New Florida condo inspection law could force owners to sell
A financial cliff may await Florida condo owners at the end of the year, as new regulations may cause association maintenance fees to skyrocket. Condo owners can take matters into their own hands to avert being shoved off the edge — but the window of opportunity is rapidly closing.
Florida has been in a state of reckoning over the last two years, after the collapse of Surfside’s Champlain Towers in 2021 set off a slew of new regulations. In the aftermath, lawmakers realized that the condominium law that allows associations to defer critical maintenance and not hold reserves for future repairs and maintenance may lead to more tragedy.
Structures built in the 50s, 60s, and 70s have been slowly deteriorating and have become more difficult and expensive to maintain. Roofs and other components of these older buildings, meant to last 20-30 years, have been pushed beyond their lifespan. Senate Bill 4D, enacted during the 2022 session, created new standards for condo buildings over three stories tall.
Under SB4D, condo developments over 30 years old — two-thirds of all condos in Florida — must undergo inspections and immediately address critical defects. SB4D also eliminates the ability of COAs to waive reserve contributions, instead requiring that they collect the annual cost needed to repair and replace certain elements by the end of their life span, as determined by a 10year Structural Integrity Reserve Study (SIRS).
The deadline to complete these inspections is Dec. 31, 2024. As inspection results come in, many condo associations and owners will realize the scale of the problem. Many associations may face repair costs in the millions. Even after allocating those costs among all unit owners, many owners in older buildings may not be able to afford the increased maintenance fees and special assessments to make immediate repairs.
Condo owners need to understand: they’re going to be on the hook. The state legislature is committing budget and resources to ensuring enforcement; avoidance will not be possible.
Their monthly association fees will increase as the building works to replenish deficient reserves.
For millions of condo owners in Florida, the next year is going to be filled with painful choices. For many buildings, there is a silver lining – the land under their building is usually very valuable, so for most, the best chance of escaping the economic fallout will be to unite and sell the condo property to a bulk buyer rather than suffer under liens, credit hits and foreclosure.
Selling the units individually may not be an option for the majority of owners if their condos become distressed due to many owners being unable to pay their fees, as mortgage lenders are no longer willing to lend on condos in distressed buildings. The same factors that are pushing unit owners to sell will keep away buyers who can likely get property in a newer build for the same cost.
Developers, on the other hand, are likely willing to pay more for the valuable site. Of course, selling to a developer does require a fair amount of coordination. In order to get the best market value for owners, either an association needs to be united or owners need to organize to bring their property to market.
Association board members have the fiduciary duty to be proactive in bringing a proposal forward to owners, and raising the alarm about what’s to come if they believe that their condo building will not be financially viable in the future. If the value of the land that the condo complex sits on is greater than the value of the complex itself, associations need to alert owners: It is likely they’re past the point of no return.
Owners have options. They have the ability to shop for the best deal, and work out details that can be the difference between having a place to live next year and not.
But this window of opportunity won’t last forever. Once the structural studies are factored in, associations are looking at what’s likely to be a domino effect, as things like liens and foreclosures make it significantly more difficult to find a willing buyer.
Come Jan. 1, associations need to have a solution — which means that these boards need to start engaging legal counsel immediately to help understand the scope of their options, and what needs to be done in order to get owners the best deal.
SB4D is a vital update to Florida’s condominium regulations, and will undoubtedly help prevent tragedy. But the short-term impacts are going to be severe for owners.
Ignoring the problem or pushing this decision off will only worsen the outcome. Condo owners still have control over their fate, but only if they act quickly.
Joseph Hernandez is a partner at the Miami law firm Bilzin Sumberg.