Florida condo owners facing foreclosure are navigating an already complex legal process. But thousands of Florida condo owners are now simultaneously dealing with a second legal process: condominium termination. Following the 2021 Champlain Towers South collapse in Surfside and the wave of new inspection and reserve requirements under Florida SB 4-D (2022), many older Florida condo buildings are facing termination proceedings as owners evaluate whether the cost of mandatory repairs exceeds the value of the property.
If you are behind on your condo mortgage and your building is also pursuing termination under Florida Statute 718.117, the interaction between these two processes can significantly affect your options. This guide explains how both work and what you need to know.
What Is Florida Condo Termination Under F.S. 718.117?
Florida Statute 718.117 is the mechanism for voluntarily dissolving a condominium association and ending the condominium form of ownership. When a condo is terminated:
- The condominium form of ownership ends -- individual unit deeds are extinguished
- The property reverts to a fee simple ownership interest held as tenants in common by all former unit owners (in proportion to their unit interests)
- The property is typically sold to a developer, bulk buyer, or other purchaser
- Sale proceeds are distributed to each unit owner (and their lienholders) based on a fair value determination
Termination requires approval by a supermajority of unit owners (typically 80% or more) and approval by 80% of mortgagees. Once approved and recorded, a termination trustee manages the asset disposition and distribution process.
The SB 4-D Context: Why Terminations Are Increasing
Prior to 2022, condo terminations in Florida were relatively rare. The Champlain Towers South collapse changed that. Florida's subsequent legislation (SB 4-D in 2022, followed by HB 1021 in 2023) created mandatory structural inspection requirements and fully funded reserve mandates for buildings three stories or taller. Key deadlines under this legislation:
- Buildings 30 years or older (25 years if within three miles of the coast): Milestone Inspection Phase 1 required by December 31, 2024
- Structural Integrity Reserve Studies: required for all buildings; reserves must be fully funded starting with the fiscal year beginning on or after December 31, 2024
- Buildings that defer or underfund reserves face restrictions on using reserve funds for non-structural purposes and potential regulatory action
For many older Florida condo buildings -- particularly aging mid-rise buildings in Miami-Dade, Broward, Palm Beach, Pinellas, and other coastal counties -- the cost of required structural repairs and full reserve funding is creating special assessments of hundreds of thousands of dollars per unit. Faced with assessments they cannot afford, more unit owners are consenting to termination proceedings.
How Foreclosure and Condo Termination Interact
If you are in active foreclosure when your condo association pursues termination, both legal processes run concurrently. The interaction depends on timing and the relationship between your unit's fair value and your outstanding mortgage balance.
If Fair Value Exceeds Your Mortgage Balance
If your unit's fair value determination exceeds your outstanding mortgage payoff amount, the termination sale may actually resolve your foreclosure problem. Here is how it works:
When the condo is sold and proceeds are distributed, the termination trustee pays lienholders -- including your mortgage lender -- in priority order. Your lender receives the full payoff amount from your unit's proceeds. The remaining balance belongs to you. The mortgage is satisfied, the foreclosure case becomes moot, and you keep any surplus.
This is functionally similar to selling before foreclosure, except the seller is the termination trustee rather than you personally. The practical benefit to you is the same: your mortgage is paid, no deficiency judgment, no foreclosure on your record.
If Your Mortgage Exceeds Fair Value
If your outstanding mortgage balance is higher than your unit's fair value determination, the termination distribution will not fully satisfy your loan. Your lender receives the fair value amount from the proceeds, and the remaining deficiency is still your debt.
At this point, you are in a position similar to a short sale -- the property sold for less than you owe, and you need to negotiate with your lender about the deficiency. Florida law allows lenders to pursue deficiency judgments within one year of a foreclosure sale or equivalent disposition. Work with your lender proactively to negotiate a deficiency waiver before the termination closes.
