For years, condo associations across the
state have deferred routine maintenance and put off
budgeting for future repairs to minimize costs for unit
“Whether or not there was enough money to fix the building at some point in the future, that would be somebody else’s problem,” said Martin Schwartz, a partner at Miami’s Bilzin Sumberg law firm who specializes in condo law.
The exterior of Paradise Shores on Saturday, Sept. 24, 2022, in St. Petersburg. From retirees looking to downsize, to young professionals trying to snag a starter home or snowbirds searching for a winter getaway, condominiums have long been a staple for anyone seeking a slice of Florida real estate on a budget. But safety legislation passed this year in the wake of the deadly Surfside building collapse could plunge the condo market into turmoil.
Schwartz said the
buildings that are in the worst shape tend to be populated
by people living on fixed and low incomes. He’s concerned
that the new law could make housing unaffordable for them.
“I literally have a woman that lives in the building across from me who’s 80 some years old, who went and got a job working in some sort of manufacturing plant in order to make the money to pay for the special assessment,” Rasbach said.
Others have decided to sell their condos. Over the past year Paradise Shores has seen nearly 50% turnover, mainly from snowbirds who can’t justify the cost of a second home given the new fees, Rasbach said.
When the new law goes into effect in 2025, roughly 28,000 condo associations across the state will face the same predicament as Paradise Shores. Some fear it could trigger a fire sale from condo owners trying to cut their losses.
“If your building has been hit with a major assessment, you better be willing to drop your price,” said Greg Main-Baillie, executive managing director for the Florida Development Services Group at Colliers.
If too many discounted condos flood the market, it could cause values to plummet across the board.
Some condo associations may decide it’s not worth it to try and bring the property up to standard.
“For a lot of these aging buildings, the land that they’re on is more valuable than the building itself,” said Taylor Collins, a managing partner and co-founder of South Florida real estate group Two Roads Development.
His company works to terminate struggling condo associations so it can buy the buildings and redevelop the land. He said condo owners can get a better price for each unit when the whole association comes together to do a bulk sale.
Still, not every condo is a good candidate for redevelopment. Waterfront properties and buildings in dense downtown areas are more desirable than those off the coast and away from growth.
Though the law may force some condo associations to make difficult decisions in the short term, Collins said it’s a necessary step toward improving the safety and longevity of Florida’s condos. He noted that many insurance providers are already updating their standards in accordance with the law.
Last year, Paradise Shores saw its insurance premium increase by 29%. This year, their insurer has refused to renew its policy due to a number of lingering maintenance issues. Now they are scrambling to find a new insurer before the policy lapses in April.
Main-Baillie said he expects to see a mad dash from condos trying to secure the capital and labor needed to come into compliance with the new law before 2025.
“Unfortunately board members don’t always have the experience or knowledge of construction management to be able to keep the community out of risk,” he said. “The engineers and contractors in this environment take advantage of the scenario pretty often.”
He said condo associations should consider hiring a professional manager to protect themselves as they embark toward an uncertain future.