Florida real estate bomb could destroy multiple wallets

Florida Real Estate – Surfside Building Collapse Zone, Surfside, Florida – Courtesy of Shutterstock – Kristi Blokhin

In response to the fatal collapse of the 12-story Champlain Towers South at SurfsideFlorida Governor Ron DeSantis signed legislation requiring emergency reserve funds for condominiums across the state in May of last year.

Some real estate market experts have warned that the necessary reserves could wreak havoc on Floridians’ finances, despite politicians’ hopes that the revised condominium law will protect residents from such events.

“These costs, they’re passed on to the consumer in one way or another,” Pinion Enterprises Founder and CEO Joe Pinion said on “Mornings with MariaMonday. “Here comes the budget breaker: this stipulation [was] put in place by Governor DeSantis to secure lives, but it will end up bankrupting a lot of people who didn’t see that 50% hit coming.

Florida Senate Bill SB 4-D Mandates Preventative Maintenance, Building Inspections on Structures Three Stories or Greater, and Collection and Management of Structural Integrity Reserve Studies and Finances by condo communities.

Every ten years, associations must complete a reserve cost study for repairs costing at least $10,000. Then, the associations must mail to the co-owners their structural integrity studies so that they can co-finance the reserve according to a payment schedule established by the association.

“You’re talking about people who have the Airbnb and they’re like, ‘Oh, all these people with their Airbnb business, that would be great, I was going to rent this property or I’m going to own this property, and then the income real is going to eclipse what I have to pay for this monthly rent or this monthly mortgage,” explained the CEO.

Mitch Roschelle, founding partner of Macro Trends Advisors, also warned that the reservation rule will “create a dichotomy” in Florida between high-rise condominiums and single-family homes.

“It’s going to make single-family homes potentially more desirable because you can control your own destiny,” Roschelle said. “The other thing we’re seeing in Florida…after the Surfside disaster, people don’t want to be on condo boards anymore because it’s a huge responsibility.”

“You’re volunteering to give back to your community, basically, and you’re potentially liable if you decide not to fix the seawall when it was supposed to be,” he continued. “So there’s going to be a lot of upheaval in Florida.”

When the Champlain Towers collapsed on June 24, 2021, they were 40 years old and in dire need of repair. Following the disaster, which claimed the lives of 98 people, authorities are now considering the need to ensure the safety of other deteriorating structures.

The Florida Bar Works Committee’s Real Estate, Estates and Trusts Law Section reported at the time that 912,376 condo units in Florida housing more than 2 million people were at least 30 years old, with more 105,000 over 50 years old and almost 328,000 built between 40 and 50 years ago.

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