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Tag: condo ownership

Castles in the Sand

Back to the real world – part two

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

Last week we talked about the real-world problem of Florida homeowner’s insurance. As pointed out, new legislation that attempts to eliminate assignment of claims and thus protect against frivolous lawsuits has been signed by Gov. Ron DeSantis. The hope is this will encourage new insurance carriers to do business in Florida and retain the existing companies.

This week we’re continuing to bring the real world back, this time, however, it’s for condo owners. Condo homeowners who may have been happily dozing last year could have missed the new Florida condo owner’s requirements, so let’s have a review.

In May, the governor signed a law in response to the 2021 tragic collapse of Champlain Towers South in Surfside, Florida that killed 98 people. Under the new law, structural inspections are required of condo buildings three stories or higher over 30 years old, or 25 years old if within 3 miles of the coast. There are an estimated 2 million residents in the state of Florida who reside in more than 912,000 condominium units that are 30 years old or older and a lot more who are within 3 miles of the coast, including all of Anna Maria Island and most of the Manatee County coastline.

The recertification inspections must be performed by Dec. 31, 2024 by certified inspectors and paid for by the condo associations. The results of the inspections must be turned over to condo owners, condo associations and local municipalities. If the inspections reveal major structural problems, law enforcement agencies and condo associations will determine how to move forward with condo residents, who, of course, have to pay for the inspections and the repairs.

Even if structural repairs aren’t needed immediately, the bill has other major provisions involving reserve requirements that for sure will become a financial headache for condo associations that have put off repairs. Well, now is the time to pay the price for those bad decisions because, under the new law, condos can no longer waive reserves for building components deemed critical to structural soundness. This provision is called the Structural Integrity Reserve Study.

In addition, some condo associations will have to make up reserves waived in prior years and provide new reserves not previously required for certain structural issues. In the past, Florida legislation did not require condo associations to fully fund their reserve studies, giving condo owners and boards a great deal of flexibility. Now, however, the new law requires associations to keep their structural integrity reserves fully funded based on the reserve study or face possible legal action. Obviously, condo associations need to choose their licensed Florida inspectors carefully since what their study shows after their inspection is very difficult to have changed.

As insurance rates go up, Florida condo residents are struggling to comply with these new regulations in the face of a pullback in the real estate market because of increased mortgage interest rates. Higher condo fees that will result after the inspections and reserve mandates will hit long-time condo residents, many of them seniors on fixed incomes.

In spite of insurance issues, recertifications and hurricanes, U.S. citizens still want to move to Florida. According to the Census Bureau, between July 2021 and July 2022, Florida was the top state out of 10 with incoming domestic population migration at 318,855, followed by Texas at 230,961. The rest of the top 10 didn’t even break 100,000.

We may be faced with real-world problems but I doubt that it would make anyone leave. It will smooth out eventually, resulting in stronger building regulations, a good thing for the future of Florida real estate.

Castles in the Sand

Anticipating condo special assessments

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

Owning property is nothing short of waiting for the unexpected to happen. Whether you own a single-family home or live in a condominium community, you can be sure that eventually, you will have to make a major repair involving major money. The only difference is how those repairs will be funded.

When you own your own home and the roof needs to be replaced, it’s your financial responsibility. When you live in a condo community, it’s still your responsibility only it’s administered differently. Hopefully, your homeowners’ association will have anticipated major repairs and will have funded these and other expenses accordingly, however, if they didn’t, get ready for a special assessment.

Special assessments are designed so that condominium boards can pay for unanticipated expenses they don’t have the money for. These are one-time payments that can be a lump sum or spread out over a specified period of time. Once the purpose of these additional funds is met, the special assessment ends, and if there is money that was collected from the owners, it cannot be used for any other purpose and must be refunded.

Condo boards have the ability to pass a special assessment as they see fit without the majority vote of owners. Owners must, of course, be notified of a scheduled vote and the purpose of the assessment. Typically, owners know well in advance of an upcoming assessment since these matters are discussed in prior board meetings with the full knowledge of owners and a full explanation from the board of why this is necessary. Frequently boards will decide if it is more advantageous to borrow the money for the repairs and use the special assessment to repay the loan.

Another type of special assessment that many condo associations in Manatee County experienced last year was a special assessment for hurricane damage. Just like single-family homes, condo associations have a hurricane deductible as part of their insurance policies. If the association requires repairs after a hurricane, as many experienced with Irma, that are not covered because of the hurricane deductible, the owners will likely be billed for a special assessment to cover these repairs.

However, most homeowners’ insurance policies for condos have loss assessment coverage to reimburse owners for assessments levied on them for hurricane damage. Loss assessment coverage by Florida law is a minimum of $2,000, and some insurance companies have a $250 deductible from that amount.

It is particularly important for anyone who is considering the purchase of a condominium to inquire about the financials of the association. Ask if the association is fully funded, meaning that it has anticipated future repairs and is funding this amount from regular dues payments. If you have an accepted offer and contract on the purchase of a condo, you will be provided with the financials of the association and have time to understand how healthy the association is financially. Also, be sure to ask for a list of recent special assessments and their purpose. Naturally, older condo communities will face more maintenance issues, and you want to be sure that the board has recognized and planned for these events.

Expect the unexpected when you own any kind of property because for sure it will happen. Just because you own a condominium, don’t think that everything is automatically taken care of. It’s your responsibility before you purchase to understand and feel comfortable with the way funds are disbursed within a homeowners’ association.

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