to be entitled to 30% of the decedent’s 15 real and personal property owned at the time of death. The purpose of elective share is 16 to prevent a spouse from being harmed by an unfair will. If a decedent left less than 30% 17 to his or her spouse, the surviving spouse can use this right to override the will and claim 18 at least that amount. 19

Elective share is not automatic. It must be elected by filing with the court within four 20 months of the date of first public notice of the administration of the estate. If the will is 21 litigated, elective share must be filed with the court within 40 days following the 22 termination of litigation. Elective share is a personal right and cannot be sold or 23 transferred to another person. Once a 30% share has been transferred to the surviving 24 spouse, the surviving spouse owns the property in fee simple and can dispose of it 25 through sale, or use the property as desired. 26

Elective share does not apply to property owned as a tenancy by the entireties. This 27 protection is unnecessary since a surviving spouse is the sole owner of the property. 28

Elective share does not apply to homestead property. (For additional information on 29 this topic, refer to the Constitutional Homestead Rights section in this chapter.) 30 31

Descent and Distribution 32

33 Probate laws provide for the passing of property to legal heirs under the law of 34

descent and distribution. When an individual dies intestate (without a will), the law 35 stands between the property of the decedent (the individual who died) and any possible 36 claimants, to be certain that the assets of the decedent are distributed fairly and in 37 accordance with the law. 38

The court will appoint a personal representative to administer the affairs of the 39 decedent and distribute the assets according to the law of descent and distribution. 40

Under the law of descent and distribution, all property passes to a surviving spouse if 41 there are no lineal descendants or no lineal descendants of both spouses. Lineal 42 descendants are persons who are in direct line to an ancestor, such as children, 43 grandchildren, and great-grandchildren. If there are lineal descendants, who are not 44 lineal descendants of both spouses, then the surviving spouse receives one-half of the 45 property. The balance of the property is divided among the lineal descendants. [F.S. 46 732.103] 47

The law of descent and distribution does not apply if the decedent dies testate (left a 48 will). Instead, the court will confirm the appointment of the personal representative 49 named in the will and require the personal representative to show that the terms of the 50 will are followed in the distribution of the assets. 51

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Constitutional Homestead Rights 1

2 The Florida Constitution defines a homestead (or homestead property) as, “any real 3

property owned by the head of a household who resides therein.” This includes women 4 or men who live alone. 5

The Florida Constitution exempts homestead property from the execution and forced 6 sale of the property to satisfy personal judgment liens, such as personal loans or credit 7 card debt, which are held against the head of a household. However, homestead 8 property can be foreclosed upon for debts that are related to the property and debts 9 entered into jointly by both spouses. In other words, homestead property can be sold at 10 foreclosure for nonpayment of any lien, except a judgment lien against the head of 11 household. Either spouse can claim to be the head of household. 12

The amount of property protected by homestead rights is limited to one-half acre if 13 the homestead is located within a municipality or to 160 acres if located outside of a 14 municipality. The value of the homestead is not considered. If the property is greater 15 than these limits, the amount over these limits may be foreclosed and sold to satisfy 16 creditors. 17

Special rules apply to the distribution of homestead property upon the death of an 18 owner. If the homestead were owned as separate property of the decedent, the surviving 19 spouse is entitled to a life estate; however, if there are lineal descendants, they become 20 vested remaindermen. A related provision entitles the surviving spouse to $1,000 worth 21 of personal effects, $10,000 worth of home furnishings, and all automobiles. 22

The homestead rules override any attempted disposition in a will, with only one 23 exception. The homestead property may be left in fee simple to the surviving spouse if 24 there are no minor children. Homestead rights are a provision of the Florida State 25 Constitution and take precedence over the law of descent and distribution, and elective 26 share. 27

If the homestead is abandoned, homestead rights are lost. These rights are not lost 28 as a result of divorce if there are minor children who continue to live in the property. Both 29 spouses must sign any conveyance or mortgage of homestead property, even if the 30 property is owned as separate property by only one spouse. 31

The constitutional homestead rights are automatic to those who qualify and do not 32 require the filing of any documents in the public records. The homestead tax exemption 33 is a statutory benefit rather than a constitutional right; it is not necessary to file in the 34 public record to receive this benefit. The homestead tax exemption is discussed in detail 35 in Chapter 18. 36 37

CONDOMINIUMS, COOPERATIVES, AND TIMESHARES 38

39 The Division of Florida Condominiums, Timeshares, and Mobile Homes within the 40

Department of Business and Professional Regulation (DBPR) is the regulatory agency 41 for the operation of condominiums, cooperatives, mobile home parks, and timeshare 42 facilities. 43

Condominiums, cooperatives, and timeshares are all considered to be real estate; 44 therefore, a real estate license is required to sell or lease these types of properties 45 unless the individual works directly for the owner-developer and is paid a salary. 46 47

Condominiums 48

49 Consumer demand for condominium ownership is especially popular in areas where 50

desirable land is scarce. Condominium ownership has social and economic advantages 51 over apartment living. Condominium ownership is compatible with the lifestyles of people 52 who desire time to pursue leisure activities and freedom from the personal responsibility 53 for maintaining the exterior of their properties. 54



