In 2021, state lawmakers imposed new requirements on older apartments after a 12-story apartment building collapsed and killed people in the Surfside suburb of Miami, Florida. Buildings that are at least 30 years old, such as the collapsed Champlain Tower, must undergo specialized inspections, repairs, and reserve funds for future maintenance. The deadline is the end of this month.
With inspections underway, bills are coming due. For some associations, the costs run into the millions of dollars, and condo owners, many of whom are retirees on fixed incomes, are left in the lurch.
About 1 million units will need to comply with the new capital-intensive rules. Some owners are looking to sell their units rather than comply, others are choosing to leave, and still others are seeking bailouts from investors.
Longtime analyst Peter Zalewski, founder of Miami real estate consulting firm Condo Vultures, calls it the condo cliff.
“I would compare it to what we saw during the Great Recession, which was essentially zombie construction. These were units where a small group of people basically had to bear the cross or pay for other people who couldn’t pay, whatever. It’s them who can’t or choose not to pay,” Zalewski said.
In South Florida, which consists of Miami-Dade, Broward and Palm Beach counties, three-quarters of all condo units for sale are older than 30 years and subject to new regulations, according to Zalewski. constraint. During the typically busy summer season, sales fell 21.5% year-over-year and average prices fell 2.4%. In the third quarter of this year, the number of active listings increased by 60% compared with the same period last year.
Search and rescue teams search for possible survivors in the partially collapsed 12-story Champlain Towers South apartment building on June 29, 2021 in Surfside, Florida.
Chandan Khanna | AFP | Getty Images
According to a recent report, special assessment fees to make repairs are as high as $200,000 per unit owner, with repair costs as high as $15 million. Palm Beach Post.
“What’s happening now is that these reports are coming in, the maintenance fee budgets are being put together and a lot of councils don’t want to acknowledge the exact amounts. All the bills will be sent out and people will receive their booklets saying how much you need to pay each month. Fees, so now is the calm before the storm.
In September, Florida Gov. Ron DeSantis called for a special session to address the condo association’s financial cliff. However, legislative leaders decided to wait until the regular session begins in early 2025 before considering any changes to the law, saying they needed to better understand the finances involved, according to the Palm Beach Post.
Stefania Ancona, a real estate agent in Miami, said the number of buyers now is extremely limited, so sellers must first pay for a new appraisal or significantly reduce the price. But there is another exit: investors.
Ancona said one of the buildings — the Bay Gardens Estates apartment complex on West Miami Avenue — will be sold to a large investor and torn down to make way for luxury oceanfront property.
“I think it’s safe to say that a foreclosure or a short sale could happen. I don’t know yet. I haven’t seen a lot of that as investors again buy up buildings that they think are in ideal locations,” she said .
Apartment prices fell about 2 percent over the summer, and Zalewski said that’s just the beginning.
“It wasn’t until September that the area started being bombarded with information about traps,” Zalewski said. “Uninformed buyers saw cheaper prices (in the summer) and thought they’d better buy now so they can own a piece of land in South Florida. There’s a lot of buyer’s remorse right now.”
