How to Sell a Condo With a Pending HOA Lawsuit in Florida

What Florida SB 4-D Requires — and Why So Many Condos Are Now in Litigation

Florida Senate Bill 4-D, signed into law in May 2022 in the wake of the Champlain Towers South collapse in Surfside, imposed the most significant structural safety mandates on condominium buildings in the state's history. The law applies to any condo building that is three stories or taller.

Milestone inspections are now mandatory. A Phase 1 milestone inspection must be completed by December 31, 2024 for buildings that reached 30 years of age on or before July 1, 2022, or by December 31, 2025 for buildings that reach 30 years on or before July 1, 2023. For buildings within three miles of a coastline, the inspection threshold drops to 25 years. If the Phase 1 inspection reveals substantial structural deterioration, a Phase 2 inspection (far more invasive and expensive) is required.

The law also eliminated the long-standing Florida practice of waiving reserve funding through a member vote. Under prior law, condo associations could vote annually to waive full reserve contributions, leaving buildings chronically underfunded. SB 4-D ended that. Associations must now fund reserves based on a structural integrity reserve study (SIRS) completed by a licensed engineer or architect. Full reserve funding for structural components (roof, load-bearing walls, foundation, fireproofing, plumbing, electrical) is mandatory beginning January 1, 2025.

The litigation connection is direct. Many associations either failed to fund reserves for years or deferred inspections and repairs. Unit owners have responded with class-action suits against the association. Separately, associations that completed inspections and found serious defects have filed suit against the original contractors or engineers for faulty construction. Insurance carriers are disputing coverage on these claims. The result is a wave of active litigation across Florida condo buildings, and active litigation is precisely what lenders flag on the condo questionnaire.

How Pending Litigation Kills Conventional and FHA or VA Financing

When a buyer applies for a conventional mortgage on a Florida condo unit, the lender is required to evaluate not just the borrower's creditworthiness but the financial health of the entire condominium project. Fannie Mae, Freddie Mac, FHA, and VA each publish approval standards for condo projects, and active litigation is an automatic disqualifier under all four.

The mechanism is the condo questionnaire, sometimes called the condo certification or project approval form. The HOA or management company must complete this document truthfully before any lender will process a loan on a unit in the building. Question sets vary slightly by lender, but every version asks whether the association is currently a party to any litigation, as plaintiff or defendant. If the answer is yes, the lender classifies the project as unapproved or ineligible. No further underwriting takes place.

Fannie Mae's Selling Guide (B4-2.2-04) lists active or pending litigation as a project review trigger that results in ineligibility when the litigation involves the structural integrity of the building, the financial solvency of the association, or the rights of unit owners. Freddie Mac's guidelines mirror this standard. FHA's Condominium Project Approval requirements under Mortgagee Letter 2021-01 similarly exclude projects with pending litigation that could affect the project's financial viability.

The practical consequence for sellers: any buyer who needs financing, which is the overwhelming majority of buyers on the MLS, cannot close. Even buyers who want to purchase are turned away by their lender, not by their own choice. Agents routinely accept offers, run the condo questionnaire, and discover the litigation flag only after weeks of back-and-forth. The deal collapses. The seller goes back to market with a stigma. This cycle repeats until the litigation resolves, which can take years.

There is no workaround within the conventional lending system. The lender cannot waive the litigation question. The title company cannot cure it. The only path to closing with a financed buyer is waiting for the lawsuit to resolve or settle, and even then, Fannie Mae requires a seasoning period before the project is reinstated.

Types of Litigation That Block Financing — and Why Each One Triggers Lenders

Not all lawsuits carry the same weight in the eyes of lenders, but Florida condo buildings are generating three primary types of litigation that all trigger the unapproved project classification.