Condominiums provide for the ownership of individual units within a multiple-unit 1 building. Each owner owns a three-dimensional airspace within the building and has title 2 to the airspace within the walls, floor, and ceiling of each unit. 3

The ownership of each condominium unit includes a fractional ownership of the 4 common areas. The building is a common element along with the hallways, elevators, 5 sidewalks, parking lots, driveways, landscaping, and recreational facilities. 6

A master insurance policy insures the common areas and protects individual owners 7 against lawsuits that may arise from accidents that occur in common areas. Individual 8 unit owners must provide their own coverage for the interior of the unit and personal 9 property. 10

Ownership of the condominium unit can be in fee simple, or any other estate in real 11 property recognized by law. Each condominium unit is mortgaged, taxed, and sold 12 independently of other units. In the event of default by a unit owner, the individual 13 condominium unit is foreclosed and the unit is sold without affecting the other 14 condominium units. 15

The Florida Condominium Act, F.S. 718, gives statutory recognition to the 16 condominium form of real property ownership. By law, developers of condominiums 17 must file a declaration to create a condominium association and execute a master deed 18 that conveys the title to the condominium association. The declaration includes the name 19 of the association, the legal description and survey of the land, a description of the unit 20 owners’ membership rights and obligations, a copy of the bylaws and other documents 21 associated with the creation and operations of a condominium are set forth in F.S. 22 718.503. 23

Should the documents previously mentioned be requested by the buyer in writing 24 and not provided by the seller, the agreement is voidable. New condominium buyers are 25 allowed a 15-day right of rescission following receipt of the above condominium 26 documents from the developer. Resale condominium buyers are allowed three business 27 days from the date of receipt of these documents to either rescind the transaction or 28 proceed with the sale. [F.S. 718.503(1)(a)1] 29

F.S. 718.503 requires any contract for the sale of a condominium to contain certain 30 disclosures with specified language regarding the rights of the parties. Failure to include 31 the disclosure allows a party to void the agreement. 32 33

Cooperative Association 34

35 Cooperative ownership is legally quite distinct from condominium ownership. A 36

cooperative association is a corporation that buys and owns a multiple-unit building. 37 Shares of stock in the corporation are sold to individuals who in turn are given a 38 proprietary lease by the corporation, which allows the shareholder to occupy specified 39 space within the building. F.S. 719.503 requires disclosures for the resale of an interest 40 in a cooperative. 41

The cooperative association (corporation) secures financing and insurance for the 42 building. The individual stockholders divide the operating expenses and mortgage 43 payments proportionately based on the number of shares of stock they own in the 44 corporation. The Cooperative Act, F.S. 719, provides for real property taxes and special 45 assessments to be levied against individual units rather than the corporation. If a 46 cooperative shareholder fails to meet his or her financial obligations, the remaining 47 shareholders must make up the shortage or the corporation is in default. 48

Shareholders enjoy the same benefits of ownership as any other owner of real 49 estate, which include the following: 50 51

They may deduct their share of real estate taxes and mortgage interest from their 52 personal income taxes. 53

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They may realize equity buildup in the property due to reduction of the mortgage 1 debt. 2 3

Appreciation in property value is also possible. 4 5

The same rescission periods that apply to condominiums, 15 days for new developer 6 sales and three business days for resale transactions, apply to cooperatives. 7 8

Timeshare Ownership 9

10 Timeshare property is initially organized as a condominium. Each individual 11

condominium unit is further subdivided into time periods. Typically, 50 one-week time 12 periods per year are sold to individuals with the remaining two weeks reserved for 13 annual maintenance and refurbishing. This is known as interval ownership. 14

In the early history of timesharing in the United States, the typical sale was 15 structured as a vacation lease or right to use. These were built much like hotels. The 16 purchaser was given a right to use an unspecified unit in the hotel facility for a given 17 period-of-time per year, for a specified number of years. The purchaser did not acquire 18 ownership; they acquired a use right. These facilities typically allowed unoccupied units 19 in the project to be rented by the developer on a daily or weekly basis, the same as in a 20 hotel. 21

There are two methods used in the marketing of timeshares. One method conveys 22 title in fee simple to the purchaser as a tenant in common with the other timeshare unit 23 owners. The purchaser receives a deed for the unit purchased, combined with a use 24 agreement, which identifies the week or weeks of the year in which the purchaser is 25 allowed to occupy the unit. Another method involves the purchase of a tenancy for 26 years, converting to a tenancy in common after a specified number of years, usually 20 27 to 40 years. 28

Timeshare ownership agreements include a waiver of the right of partition. This 29 waiver prevents the owner of a timeshare from forcing the sale of the entire unit. The 30 ownership agreement also provides that each owner is responsible for the payment of 31 his or her share of the real estate taxes and maintenance. 32

F.S. 721.065 requires disclosures for the resale of an interest in a timeshare. 33 34

