For years, condo associations across the
state have deferred routine maintenance and put off
budgeting for future repairs to minimize costs for unit
owners.
“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.
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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.