After the deadly collapse of a 12-story condominium tower in the Surfside suburb of Miami in 2021, state lawmakers implemented new requirements for older condominiums. Buildings that are at least 30 years old, as was the Champlain tower that fell, have to undergo special inspections, make repairs and gather reserve funds for future maintenance. The deadline is at the end of this month.
With inspections now underway, the bills are coming due. For some associations, the costs are in the millions of dollars, and condo owners, many of whom are retirees on fixed incomes, are on the hook.
Roughly 1 million units are subject to the new capital-intensive rules. Some owners are hoping to sell their units rather than comply, others are walking away, and still others are looking to investors to bail them out.
Longtime analyst Peter Zalewski, founder of Miami-based real estate consultancy Condo Vultures, calls it the condo cliff.
“I would compare it to what we saw in during the Great Recession, which is effectively zombie buildings. These are the units where a small minority are going to have to basically bear the cross or pay for everyone else who’s not able to pay, whether they can’t or they choose not to pay,” said Zalewski.
According to Zalewski’s count, in South Florida, including Miami-Dade, Broward and Palm Beach counties, three-quarters of all the condo units for sale are more than 30 years old and subject to the new rules. In the usually busy summer season, sales were down 21.5% year over year and the average price was down 2.4%. In the third quarter of this year, active listings were up 60% from the same period the year before.
Special assessments, levied to undertake the repairs, have been 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 from the Palm Beach Post.
“What’s going on right now is these reports are coming in, maintenance fee budgets are being put together, and many boards do not want to acknowledge how much it’s going to be,” Zalewski said. “All the bills will be sent, and people will receive their little booklets where it says how much you have to pay every month. They’ll get them in January. So right now it’s kind of the calm before the storm.”
In September, Florida Gov. Ron DeSantis called for a special session to deal with this condo association financial cliff. Legislative leaders, however, decided to wait until the regular session begins in early 2025 to consider making any changes to the law, saying they need to get a better idea of the financials involved, according to the Palm Beach Post.
Stefania Ancona, a real estate agent in Miami, says the pool of buyers now is extremely limited, so sellers have to either pay the new assessments first or slash their prices. But there is another exit: investors.
One such building — the Bay Garden Manor condo building on West Avenue in Miami — is set to be sold to a large investor and torn down to make way for luxury waterfront property, Ancona said.
“I think it’s safe to say that foreclosures or short sales may happen. I don’t know yet. I haven’t seen many yet, because, again, the investors are buying out the buildings that they feel are in a desirable location,” she said.
Condo prices were down about 2% in the summer season, and Zalewski said that’s just the beginning.
“It was only in September that the area started to get bombarded with information about the pitfalls,” said Zalewski. “Uninformed buyers saw cheaper prices [in the summer] and figured they better buy now so that they could own a piece of South Florida. There is a lot of buyer regret right now.”
