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Sale of South Beach Walgreens Hits Snag Due to Condo Association’s Right of First Refusal

boat-miami-harbor-3A would-be purchaser of the Walgreens store on Lincoln Road in South Beach successfully persuaded the 3d District Court of Appeal to keep a lis pendens in place upon the property in dispute. The purchaser, who claimed that it held a right of first refusal on the purchase of the four units that the pharmacy occupied, succeeded because it was able to establish that its underlying lawsuit related to the sale of the units was based upon a duly recorded document — the condominium’s declaration document. The appeals court described the case as one that highlighted “the difference between (a) a condominium association’s right to consent to or reject a proposed unit sale or transfer and (b) the association’s right to exercise a right of first refusal.”

The centerpiece of the suit was a group of four units in the Decoplage Condominium in South Beach, where Walgreens operated a pharmacy store. In 2014, 100 Lincoln Rd SB, LLC sought to purchase the four highly coveted, street-level commercial units for $28 million. Lawyers for the seller sent a notice to the condo association, informing the association of the transaction and asking the association to waive its right of first refusal. Instead, the condo association designated Daxan 26 (FL), LLC as a non-unit owner that was willing to purchase the four units for the same terms as 100 Lincoln had offered, essentially assigning the association’s first-refusal rights to Daxan. Without the knowledge of the association or Daxan, the seller and 100 Lincoln moved the closing up to an earlier date. They also changed the terms of their arrangement, again without notifying the association or Daxan.

Three days after the closing, the association filed a notice of its exercising its right to purchase the units. Daxan, as the assignee of the association’s right of first refusal, recorded a lis pendens on the four units in dispute. 100 Lincoln asked the trial court to remove the lis pendens or to require Daxan to post a bond. The trial court refused.

100 Lincoln appealed, but to no avail. Analyzing Florida Statutes Section 48.23, the appeals court concluded that the entry of the lis pendens was proper. The court rejected 100 Lincoln’s argument that Daxan’s underlying lawsuit was not based upon a “duly recorded instrument.” Recent Florida decisions have made it clear that the wording “based upon a duly recorded instrument” imposes very exacting requirements on the party defending the lis pendens. The lawsuit, courts have stated, must be based upon terms that are contained in the recorded instrument itself.

The appeals court agreed with the trial court that Daxan’s action was predicated on a duly recorded instrument, with that instrument being the original Decoplage Declaration of Condominium recorded back in 1992. That declaration offered potential buyers ample notice about the association’s right of first refusal. The condition was clearly stated in Section 15.01 of the declaration and was obvious enough to the seller that it asked the association to waive the right.

100 Lincoln tried to rely upon a 1990 case, American Legion Community Club v. Diamond, but the court determined that the two scenarios were not the same. In the Decoplage dispute, the instrument was the declaration document, which was duly recorded in 1992. In the American Legion case, the documents were a constitution, rules and regulations, and bylaws, none of which were recorded.

Navigating the process of selling or purchasing commercial real estate can be extremely challenging. Having skilled, experienced counsel on your side can be invaluable. Talk to the dedicated Florida real estate attorneys at Stok Folk + Kon. Our attorneys have the knowledge and determination to help you protect your business interests.

Contact us online or by calling (305) 935-4440 to schedule your consultation.

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Restaurant Entitled to Enforce 20-Year Exclusivity Provision within Amelia Island Resort’s ‘Shopping Village’, Florida Business Lawyers Blog, Sept. 23, 2015

Dealing with a Contractor’s Invoice Paid by the Wrong Developer, Florida Business Lawyers Blog, March 13, 2015