Good: now bring flood insurance rates up to their real cost
/Florida real estate bombshell could destroy wallets
Last May, Florida Gov. Ron DeSantis passed legislation mandating emergency reserve funds for condominiums statewide after the tragic collapse of the 12-story Champlain Towers South in Surfside.
While lawmakers hope the condo law overhaul will protect residents from similar events, some market experts have warned that the mandatory reserves could destroy Floridians’ wallets.
"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 includes requirements for preventative maintenance and construction inspections on buildings three stories or higher, and for condo associations to collect and maintain structural integrity reserve studies and funds.
Associations are required to perform a reserve cost analysis every 10 years for repair costs that meet or exceed $10,000. Associations must then mail their structural integrity studies to condo owners, who will contribute to the reserve together through an association-approved payment plan.
To fund a reserve pool of money, 50% or more of the total cost for a condo’s repairs must be maintained.
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Macro Trends Advisors founding partner Mitch Roschelle also cautioned that the reserves law will "create a dichotomy" between high-rise condos and single-family homes in Florida.
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Champlain Towers was 40 years old and in need of major repairs when it collapsed on June 24, 2021. It's led to officials looking at the need to ensure other aging structures are safe, as 98 people were killed in the tragedy.
At the time, the Real Property, Probate and Trust Law Section of the Florida bar task force said 912,376 Florida condo units housing more than 2 million people are at least 30 years old, including more than 105,000 older than 50 years and nearly 328,000 built between 40 and 50 years ago.
These increases will obviously hit a lot of people with limited or fixed incomes, but better than leaving the to live in a fool’s paradise until “paradise” collapses into the sea. The shoddy construction and lack of maintenance of many of these condos have been an open secret for at least fifty years, but no one wanted to acknowledge it for fear of hurting real estate values. I’m impressed by Santos’ and the Florida legislature’s willingness to face the wrath of condominium owners and the real estate industry and address the issue.