Buying preconstruction in Florida — 10/10/10/70 structure and risks

10/10/10/70 structure and variants

Most common deposit structure in Florida for luxury or mid-market condo:

• 10 % at reservation (contract signing). Held in escrow by buyer's broker or directly with developer.
• 10 % at groundbreaking or contractual date (typically 4–8 months after reservation).
• 10 % at a milestone (structure top-off, foundation completion, etc.).
• 70 % at closing, on unit delivery.

Common variants:

• 20/20/60: 20 % reservation + 20 % milestone + 60 % closing. More cash upfront but sometimes reduced price.
• 5/15/15/65: 5 % reservation + 15 % groundbreaking + 15 % milestone + 65 % closing. More accessible.
• 50/50: 50 % before construction + 50 % at closing. Rare, ultra-luxury Miami.

For Canadian: 30 %+ down is standard for foreign national mortgage. So even in 10/10/10/70, you can finance the 70 % provided you qualify at closing.

The preconstruction contract

Different from FAR/BAR. Developer imposes their template contract, typically including:

• Legal description of unit with floor plan, sqft, attachments (parking, locker).
• Deposit schedule.
• Estimated completion date with tolerance margin (often 12 to 24 additional months possible).
• Authorized modifications by developer (plan changes, finishes, ±5 % dimensions).
• Cancellation: strict conditions, generally deposit forfeit if buyer withdraws.
• Force majeure: hurricanes, pandemics, shortages.
• Closing costs often fully on buyer (vs resale where seller pays deed doc stamps in most counties).
• HOA capital contribution: 1 to 2 months of fees prepaid.

Florida Condominium Act §718.503

Protective law: buyer has 15 days after receiving condo docs to cancel without penalty (vs 3 days for resale). This protection is legal and non-negotiable.

Main risks

Delivery delays

Estimated date rarely shifts forward and often slips 6–18 months. Consequences:

• Opportunity costs (capital tied up in escrow).
• Potential insurance and tax increase during delay.
• Pre-approved mortgage may expire (re-qualification at closing).

Plan modifications

Developer can modify dimensions ±5 %, swap materials (granite for quartz, etc.), change window orientation. Read contract carefully.

Developer bankruptcy

If developer goes bankrupt before delivery, deposits are theoretically protected in escrow (Florida Condominium Act requires escrow for first 10 %). But recovery can take 12–36 months and require court proceedings.

Closing-cost increase

Between signing and closing, municipal taxes, home insurance, planned HOA fees can rise 30–80 % in FL. Unpleasant surprise at closing.

Bear market

If market drops during construction and unit is worth less than contracted price, appraisal at closing can block mortgage. Buyer must make up difference in cash or withdraw (forfeiting deposits).

Real advantages

• Floor price: early-phase buyers typically get 5–15 % discount vs final market price.
• Preferred unit choice: high floors, preserved views, optimal exposures.
• Customization: finishes, à la carte options (upgrades) often below aftermarket prices.
• Appreciation leverage: if market rises during construction, you benefit from the gain.
• New construction: builder warranties, recent code, energy efficiency, easier insurance.
• Deposit leverage: 30 % total down but spread out — cash-flow comfort.

Developer due diligence

1. Track record: how many projects delivered? On time? Quality?
2. Financial strength: financing sources (US or international lender), pre-sales level (often ≥ 50 % required to start).
3. Pending litigation on past projects (verify in Florida court records).
4. Local reputation: Google reviews, local forums, past buyer testimonials.
5. Architect and general contractor: quality, experience.
6. Permits and zoning: already obtained? Or conditional?
7. Foreign developer (often Latin American in FL): more complex legal recourse if dispute.

From delivery to closing

1. Notice of completion from developer (typically 60–90 days before closing).
2. Mortgage re-qualification if financed (income, credit, ratios re-verified).
3. Insurance binder to set up.
4. Walk-through with defect list (punch list).
5. Developer repairs before closing.
6. Closing with final deposit (70 %) or full payment.
7. Key handover and access.

Punch list: most developers fix minor defects after closing within 30–60 days. Keep signed written copy.

Strategy for Canadians

• Buy in early phase for the discount, but evaluate developer-bankruptcy risk.
• Keep deposits in escrow at independent title company, not with developer.
• Negotiate extensions of financing contingency at closing time if delays.
• Don't fill bear-market gaps — prefer forfeiting deposits if appraisal too low.
• Anticipate CAD/USD fluctuation with forward contract on final 70 %.
• Structure in LLC before closing if relevant (post-closing transfer triggers doc stamps + due-on-sale).
• Read condo docs on receipt and note 15-day cancel window.