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 suburb of Surfside. Buildings that are at least 30 years old, like the collapsed Champlain tower, must be inspected carefully, repaired, and have a reserve fund set aside for future upkeep. This month’s end is the deadline.
The invoices are due, and inspections are currently in progress. Condo owners, many of whom are retirees on limited incomes, bear the financial burden of some associations’ millions of dollars in expenses.
The new capital-intensive regulations apply to approximately 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 witnessed 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 count. 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 report, the cost of the repairs has reached $15 million, and special assessments required to complete the work have reached $200,000 per unit owner.
Currently, budgets for maintenance fees are being created and these reports are being received, but many boards are unwilling to accept the amount, according to Zalewski. All of the bills will be mailed, and each person will receive a small booklet that details their monthly payment obligations. In January, they will receive them. As a result, the present is somewhat 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 West Avenue in Miami, is going to be sold to a major investor and demolished to make room for opulent beachfront real estate.
It’s safe to assume that short sales and foreclosures could occur. I’m not sure yet. Since investors are once more purchasing properties that they believe are in a desirable position, I haven’t seen many yet, she added.
According to Zalewski, the summertime decline in condo prices of around 2% is only the beginning.
According to Zalewski, the region just began to receive a deluge of information about the dangers in September. Uninformed purchasers decided to purchase today in order to acquire a piece of South Florida after seeing lower pricing [during the summer]. Many buyers are regretting their purchases at the moment.
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