Florida’s condo market has been rocked after new condo laws were enforced this year.
Florida lawmakers enacted legislation following the catastrophic collapse of the Champlain Towers condominium building in Surfside in 2021. The devastating event in South Florida’s Miami-Dade County killed 98 people when the south tower suddenly crumpled in one of the deadliest building collapses in U.S. history. To prevent similar disasters, condos of a certain age are required to undergo rigorous inspections with detailed plans to fund necessary repairs and maintain structural integrity by the end of the year.
“It’s creating the perfect storm,” says John Warsing, a sales director for Circ Residences with the South Florida real estate firm ISGWorld.
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How the Champlain Tower Disaster Changed Everything
The Champlain Towers tragedy could have been prevented with routine inspections and preventative maintenance, according to investigators.
An investigative report issued this summer pointed to a defectively designed flat slab supporting the south tower’s pool deck, just above the underground garage. The slab supporting the pool deck collapsed more than four minutes before the tower came crashing down, according to investigators, who found issues with the deck’s design, construction and maintenance.
“The condo had an inspection that said there were structural issues, but nothing was done to correct it and unfortunately, we had this terrible, terrible event,” says Brittany Alexander, founder and attorney at Premier Property Law in Fort Lauderdale, which serves property owners across Florida.
Before these new laws were put in place, structural integrity was left to self-governance by condo association boards, explains Alexander. “Many owners and association members lacked the knowledge of assessing and maintaining the structural integrity of the building,” she says.
Most condo owners don’t want to pay higher HOA fees to fund the proactive work required, creating a two-fold problem, she says. However, now that inspections and repairs are mandatory, many condo owners are facing exorbitant costs for immediate issues or to build reserves for future repairs.
The Condo Crisis in Numbers
Condo owners have flooded the market with new inventory in 2024 in hopes of unloading their condos due to rising costs.
According to data provided by the Florida Realtors Association, inventory of condos and townhomes across the state increased 65% in the third quarter of 2024 compared with the year prior. There were 60,132 active listings equating to 7.4 months supply. For reference, a year earlier, there was just 4.1 months supply in the condo market.
Closed sales in the second quarter of 2024 also slumped 12.3%, a sign of weakening demand. Not only that, but the median sale price was down 2% year-over-year.
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The New Florida Condo Laws Explained
The new Florida condo laws were created to emphasize the gravity of having regular assessments and ensure condo reserves are strong enough to handle maintenance and work needed to uphold a building’s structural integrity.
A state statute outlines the milestone and the structural integrity reserve assessments, which are the new condo requirements for buildings three stories or higher. These laws do not impact townhomes or single-family homes.
Milestone Assessment
“The milestone assessment requires experts, like licensed engineers or architects, to assess the structure of the building. They are looking for anything that would indicate the support of the building is in distress or disrepair,” Alexander says.
This can include inspecting load-bearing walls — which help keep the building up — foundations, roofs and interior walls to check for water damage that might deteriorate the property. If the building had a certificate of occupancy (COO) before 1992, owners must complete the milestone assessment by Dec. 31, 2024.
The first part of the assessment is a visual inspection. “If they find any issues, they have to do more extensive testing, which may include destructive testing to see if it’s actually a risk or just cosmetic in nature,” Alexander says.
This assessment has to happen within 30 years from the certificate of occupancy and applies to all new and future condo construction. “If the property is within three miles of the coastline, it has to happen within 25 years of COO, and every 10 years after that,” says Alexander.
The Structural Integrity Reserve Study
The structural integrity reserve study addresses how the condo association will pay for future repairs based on a building’s age and condition. The money collected in the reserve account is in addition to regular HOA fees and any required improvements discovered in the milestone inspection.
“Reserve funding is not required until January 1, 2026. However, we’re seeing increases somewhere between 30% to 40% of the reserve funds for the associations we manage right now,” says Hector Vargas, a Miami resident and president of the South Florida High-Rise Division with FirstService Residential.
Vargas manages all aspects of the condo association, from the front desk, hospitality, financials and preventative maintenance for over 400 condominium buildings and roughly 98,000 condo units.
Associations that existed before 2022 must have the reserve study done by the end of 2024 but aren’t required to have the milestone assessment completed yet, unless the buildings meet the age specifications.
The reserve study can be completed every 36 months if desired, but it must happen at least every 10 years to ensure the HOA is accurately collecting money for future repairs.
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How It’s Impacting Owners and the Market
The impact on condo owners and the statewide housing market is being felt in numerous ways. The first, and most obvious, is higher fees for owners.
New Reserve Fees in Addition to Higher HOA Fees
HOA fees are collected to pay for the building’s shared utilities, insurance and labor to maintain common areas like a pool, landscaping or cosmetic updates.
“Now, they have the additional reserve funding, which is a requirement by January 1, 2026,” says Vargas. “If the association was funding reserves, they will feel less of an impact compared to those who never really funded the reserves, but there is really no way to mitigate it.”
Vargas described how one condo association he manages needs $4.17 million to “catch up” in year one. “Then, moving forward, the reserve funding will be $750 per unit, which doesn’t include the standard HOA fee,” he says.