Unit-owner class actions against the HOA are the most common post-SB 4-D category. When an association failed to fund reserves for years, deferred required structural maintenance, or misrepresented the building's condition in financial disclosures, unit owners have grounds to sue the association for breach of fiduciary duty. These suits frequently allege that the association violated F.S. §718.112, which governs association duties, or F.S. §718.111, which covers the association's obligation to maintain common elements. Lenders treat any suit where unit owners are adverse to the association as an indicator of financial and governance dysfunction: exactly the type of risk that disqualifies a project.

HOA versus contractor litigation is the second category. After milestone inspections revealed serious structural defects in many buildings, associations hired attorneys to pursue original developers, contractors, or engineers under Florida's construction defect statutes. These suits can be worth tens of millions of dollars, and while associations pursue them expecting a recovery, the pendency of the suit still disqualifies the project under lender guidelines, even if the association is the plaintiff in a strong position. The outcome is uncertain, and lenders do not speculate on litigation results.

Insurance coverage disputes make up the third category. When an association files a property insurance claim for storm damage, structural damage, or defect repair costs and the carrier denies or limits the claim, the association often sues. These disputes are litigation in the eyes of lenders even if they appear more transactional than adversarial. A coverage dispute that reaches the suit-filed stage triggers the same disqualification.

Sellers often assume that small or clearly meritless litigation will not matter. That is incorrect. Lenders do not evaluate the merits of a case. The existence of an active docket entry is sufficient to terminate the underwriting process.

Florida Seller Disclosure Requirements for Condos With Pending Litigation

Florida law requires sellers of condominium units to make specific, legally mandated disclosures before or at the time of contract. Pending litigation is a material fact that must be disclosed. Failing to disclose it exposes the seller to rescission of the contract and potential liability for damages.

F.S. §718.503 governs developer and resale disclosures for condominiums. It requires the seller of a resale condo unit to provide the buyer with a current copy of the declaration of condominium, articles of incorporation, bylaws, rules, most recent year-end financial information, and the most recently completed structural integrity reserve study. Critically, any pending litigation involving the association is a material fact that must be disclosed separately under Florida's general real property disclosure standard.

F.S. §689.261 requires sellers of residential real property to disclose all known facts that materially affect the value of the property and are not readily observable. Pending litigation, particularly litigation that would prevent a financed buyer from closing, satisfies every element of this standard. It is known to the seller once it appears in the association minutes or is communicated in any HOA notice. It is not readily observable by a buyer walking through the unit. And it materially affects value because it eliminates a large portion of the buyer pool.

In practice, the disclosure typically happens in two ways. The seller's agent includes it on the seller's property disclosure form. The HOA management company discloses it on the condo questionnaire completed for the buyer's lender. Sellers who sell through a process that does not involve a lender-required condo questionnaire, such as a direct sale to a buyer not seeking conventional financing, still owe the disclosure directly to the buyer in writing before or at contract signing. Title Guaranty of South Florida coordinates this documentation at closing so the chain of disclosure stays clean and the deed can transfer without cloud.

Sellers who are unsure whether their building's situation constitutes pending litigation should request a copy of the association's most recent attorney engagement letter or a letter from association counsel confirming litigation status. Do not rely on informal conversations with board members.

How Cash Flow Deals Closes When Lenders Cannot

Cash Flow Deals helps you compare the Fast Cash Offer and the Premium Cash Offer. With the Fast Cash Offer, we buy your house as-is and close. With the Premium Cash Offer, a pre-approved FHA or conventional buyer we already have, ready to go, pays more and buys directly from you. You choose which offer fits your situation. Pending building litigation must be reviewed and disclosed; we do not promise that a financed buyer can skip the condo questionnaire or the lender's project requirements.

For the Premium Cash Offer, you sign with us at an agreed number and give us permission to bring in a buyer in our place. Your home may be listed through Silver Door Realty, a licensed Florida brokerage, with a licensed agent and scheduled showings. The buyer signs a new contract directly with you. Their lender funds the purchase, and title transfers once, directly from you to your buyer.

