Florida Real Estate – Area of Surfside Building Collapse, Surfside, FL – Courtesy: Shutterstock — Kristi Blokhin
In response to the fatal collapse of the 12-story Champlain Towers South in Surfside, Florida, Governor Ron DeSantis signed legislation requiring emergency reserve funds for condominiums statewide in May of last year.
Some real estate market experts have cautioned that the necessary reserves might wreak havoc on Floridians’ finances, despite politicians’ hopes that the revision of the condo law will shield residents from such occurrences.
“These costs, they get passed on to the consumer in one way or another,” Pinion Enterprises founder and CEO Joe Pinion said on “Mornings with Maria” Monday. “Here comes the budget buster: this stipulation [was] put in place by Gov. DeSantis to secure lives, but it’s going to end up bankrupting a lot of people that didn’t see this 50% hit coming.”
Florida’s Senate Bill SB 4-D mandates preventative maintenance, construction inspections on structures three floors or above, and the collection and management of structural integrity reserve studies and finances by condo communities.
Every ten years, associations must conduct a reserve cost study for repairs that cost at least $10,000. Then, associations must mail condo owners their structural integrity studies so that they can jointly fund the reserve using a payment schedule that has been established by the association.
“You’re talking about people who have the Airbnb that they thought, ‘Oh, all these people with their Airbnb business, this would be great, I was going to rent this property or I’m going to own this property, and then the actual income is going to eclipse what I have to either pay for that monthly rent or that monthly mortgage,’” the CEO explained.
Mitch Roschelle, founding partner of Macro Trends Advisors, also issued a warning that the reserves rule will “create a dichotomy” in Florida between high-rise condos and single-family houses.
“It’s going to make single-family homes potentially more desirable because you can control your own destiny,” Roschelle said. “The other thing that we’re seeing in Florida… after the Surfside catastrophe, people don’t want to be on condominium boards anymore because it’s a tremendous amount of liability.”
“You’re volunteering to give back to your community, basically, and you’re potentially liable if you decided not to repair the seawall when it was supposed to be repaired,” he continued. “So there’s going to be a lot of shakeups down in Florida.”
When Champlain Towers collapsed on June 24, 2021, it was 40 years old and badly in need of repairs. As a result of the catastrophe, which claimed 98 lives, authorities are now considering the need to ensure that other deteriorating structures are secure.
The Real Property, Probate and Trust Law Section of the Florida Bar task committee reported at the time that 912,376 Florida condo units housing more than 2 million people are at least 30 years old, with more than 105,000 older than 50 years and almost 328,000 constructed between 40 and 50 years ago.
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