Some transitions from condo developer to unit owner control go relatively smoothly. This one has not. 15 of 39 construction defects must be repaired under FL law, whether or not Centex reimburses.
Palm Coast, FL – March 27, 2014 – The Cinnamon Beach at Ocean Hammock Condominium Association is Plaintiff in a lawsuit against Centex, the developer of the 275 oceanfront condominiums at Cinnamon Beach in Palm Coast, FL. The lawsuit seeks compensation from the developer for construction defects and deficiencies identified in the turnover (transition from developer control) process totaling $14,282,151.88.
Florida statute prescribes the process through which developers turn over control of condominium projects to the unit owners. A Settlement Agreement, usually the result of negotiations, settles any cross claims between the two parties. According to a communication from the Cinnamon Beach COA president, negotiations with Centex have broken down. Centex has advised the Association “that it is unwilling to settle our Association’s claims without involvement of their subcontractors that they have sued and the insurance companies for those subcontractors.”
The communication from the Association president goes on to say, “Included in the 39 construction defect items are 15 life safety issues. We have been advised by our legal counsel that our association has an obligation under FL law to fix these 15 issues whether or not the funds come from Centex. So, if we do not get the funds to repair these issues from Centex, the funds must come from each of us as Owners.”
The life and safety issues include required roof repairs, garage ceiling repair to meet UL standards, sliding door replacement or repair and window replacement. “The total cost to repair the 15 life safety issues is $5,382,000 which equals $19,570 per unit."
The Plaintiff’s Initial Disclosure of Defects and Deficiencies filed in February itemizes defects totaling $13,442,673. It further itemizes repair costs incurred to date of $839,478.88.
The Association, and thereby the owners are confronted with two choices:
- Pay for the life and safety repairs with funds from a special assessment of approximately $20,000 per unit.
- Proceed with the lawsuit against Centex and incur legal and other costs estimated to be $2,200 per unit for 2014 and possibly $1,500 per unit in 2015. Regardless of which party prevails in the lawsuit, legal fees are not expected to be recovered from Centex.
Florida real estate law requires the existence of the lawsuit be disclosed to prospective buyers and their potential mortgage lenders. The obligation to disclose applies both to selling owners and to real estate professionals who represent selling owners or prospective buyers. The existence of the lawsuit may affect buyers’ decisions to purchase as well as their ability to get purchase financing. It will likely have a disruptive effect on condominium sales at Cinnamon Beach until the dispute is resolved.
The eleven condo buildings which overlook the Atlantic Ocean at Cinnamon Beach were completed between 2003 and 2005, during the real estate boom. A popular vacation destination, they are within the Hammock Dunes Community Development District which includes Island Estates, Hammock Dunes, Yacht Harbor Village and Hammock Beach.
The Flagler MLS currently lists 29 Cinnamon Beach condominiums for sale with listing prices ranging from $285,000 to $679,000. The average listing price per square foot is $256.93. Only two of the current listings are “short sales.” During the past twelve months, 19 Cinnamon Beach units were sold through MLS. The median selling price was $360,000. The average selling price per square foot was $217.65. Four of the sold units were short sales