We cover repair costs, and we figure out a way, so nothing comes out of your pocket. On Premium, only what the buyer's lender requires gets fixed; we arrange for those costs to be fronted and settled from the sale proceeds, from our share rather than your number. With the Fast Cash Offer, you sell as-is without making repairs. The number is agreed before any work starts, and it changes only if you agree. The one exception: if something structural surfaces that was not visible or disclosed before we signed — foundation issues, hidden moisture, old wiring, cast-iron drain failure — we re-cost it and bring the number back to you. You decide. You can walk away. We disclose what we know at offer time so this almost never happens.

Title Guaranty of South Florida handles escrow and coordinates attorney review of the pending litigation and any unit-level liens, subject to confirming its role in your transaction. Title insurance depends on the title review and the insurer's requirements. Your buyer receives the litigation disclosures in writing before signing their purchase contract.

On Premium, our payment appears as a separate line item on the HUD closing statement. Amounts owed are settled from the sale proceeds, you receive your agreed number subject to the structural exception described above, and we are paid last from what remains. If the buyer's loan falls through, that is our problem, not yours, and you can still take the Fast Cash Offer at its own number alongside the Premium Cash Offer choice. Call 786-891-9111 to compare both offers. Nothing is binding until you and the other party sign a written contract, and you can have an attorney review it first.

How Closing Works — Title Guaranty of South Florida and the Litigation Review

Selling your condo with pending building litigation calls for a review of your title, association records, disclosures, and any buyer's financing requirements. Title Guaranty of South Florida can review the title issues affecting your unit, with the scope and outcome confirmed for your transaction.

With Cash Flow Deals, you choose between the Fast Cash Offer, where we buy your house as-is and close, and the Premium Cash Offer, where a pre-approved FHA or conventional buyer we already have, ready to go, pays more and buys directly from you. On Premium, your home may be listed through Silver Door Realty, a licensed Florida brokerage, with a licensed agent and scheduled showings. Your buyer's lender must still accept the condo project and its litigation status.

Your title review first determines whether the litigation or unpaid assessments have created a lien against your individual unit. An association-level dispute and a recorded unit-level lien raise different questions. Title Guaranty searches the county records and your specific unit so you and your attorney can review any exceptions before closing.

You also need to review special assessments already levied or anticipated because of litigation or structural repairs. SB 4-D and applicable reserve requirements may affect your association's obligations. Unpaid assessments may create liens, so their treatment needs to be addressed in your contract and closing figures.

The title insurance commitment identifies the coverage available and any exclusions or requirements. Pending litigation does not by itself establish that your unit will qualify for title insurance or buyer financing. Your title team and the buyer's lender make their respective determinations after reviewing the facts.

Your deed records with the county clerk, and the transfer must address applicable association requirements under F.S. §718.116. Have your attorney confirm whether any assessment liability or obligation connected to the litigation could remain after closing.

Cash Flow Deals reviews your condo's litigation status, HOA minutes, and special assessment notices within 24 hours of your call so you can compare both offers with those issues in view. We cover repair costs, and we figure out a way, so nothing comes out of your pocket. On Premium, only what the buyer's lender requires gets fixed, with the costs fronted and settled from the sale proceeds from our share. On Fast Cash, we buy as-is and you make no repairs. The number is agreed before any work starts, and it changes only if you agree. The one exception: if something structural surfaces that was not visible or disclosed before we signed — foundation issues, hidden moisture, old wiring, cast-iron drain failure — we re-cost it and bring the number back to you. You decide. You can walk away. We disclose what we know at offer time so this almost never happens.

Your unit-level lien search, written litigation disclosures, and any lender review follow before closing. With Premium, your buyer signs a new contract directly with you, their lender funds it, and title transfers directly to them. If the buyer's loan falls through, that is our problem, not yours, and you can still take the Fast Cash Offer at its own number alongside your Premium Cash Offer choice. Closing takes 45 days or less when the required reviews and financing are completed within that window, on a date you help pick; your written contract sets the applicable timing.