Sonja Przulj loves her
two-bedroom, two-bath condominium in Miami, located on the
21st floor of the 27-story Palm Bay Yacht Club, with
spectacular views of Biscayne Bay, downtown Miami and South
Beach. She paid $285,000 for the corner unit in September
2021 after renting in the building for years.
Przulj, 39, purchased at the height of the pandemic, when
she was working nonstop as a nurse. “It seemed like it was
meant to be,” she says. “But the thrill was very short-lived.”That’s
because less than a year later, Przulj, who lives in the
condo with her husband, Jean Pablo Vialle, and their
five-year-old son, was hit with a $145,000 special
assessment by the condo association to pay for repairs in
the aging building.
“It’s an earth-shattering number,” she says. And one she
can’t afford to pay.
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A dozen condos along Tampa's iconic Bayshore Boulevard will soon be subject to Florida's milestone inspection law, Department of Business and Professional Regulation records say. |
Attorneys for those
being sued have called the allegations false, saying the
repairs are mandated by law and the condition of the tower
is dire. It has been the subject of numerous hearings in
front of Miami-Dade County’s unsafe structures committee.
“It defies logic to allege that the association and board of
directors are deliberately acting in bad faith to put
themselves in more debt than is necessary,” defense
attorneys wrote in one filing. The case is in mediation, but
in April, Judge Thomas J. Rebull ruled that it would not be
in the public interest “in light of the Surfside Condominium
collapse” to further delay concrete restoration on the
tower, including installing shoring to the condominium’s
parking garage. Residents of older condos face steep new
costs in assessments for repairs, funding reserves for
future maintenance and insurance rate hikes.
The dispute pitting residents against each other is a
scenario likely to be playing out again in Florida as state
laws go into effect requiring older condos three stories and
taller to be reinspected at earlier intervals and for condo
associations to be more diligent in funding reserves for
on-going maintenance and repairs. The June 2021 collapse of
the 12-story Champlain Towers South, killing 98 people in
Surfside, laid bare safety concerns about Florida’s older
condo towers — the earliest ones now reaching past 50 years
of age. Scores of other high-rises were built 40 years ago
during a building boom in South Florida, an era when
insufficient building codes and lax inspections were the
subject of repeated grand jury investigations.
Before the collapse in Surfside, condo buildings in Florida
weren’t required to be inspected by a licensed architect or
engineer after being occupied, with the exception of those
in Miami-Dade and Broward counties which had enacted their
own, stricter local ordinances. Champlain Towers South’s
40-year inspection, as required under Miami-Dade’s
recertification program, was underway but repairs had not
been made at the time it collapsed. When state lawmakers
first responded to the disaster nearly a year later, the
state began requiring all condominium buildings of at least
three stories or higher to undergo a “milestone inspection”
after 30 years, and every 25 years if they were within three
miles of a coastline.
The buildings then would be required to be inspected at
10-year intervals going forward. Condo associations also
were required to ensure they had sufficient cash on hand for
future structural repairs and could no longer waive or
underfund reserves. The 2022 law caused such upheaval that
this spring lawmakers and the governor pushed the
requirement for coastal buildings back to 30 and are leaving
it to local governments to decide if a 25-year inspection is
“justified by local environmental conditions” including
proximity to seawater.
The scale of who might be affected by the reinspections and
ensuing costs is massive, according to legal and engineering
experts. When the Florida Bar produced its report on the
Surfside collapse, it cited figures from the Florida
Department of Business and Professional Regulation saying
there are more than 912,000 condominium units (out of some
1.5 million total units) in Florida at least 30 years old.
Calculated using U.S. Census formulas, the state pegs the
number of people living in condo units 30 years and older at
upwards of 2 million.
But the uncertainty faced by those now living in older
buildings with expensive repairs remains as some
associations come to realize past boards never funded the
reserves needed to maintain aging buildings, and now the
state gives them no option. “I’m very proud of how quickly
my boards have leapt into action,” says Donna DiMaggio
Berger, a partner at Becker & Poliakoff in Fort Lauderdale
who is board certified in condominium and planned
development law. “But some are now being threatened with
recall by unit owners who want to throw a monkey wrench into
the maintenance and repair process because they don’t want
to pay assessments. That is the type of craziness going on
now.”