Provisions of the Timeshare Act 35

36 The Florida Timeshare Act, F.S. 721, was enacted in 1981 to regulate the industry 37

and to help prevent fraud and deceptive sales practices. The law is considered to be a 38 model for other states. 39

The provisions of the Florida Timeshare Act include the following: 40 41

Developers and sellers must provide a copy of the sales contract to each 42 purchaser, which must contain specific information regarding charges for 43 reservations, maintenance, and management. 44

45

Timeshare public offering statements must be provided to each purchaser and 46 must be filed with the state of Florida. All advertising must be filed with the state 47 of Florida. In addition, there are specific limitations on representations that may 48 be made in any advertising. 49

50

All contracts for the resale of timeshares must clearly define the rights and 51 obligations of all parties to the contract. 52



The name and address of the managing entity of the timeshare plan, disclosure 1 of closing costs, and a statement that discloses the existence of any mandatory 2 exchange program membership must be provided. 3

4

A ten-day cooling off period must be provided for the purchase of new and resale 5 timeshares, during which time the purchase contract can be canceled without 6 penalty or obligation by giving written notice to the seller (owner-developer). 7

8

Managing Condominiums, Cooperatives, and Timeshare Projects 9

10 A salaried manager of a condominium, cooperative, or timeshare project is required 11

to have a Community Association Manager’s (CAM) license if he or she performs 12 management services. These services include controlling or disbursing funds, preparing 13 budgets or other financial documents, assisting in the noticing or conducting of 14 meetings, coordinating maintenance, and other day-to-day services involved with the 15 operations of a community association. A residential community association is defined 16 as one containing more than ten units or an annual budget or budgets of more than 17 $100,000. This license is issued by the Division of Florida Condominiums, Timeshares, 18 and Mobile Homes. 19

20

COMMUNITY DEVELOPMENT DISTRICT (CDD) [F.S. 190] 21

22 A community development district (CDD, or district) is a local unit of special-purpose 23

government authorized by F.S. 190. A CDD provides a mechanism for the financing and 24 management of new communities. The district is authorized to fund, plan, establish, 25 acquire or construct, operate, and maintain specific public improvements and community 26 facilities on behalf of its residents, including: 27 28

Water management and control 29

Water supply, sewer, and wastewater management 30

Bridges or culverts 31

District roads 32

Street lights, alleys, landscaping, and undergrounding of electric utility lines 33

Public transportation, parking improvements, and related signage 34

Investigation and remediation costs with the cleanup of environmental 35 contamination 36

Conservation areas and wildlife habitats 37

Parks and facilities for outdoor recreational, cultural, and educational uses 38

Fire prevention and control 39

School buildings and related structures 40

Security, except that the district may not the exercise any police power 41

Waste collection and disposal 42 43 The district is governed by a board of supervisors, elected by the landowners of the 44

district. The board has the power to levy and assess an ad valorem tax on the taxable 45 property in the district. 46

The board hires a district manager, who is responsible for the daily operations of the 47 CDD. After six years, the governing of the district must begin to transition to the 48 residents. 49

F.S. 190.048 requires disclosure of the power to impose tax levies or assessments 50 be provided in the sales contract of real estate within a district. 51

142 Chapter 8


HOMEOWNERS’ ASSOCIATION (HOA) [F.S. 720] 1

2 F.S. 720 defines a homeowners’ association (HOA), or association, as a Florida 3

corporation responsible for the operation of a community or a mobile home subdivision 4 in which the voting membership is made up of property owners. HOA membership is a 5 mandatory condition of property ownership. The HOA is authorized to impose 6 assessments that, if unpaid, may become a lien on the parcel. The term “homeowners’ 7 association” does not include a community development district or other similar special 8 taxing district. 9

The association must maintain official records that include the following: 10 11

Plans, specifications, permits, and warranties related to common area 12 improvements or other property maintenance 13

Association bylaws 14

Articles of incorporation of the association 15

Declaration of covenants 16

Association rules 17

Board of directors’ meeting minutes for past seven years 18

Member roster with mailing addresses and parcel identifications 19

Association insurance policies for past seven years 20

Association contracts and bids 21

Tax returns and financial and accounting records for past seven years 22 23

Required HOA Disclosures 24

25 F.S. 720.401 requires that a homeowners’ association disclosure be provided to 26

buyers when membership in such an association is required. If a sales contract does not 27 conform to the requirements of this subsection in Florida law, the buyer may void it 28 within three days, or prior to closing, whichever comes first. 29

Initial developers and subsequent owners must disclose to a buyer who signs a sales 30 contract that: 31

32

The owner is required to be a member of the HOA. 33 34

Recorded private restrictions govern the use and occupancy of the property. 35 36

The owner is obligated to pay assessments to the HOA with failure to pay leading 37 to possible lien recording and enforcement with foreclosure. 38 39

There may be land use and/or recreation fees. If so, the amounts of such 40 obligations must be disclosed in the contract. 41

42

The developer may have the right to amend the restrictive covenants without the 43 approval of the association membership. 44

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