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A Florida ‘condo cliff’ is coming as owners deal with fallout from 2021 Surfside
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A FLORIDA ‘CONDO CLIFF’ IS COMING AS OWNERS DEAL WITH FALLOUT FROM 2021 SURFSIDE
COLLAPSE

Published Mon, Dec 9 20241:47 PM ESTUpdated Mon, Dec 9 20242:33 PM EST
Diana Olick@in/dianaolick@DianaOlickCNBC@DianaOlick
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Key Points
 * 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.
 * 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.
 * 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.

watch now
VIDEO3:3703:37
Impending Florida ‘condo cliff’: Here’s what to know
Squawk Box


After the deadly collapse of a 12-story condominium tower in the Surfside suburb
of Miami, Florida, 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.

Search and Rescue teams look 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

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.”


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