With so many unit owners unable to pay special assessments,
some boards are seeking loans to help cover the cost of
repairs — loans that are collateralized by the association’s
receivables from residents’ payments on assessments, says
Telese Zuberer, an attorney with Icard Merrill in Sarasota
who represents homeowner and condo associations. Others
expect the payments to be made on relatively short payment
schedules, like Przulj could be required to do.
Unit owners opting to sell when facing a special assessment
may find it difficult or impossible to find a buyer willing
to assume that obligation. But some developers are
capitalizing on the situation by attempting to buy out
entire towers.
Edgardo Defortuna, president and CEO of Fortune
International Group in Miami, is among a group of South
Florida developers who target older condo towers —
particularly those in prime locations or on the waterfront —
for redevelopment, buying out entire towers of homeowners,
dissolving the condo association and tearing the towers
down. Defortuna says that due to the scarcity of land in
South Florida, the projects make sense, especially when
condo owners are paid well above market rates to vacate the
units. “You can make an offer for all the units in the
building that is above the market price of each individual
unit,” he says. “Then you can terminate the condominium,
knock it down and build a new tower.”
Defortuna says Fortune has completed three condominium
terminations to date and has plans to acquire additional
properties. Fortune typically offers owners up to twice the
market value of their units, he says, and the firm’s
brokerage arm helps them find a new place to live.
“If you spend $100,000 redecorating your unit and change
your bathrooms and kitchen, a buyer might be willing to pay
$100,000 extra because this unit is better than the rest,”
he says. “But if you’re special assessed for $100,000 to pay
for fixing columns and filling cracks to make sure the
building won’t fall down, a buyer coming in will see you
have the same old unit as before and won’t pay any more for
it. You’re not adding any value to your unit other than
making the building sound structurally.”
While much of the initial impact of the post-Surfside
reforms is being felt in South Florida, where most of the
state’s earliest condo towers were built, the ramifications
of the new inspection and reserve laws eventually will be
felt statewide. Bilzin Sumberg Partner Joseph Hernandez, who
represents developers in condo terminations and
redevelopment, says there’s no way to sugarcoat that many
condo-dwelling Floridians are living in homes not built to
last.
“That’s a cold hard reality,” Hernandez says. “They all have
a variety of functional obsolescence issues — poor
engineering (or) they are starting to degrade because they
are by the water. The value of the units continues to
decline. It doesn’t take a genius to figure out when you
have increasing costs and a decreasing value of the unit. …
There may be some special cases out there where the building
over their history, they may have made some changes and
stayed ahead of it. But the majority of them have reached
the point where it is only getting worse.”
Berger, the condominium association attorney, says the new
law is the final cap on an era where a coastal residence is
attainable for most buyers. “Developers marketed
condominiums and cooperatives as your little slice of
affordable paradise where you could live on the ocean and
enjoy those views,” Berger says. “But it seems like only the
very wealthy are going to be able to afford to live in older
coastal buildings. Still, if Florida ends up with the safest
housing stock in the country, that is a very positive
thing.”
The prospect of a $145,000 special assessment and the
ensuing court fight have soured Palm Bay Yacht Club resident
Przulj on condo life. “I love this building, and everyone
who comes here sees how special it is,” she says. “But
living in a condo feels like you’re never in control. I
don’t know if this was such a smart move.”
Florida’s new condo inspection law
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Applies to buildings at least three stories tall.
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For buildings less than 30 years old, the milestone inspection must be completed by Dec. 31 of the year in which the building reaches 30 years of age and every 10 years thereafter.
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Buildings for which a certificate of occupancy was issued on or before July 1, 1992, must have their initial milestone inspection by Dec. 31, 2024.
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If justified by local environmental conditions, including proximity to seawater, local enforcement agencies responsible for enforcing the milestone inspection requirements can opt to require a 25-year inspection.
No Easy Out
While some condo tower boards are seeking loans to help
cover the costs of needed repairs, it’s not a slam-dunk
solution for all. Governing documents sometimes don’t give
condo boards the authority to take out a loan. “In other
cases, the windstorm deductible the association has chosen
(to make the coverage affordable) is too high to make the
association a feasible borrower for most banks,” points out
Donna DiMaggio Berger, a partner at Becker & Poliakoff in
Fort Lauderdale who specializes in condominium and planned
development law. “It’s a perfect storm with the state doing
little currently to sort it out.”