After the fatal collapse of a 12-story apartment tower in the Surfside suburb of Miami, Florida, in 2021, state lawmakers implemented new requirements for older residential units. Buildings that are at least 30 years old, as well as the fallen Champlain Tower, must undergo special inspections, make repairs and raise reserve funds for future maintenance. The deadline is the end of this month.
With inspections now in place, bills are due. For some associations, the costs run into the millions of dollars, and apartment owners, many of whom are retirees on fixed incomes, are left in a bind.
Nearly 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 consulting firm Condo Vultures, calls it the “condo cliff.”
“I would compare it to what we saw during the Great Recession, which is virtually zombie buildings,” Zalewski said. “These are units where a small minority will have to bear the cross or pay the price for everyone else who is unable to pay, whether they can’t or choose to pay the price.” Non-payment.”
In South Florida, including Miami-Dade, Broward and Palm Beach counties, three-quarters of all condo units for sale are over 30 years old and subject to the new rules, according to Zalewski's count. In the typically busy summer season, sales fell by 21.5% year-on-year, and the average price fell by 2.4%. In the third quarter of this year, active listings increased by 60% compared to the same period of the previous year.
Search and rescue teams search for possible survivors at 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 repairs have reached $200,000 per unit owner, and repair bills have reached $15 million, according to a recent report by the Palm Beach Post.
“What's happening now is these reports are coming in, the maintenance fee budgets are getting lumped together, and a lot of boards don't want to acknowledge the size of it,” Zalewski said. “All the bills will be sent out, and people will receive their little booklets of how much you have to pay each month. They'll get them in January. So, now it's like the calm before the storm.”
In September, Florida Gov. Ron DeSantis called a special session to address this condo association's fiscal cliff. However, legislative leaders decided to wait until the regular session begins in early 2025 to consider making any changes to the law, saying they needed to get a better idea of the finances involved, according to the Palm Beach Post.
The pool of buyers now is so limited, says Stefania Ancona, a Miami real estate agent, that sellers either have to pay new appraisals first or lower their prices. But there is another way out: investors.
One of those buildings — the Bay Garden Manor condominium on West Avenue in Miami — is scheduled to be sold to a major investor and demolished to make way for luxury waterfront properties, 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 a lot yet, because investors, again, are buying buildings that they feel are in a desirable location,” she said.
Apartment prices fell about 2% in the summer season, and Zalewski said this is just the beginning.
“It was only in September that the region began to be bombarded with information about the risks,” Zalewski said. “Uninformed buyers saw cheaper prices (in the summer) and thought they better buy now so they can own a piece of South Florida. There's a lot of buyers' remorse right now.”
