Lawmakers in the state enacted new regulations for older condominiums in 2021 following the fatal collapse of a 12-story condominium complex in the Miami neighborhood of Surfside.
Buildings that are at least 30 years old, like the collapsed Champlain tower, must be inspected carefully, repaired, and have a reserve budget set aside for future upkeep. This month’s end is the deadline.
The invoices are due, and inspections are now in progress. Condo owners, many of whom are seniors on limited incomes, bear the financial burden of some organizations’ millions of dollars in expenses.
The new capital-intensive regulations apply to about 1 million units. Instead of complying, some owners are walking away, others are expecting to sell their apartments, while still others are turning to investors for financial support.
It’s known as the condo cliff by veteran analyst Peter Zalewski, who founded the Miami-based real estate firm Condo Vultures.
“I would liken it to the zombie-like structures that we seen during the Great Recession. According to Zalewski, these are the units where a tiny minority will essentially have to bore the cross or make the payment for everyone else who is unable to do so, whether they are unable to or choose not to.
Three-quarters of all condo units for sale in South Florida, which includes Miami-Dade, Broward, and Palm Beach counties, are over 30 years old and are thus governed by the new regulations, according to Zalewski’s tally.
Sales were down 21.5% year over year and the average price was down 2.4% during the typically busy summer season. Active listings increased by 60% in the third quarter of this year compared to the same period last year.
According to a recent Palm Beach Post story, the cost of the repairs has reached $15 million, and special assessments required to complete the work have reached $200,000 per unit owner.
“At the moment, these reports are being received, maintenance fee budgets are being created, and many boards are unwilling to admit how much it will be,” Zalewski stated. People will receive their tiny booklets with the monthly payment amounts, along with all of the bills. In January, they will receive them. As a result, the present is rather tranquil before the storm.
To address this condo association financial predicament, Florida Governor Ron DeSantis summoned a special session in September. However, the Palm Beach Post reports that legislative leaders chose to postpone considering any modifications to the law until the regular session starts in early 2025, citing the need to better understand the financials involved.
According to Miami real estate consultant Stefania Ancona, sellers must either lower their prices or pay the new assessments first because there is now a very small pool of purchasers. Investors, however, are another way out.
According to Ancona, one such structure, the Bay Garden Manor condominium complex on Miami’s West Avenue, is going to be sold to a major investor and demolished to make room for opulent beachfront real estate.
“I believe it’s reasonable to assume that short sales or foreclosures might occur. I’m not sure yet. Since the investors are once more purchasing properties that they believe are in a desirable position, I haven’t seen many yet,” she remarked.
According to Zalewski, the summertime decline in condo prices of around 2% is only the beginning.
According to Zalewski, “the area only began to get bombarded with information about the pitfalls in September.” “Uninformed buyers decided to purchase now in order to own a piece of South Florida after seeing lower prices [in the summer].” Many buyers are regretting their purchases at the moment.