HOA fees have climbed for many owners lately — particularly for those in hurricane-prone areas of the state, because of insurance costs. A recent Redfin report shows that during the three months ending July 31, HOA fees increased in Florida more than 5% in Miami to more than 17% in Tampa.
“We try to find solutions to mitigate rising HOA expenses, but there are very few options with respect to insurance after many carriers left the state,” says Vargas.
Expensive Special Assessments
A special assessment is a fee charged to condo owners in addition to their regular association monthly maintenance fees for a special project or an unforeseen repair.
“Astronomical special assessments are being delivered to members,” says Vargas. One condominium association Vargas manages needs $20 million to make the necessary repairs found in the milestone assessment, “which equates to a special assessment of about $132,000 per unit,” he says.
Higher fees and unexpected special assessments are challenging for anyone, but they’re especially alarming for older condo residents on a fixed budget.
Low Demand and Lots of Inventory
“The condos that are taking the biggest beating are over 30 years old,” Warsing says.
Florida has an estimated 1.5 million condos, with 37% in South Florida’s Miami-Dade and Broward counties.
Pre-Covid condo inventory in South Florida was just over 22,000. This was considered a healthy, balanced market before a pandemic-fueled buying frenzy took hold. During the pandemic, condo inventory plummeted, leaving roughly 12,551 condos in South Florida for sale in the third quarter of 2023. In the third quarter of 2024, there were around 20,080 condos listed for sale in South Florida, an increase of 143%.
Just over 17,000 of those 20,000 listings were condo buildings aged 30 years or more, Warsing says.
According to data from multiple listing services compiled by ISGWorld, South Florida condo buildings from 10 to 30 years old have seen prices increase 9% over the last year. Condos aged 30 years or older, on the other hand, have seen prices fall by 21% year-over-year as of the third quarter.
Inability to Finance or Insure Older Condos
“It’s not just a lack of demand in the current crisis, many condos also aren’t financeable or insurable,” Warsing says. Banks and insurance companies want a laundry list of HOA documents, which now includes these survey results, he adds. “If they don’t know the structure’s condition or it’s not in good shape, it could make it nonfinanceable or noninsurable.”
The Future of Florida’s Condo Market
When the new laws first rolled out, condo owners in older HOA buildings panicked. There was little guidance on how they could finance the necessary repairs. Many owners, particularly those on a fixed income lack the funds to pay for higher costs and these big assessments.
However, financing solutions have hit the market, helping the condo building and, in turn, owners.
“Many banks are offering a line of credit to communities for a year or two, where the associations can draw against that once they know exactly how much they can borrow,” says David Podein, equity partner with Haber Law in Miami.
Once they have a firm idea of the necessary repair cost and have begun repairs, the bank converts the line of credit to a fixed loan, Podein explains. Condo owners can then pay over time, sharing the interest due on the loan, or pay the assessment upfront without interest.
The financing option doesn’t eliminate the burden of paying for the special assessments. “These repairs are needed, and there is no magic pot of honey to pay for them. It’s a shared responsibility as a condo owner to pay for the maintenance and upkeep of the building,” Podein says.
“Giving the owners the option to pay over time often makes it much more affordable and eliminates the risk of having zombie buildings,” he adds.
Some owners may still need to sell their condo because they cannot afford the new HOA fees or the special assessment, even with the pay-over-time option. As a result, there will likely be increased listings of condos aged 30 years or more in the coming year.
However, developers continue to build high-rise condos, which are selling for top dollar, indicating demand for condo communities. “When we look at newer buildings, 10 years or newer, inventory is strong and sales are happening,” Warsing says.
What Florida Condo Owners Can Do
Condo associations are required to provide a copy of the inspection and survey results within 45 days of completion. For most condos, the inspection will have been completed and if there is a special assessment, you should have been notified.
If you can pay the fee outright, do so. This allows the HOA community to make the required repairs, which improves the safety of the building and its value. If you cannot afford the fee, ask what options you have for financing it or paying over time.
Selling may be an option if the costs are not sustainable long-term. However, if you own an older condo in Florida, you may struggle to sell it right now. Waiting until the necessary repairs are made to the building and inventory and demand normalize will likely net you more money.
Renting your unit may be a way to cover any mortgage or insurance costs until it’s a more advantageous time to sell, if allowed by the HOA community and the building is deemed safe.
Try to continue paying your condo fees until you can sell, if the new long-term cost isn’t sustainable. If you stop paying, the condo association can foreclose, take ownership of the property and sell it at auction or on the traditional market to recoup its debts.
As unfortunate as the circumstances are, the new fees will make for safer communities and eventually help the resale value of the property. However, it’s a challenging in-between period for now.
Podein believes there will be some relaxation with the new laws, but it will take time.
“There was a lot of chatter toward the end of summer and early fall where Florida’s governor, DeSantis, was encouraging Congress to have a special section and relax some of the regulations, but nothing has been officially proposed or come from it,” Podein says.
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Florida?s Condo Crisis: Can Condo Owners Recover? originally appeared on usnews.com
Update 12/18/24: This story was published at an earlier date and has been updated with new information.
