After the fatal collapse of a 12-story residential tower in the Surfside suburb of Miami, Florida, in 2021, state lawmakers introduced new requirements for older condominiums. Buildings that are at least 30 years old, like the collapsed Champlain Tower, must undergo special inspections, make repairs and collect reserves for future maintenance. The deadline ends at the end of this month.
Now that inspections are underway, bills are due. For some associations, the costs run into millions of dollars, and condo owners, many of whom are retirees on fixed incomes, are on the hook.
Around 1 million units will be subject to the new capital-intensive rules. Some owners are hoping to sell their units rather than hold on, others are retiring, and still others are looking for investors to bail them out.
Longtime 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 essentially has to bear the cross or pay for everyone else who can't pay, regardless.” “They can't pay or choose not to pay,” Zalewski said.
By Zalewski's count, in South Florida, including Miami-Dade, Broward and Palm Beach counties, three-quarters of all condos for sale are older than 30 years and subject to the new rules. In the normally busy summer season, sales fell 21.5% year-on-year and the average price fell 2.4%. In the third quarter of this year, active listings increased 60% compared to the same period last year.
Search and rescue teams search for possible survivors in the partially collapsed 12-story Champlain Towers South condo building on June 29, 2021 in Surfside, Florida.
Chandan Khanna | AFP | Getty Images
According to a recent Palm Beach Post report, special taxes levied to make the repairs were up to $200,000 per unit owner and repair bills were up to $15 million.
“What's happening right now is these reports are coming in, budgets are being put together for maintenance fees, and a lot of boards don't want to know what they're going to be,” Zalewski said. “All the bills are sent out and people get their little booklets saying how much they have to pay each month. You will get them in January. So at the moment there is, so to speak, the calm before the storm.”
In September, Florida Gov. Ron DeSantis called a special session to address the homeowners association's financial cliff. However, according to the Palm Beach Post, legislative leaders decided to wait until the start of the regular session in early 2025 to consider any changes to the law, saying they needed to get a better handle on the finances involved.
Stefania Ancona, a real estate agent in Miami, says the pool of buyers is now extremely limited, forcing sellers to either pay the new tax bills first or lower their prices. But there is another way out: investors.
One such building — the Bay Garden Manor condo building on West Avenue in Miami — is slated to be sold to a major investor and demolished to make way for a luxury waterfront property, Ancona said.
“I think it’s safe to say that there could be foreclosures or short sales. I don't know yet. “she said.
Condo prices are down 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,” Zalewski said. “Uninformed buyers saw cheaper prices [in the summer] and thought they had better buy now to own a piece of South Florida. There is a lot of buyer regret right now.”