Challenging the Fair Value Determination
The fair value assigned to your unit in the termination process is critical. Under F.S. 718.117, a unit owner who disagrees with the fair value determination has the right to challenge it. Steps to challenge:
- Obtain an independent appraisal from a Florida-certified residential or commercial appraiser, depending on your building type. The appraiser should use comparable sales methodologies appropriate for a bulk purchase scenario.
- Review the termination trustee's appraisal for methodology, comparables used, and adjustments. Bulk-purchase scenarios can depress per-unit valuations significantly below individual unit sale prices.
- Negotiate with the termination trustee. Many disputes are resolved through negotiation before litigation.
- File in Florida Circuit Court if negotiation fails. The court can independently determine fair value. This process takes time, so act quickly -- termination timelines move forward even during disputes.
Condo Association Liens and Special Assessments in Termination
Many unit owners in buildings pursuing termination have unpaid condo association dues, special assessments for deferred maintenance, or assessment liens recorded against their unit. These liens are typically paid from termination proceeds in priority order after the mortgage and before any surplus goes to the unit owner.
Florida law gives condo association liens a specific priority position relative to mortgage liens, which varies by assessment type. If your unit has substantial association liens, these reduce your net proceeds from the termination and could affect whether your mortgage lender receives full payoff. Review any recorded condo liens carefully and factor them into your analysis of the termination proceeds.
Your Options as a Condo Owner Facing Both Foreclosure and Termination
Depending on your situation, you have several paths:
Participate in the Termination Sale
If fair value exceeds your mortgage balance, participating in the termination may be your best outcome. Your mortgage is paid at closing, no deficiency, and you keep the surplus. Contact the termination trustee to ensure your lender's payoff information is accurate and the distribution is processed correctly.
Negotiate a Deficiency Waiver Before Termination Closes
If fair value is below your mortgage balance, negotiate with your lender now -- before the termination closes -- to agree in writing that the lender will accept the termination distribution as full satisfaction. See our guide on short sale deficiency waiver negotiation for negotiation tactics, which apply equally in a termination scenario.
Sell Your Unit Before Termination Closes
It may be possible to sell your individual unit before the termination process is complete. This is only viable in the early stages of a termination proceeding, before the termination plan is recorded and the sale process is locked in. If this window is open, a pre-foreclosure sale may let you sell at a market price that exceeds the termination fair value.
File for Bankruptcy
If you cannot resolve both the foreclosure and the termination deficiency through negotiation, Chapter 13 bankruptcy creates an automatic stay that halts foreclosure and may give you time to evaluate your options in the termination process. Consult a Florida bankruptcy attorney about how a termination distribution interacts with your bankruptcy estate.
Related Resources for Florida Condo Owners
These guides cover topics relevant to Florida condo owners facing foreclosure or dealing with building financial challenges:
- Florida Foreclosure Process Overview -- how the judicial foreclosure process works for all Florida property types including condos
- Short Sale in Florida -- how short sales work when a condo terminates with proceeds below the mortgage balance
- Florida Short Sale Deficiency Waiver Negotiation -- tactics for negotiating deficiency waivers applicable to condo termination scenarios
- Deficiency Judgment Protection in Florida -- Florida law on deficiency calculations and the one-year filing window
- Florida Foreclosure Surplus Funds -- what happens when termination proceeds exceed your mortgage and how to claim the surplus
- Chapter 13 Bankruptcy to Stop Foreclosure -- automatic stay halts foreclosure proceedings while you evaluate termination options
- Buying a Home After Foreclosure in Florida -- waiting periods and credit recovery after a condo termination with mortgage deficiency
- HUD-Approved Counseling in Florida -- free housing counselors who can help you understand both the foreclosure and termination processes
Barrett Henry is a REALTOR with 23+ years of real estate experience and a Broker Associate at REMAX Collective. The intersection of Florida condo termination law and mortgage foreclosure law is genuinely complex, and the right strategy depends entirely on your specific building, your unit's fair value, and your outstanding mortgage balance.
Facing foreclosure in a Florida condo that is pursuing termination? Contact us today for a free consultation -- no cost, no obligation.
