Real Estate Investors Take Note, Timeshare Sunsetting Provisions on the Horizon
A bulk sale of 29 timeshare condominium units at the Palm Beach Resort and Beach Club Condominium Association was purchased for $9,755,000 by Copperline Partners. The bulk sale transaction was approved by the Bankruptcy Court on February 14, 2022
and closed on March 2, 2022, Case No. 21-15555-BKC-EPK which was filed in United States Bankruptcy Court of the Southern District of Florida, West Palm Beach Division.
As a timeshare condominium, the ownership interest to each Unit is held in weekly intervals, totaling 1,508 weeks for the 29 condominium units. The Association’s governing documents stipulated that the timeshare ownership interests would terminate on December 31, 2020, unless a majority of the membership voted to continue the timeshare form of ownership. Since the membership vote to continue the timeshare form of ownership was not obtained, the timeshare ownership terminated and the Association was required to initiate a partition action to sell the property and adjudicate the rights of more than 800 owners.
This massive and complicated undertaking began in February 2020 when Eisinger Law, a Hollywood, Florida-based law firm specializing in community association law was retained by the Association. Legal counsel included Eisinger Law partners Alessandra Stivelman, Esq. and Carolina Sznajderman Sheir, Esq., and who handled the complex process of identifying all parties that may claim an interest to the property as well as negotiations for the eventual sale of the Property. The initial partition action was filed in Palm Beach County Circuit Court, naming over 1000 owners and former owners. Due to the unique nature of ownership of the property (a significant number of fractionalized owners), Stivelman and Sheir teamed up with Attorney Ido J. Alexander, Esq., of AlignX Law, to navigate and effectuate the sale process through the strategically filed Chapter 11 bankruptcy proceeding that resulted with a confirmed plan of liquidation and an approved sale.
Without Florida case law precedent, the more than two-year lengthy legal process involved diving into unknown legal terrain with lots of learning along the way. Eisinger Law’s resourceful legal team used ingenuity to craft new procedural tactics, such as moving from Circuit Court to Bankruptcy Court, which was better equipped to complete the complicated transaction.
To the best to the attorneys’ knowledge, the Palm Beach Resort and Beach Club Condominium Association Partition Action is the first in Florida.
Why bankruptcy court?
Incorporated in 1981, the community association was never in a distressed state and has remains in good condition, both structurally and financially.
The legal team meticulously researched each title and painstakingly contacted, then sued over 1000 parties with timeshare ownership interests. Many were foreign owners who resided in Canada, Finland, France or the United Kingdom. Some timeshares were owned by Trusts or were willed down through several generations. The sheer scope and magnitude required an unusual approach in this type of proceeding.
Originally Sheir attempted to file the partition action in Palm Beach Circuit Court and almost broke the internet. Apparently, circuit court is not properly equipped to handle this type of mass filing. The backend system could not even accept multiple filing fees. Ultimately, even when it reached bankruptcy court, it took the clerk of the court a full week to manually input each party into the system.
In June 2021 the Association commenced its Chapter 11 bankruptcy case. According to Alexander, the bankruptcy process was the most effective strategy, not because the Association was in financial straits and with no other alternative, but to the contrary. The bankruptcy process was significantly more adaptable and suitable at handling a large volume of parties such as the large number of fractionalized owners of the units, while providing the flexibility necessary to bring about the end result sought, the closing of the sale in a relatively short period of time.
What does the future hold for timeshares?
There are approximately 556 timeshares in the state of Florida. Many timeshares, or condominiums which have a timeshare component, were built in the ‘80s, ‘90s or earlier and contain 30-year sunsetting provisions in the governing documents unbeknownst to individual unit owners who utilize their residence typically for one week each year.
As for the Palm Beach Resort and Beach Club Condominium Association, Copperline Partners, headed by Adam Schlesinger, is now the sole owner of all 29 condominium units and as such has controlling voting interests. Presently, there are no known plans to terminate the condominium association and the property plans to continue honoring short-term rentals.
The Palm Beach Resort and Beach Club Condominium Association is located at 3031 South Ocean Boulevard in Palm Beach, Florida. Originally built in the ‘50s or ‘60s the property is situated on a man-made finger jetty, with significant waterfront on the Intracoastal. According to the attorneys, a unique property such as this would never be allowed to be built today.
Eisinger Law., is a full-service Florida law firm focusing on community association law, real estate law, developer representation, commercial litigation, insurance law, estate planning and probate. For more info visit eisingerlaw.com.
AlignX Law, headed by Attorney Alexander is a law firm focused on complex bankruptcy law, and newly emerging blockchain space.