Following the deadly collapse of a 12-story condominium tower in the Surfside suburb of Miami, Florida, in 2021, state lawmakers introduced new requirements for older condominium buildings. Buildings that are at least 30 years old, like the Champlain Tower that fell, must undergo special inspections, make repairs and collect reserve funds for future maintenance. The deadline is the end of this month.
Now that the inspections are underway, the bills are coming in. For some associations, the costs are in the millions of dollars, and condo owners, many of whom are retirees on fixed incomes, are in dire straits.
About 1 million units are subject to the new capital-intensive rules. Some owners hope to sell their units rather than comply, others walk away and still others look to investors to bail them out.
Analyst Peter Zalewski, founder of Miami-based 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 zombie buildings. These are the units where a small minority will actually have to bear the cross or pay for all the others who cannot pay, whether they can't, or they choose not to pay,” said Zalewski.
By Zalewski's count, in South Florida, which includes Miami-Dade, Broward and Palm Beach counties, three-quarters of all condos for sale are more than 30 years old and subject to the new rules. In the usually busy summer season, sales fell by 21.5% year on year and the average price by 2.4%. In the third quarter of this year, active listings increased by 60% compared to the same period the year before.
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
Special assessments levied to make the repairs have run as high as $200,000 per unit owner, and repair bills have come in for as much as $15 million, according to a recent report by the Palm Beach Post.
“What's happening now is that these reports are coming in, budgets for maintenance costs are being put together, and many boards don't want to know how much it's going to be. All bills will be sent out and people will receive their little books. which states how much you have to pay each month. They'll get them in January. So right now it's kind of the calm before the storm,” Zalewski said.
In September, Florida Governor Ron DeSantis called for a special session to address this condo association financial cliff. However, legislative leaders decided to wait until the regular session begins in early 2025 to make any changes to the law. They said they need to get a better idea of the financial aspects involved, according to the Palm Beach Post.
Stefania Ancona, a real estate agent in Miami, says the number of buyers is now extremely limited, so sellers must either pay the new assessments first or lower their prices. But there is another exit: investors.
One such building — the Bay Garden Manor apartment building on West Avenue in Miami — will be sold to a major investor and demolished to make way for luxury waterfront real estate, Ancona said.
“I think it's safe to say that foreclosures or short sales could happen. I don't know yet. I haven't seen many because, again, the investors are buying up the buildings that they think are in an attractive location.” she said.
Apartment prices dropped about 2% during the summer season, and Zalewski said that's just the beginning.
“It wasn't until September that the area was bombarded with information about the pitfalls,” says Zalewski. “Uninformed buyers saw cheaper prices [in the summer] and thought they better buy now so they could own a piece of South Florida. There is a lot of buyer's remorse right now.”