Thursday, September 9, 2010

Now may be the right time to buy out that long-term recreation lease!

My sister bought a condominium unit a few years ago and quickly found out that more than 50% of her monthly maintenance was going to pay a husband and wife living in another state for the long-term lease they held on her community’s recreational facilities. After paying for insurance, there was almost nothing left over to fund essential services in the community. Associations in this situation have three options: try to attack the lease as being unconscionable, persuade the lessor to sell or persevere and know that the 99-year lease will not be paid off in their members’ lifetimes!

Most lessors will not be inclined to sell given that the lease payments make a nice annuity for them. While Section 718.401 lays out what is and is not acceptable in recreational leases, any challenge to such a lease will inevitably be met by strong lessor objections and a claim that the statute is unconstitutional. Nevertheless, associations that are currently struggling under the burden of paying enormous land lease fees might want to consider current economic conditions and the wholesale devaluation of real property to determine if now is the right time to exercise your right to purchase the land lease.

If the association and the lessor cannot agree on the sale price (and it is almost a certainty that these two parties will not agree) arbitration must be used to determine such sale price. While there are many factors that will go into the arbitrator’s determination of such price, current assessed value will be part of the equation. Here is the pertinent section of 718.401:

f)1. A lease of recreational or other commonly used facilities entered into by the association or unit owners prior to the time when the control of the association is turned over to unit owners other than the developer shall grant to the lessee an option to purchase the leased property, payable in cash, on any anniversary date of the beginning of the lease term after the 10th anniversary, at a price then determined by agreement. If there is no agreement as to the price, then the price shall be determined by arbitration conducted pursuant to chapter 44 or chapter 682. This paragraph shall be applied to contracts entered into on, before, or after January 1, 1977, regardless of the duration of the lease.

If your community has ever toyed with the idea of buying out your land lease, now might be the best time to do it.


  1. I am currently trying to get the lessor to give me a buyout price for
    a land lease on a condo unit I own. He claims that this statue was overturned in 1996.
    The condo was formed in 1974.

    I had asked him back in 2004 and he refused .
    Can he just refuse?

  2. I have copied the pertinent language from the statute below. There is nothing in the statute that would force the lessor to sell to you. He or she must want to entertain your offer.

    Section 718.111(8), Florida Statutes, provides:

    PURCHASE OF LEASES.—The association has the power to purchase any land or recreation lease upon the approval of such voting interest as is required by the declaration. If the declaration makes no provision for acquisition of the land or recreation lease, the vote required shall be that required to amend the declaration to permit the acquisition.